Margin Index Report Q1 2025
Q1 2025 has brought a mixed picture for recruitment profitability across the UK. Some sectors, such as education and commercial, have shown notable resilience and upward movement, supported by consistent demand and client reliance on flexible staffing. These areas continue to offer promising opportunities for growth and margin improvement.
Elsewhere, healthcare, driving, and construction sectors have seen tighter margins, reflecting increased cost pressures, compliance demands, and more cautious client spending. While industrial recruitment remains relatively steady, challenges such as wage expectations and operational costs persist across the board.
This quarter’s report highlights the importance of adapting to shifting sector conditions, streamlining operations, and aligning services with evolving client expectations.
Looking ahead, it will be especially interesting to see how margins respond in Q2 2025, once the National Insurance increase comes into full effect. This change is expected to impact both agency costs and client budgets, potentially influencing hiring patterns, placement models, and overall profitability across multiple industries.
Education
Margin: 26.56% | Up 3.24% from Q4 2024
Education led the way in Q1 2025 with a significant 3.24% increase in profit margin, rising from 23.32% in Q4 2024 to 26.56%. This strong performance reflects continued demand for teaching and support staff, driven by increased pupil numbers, government funding initiatives, and a sustained focus on SEND provision. Recruitment agencies are benefiting from long-term vacancies and high daily cover needs, with schools across the UK increasingly reliant on agency support to fill persistent staffing gaps.
Construction
Margin: 13.30% | Down 0.14% from Q4 2024
Construction margins fell slightly from 13.44% to 13.30%, continuing a trend of margin pressure in a cost-sensitive sector. Labour availability remains an issue, while commercial and public infrastructure project delays have resulted in fluctuating demand. Recruiters are having to negotiate more flexible terms to retain clients, contributing to the marginal drop. Despite this, the market remains active, particularly in housing repair and retrofit roles.
Healthcare
Margin: 25.13% | Down 1.66% from Q4 2024
Healthcare saw one of the most notable margin declines this quarter, dropping from 26.79% to 25.13%. NHS cost-saving measures, alongside increased use of staff banks and direct hiring, are limiting opportunities for agencies. Compliance costs and administrative burdens remain high, impacting profitability, especially in clinical placements. Recruiters operating in this sector may need to diversify into private healthcare or specialist roles to counteract margin pressure.
Industrial
Margin: 15.04% | Up 0.11% from Q4 2024
Industrial recruitment showed a marginal improvement, increasing from 14.93% to 15.04%. This reflects steady demand in warehousing, logistics, and production roles, particularly in e-commerce and food distribution. While growth is modest, the sector offers stable, repeat business, and agencies with efficient fulfilment processes are best placed to maintain healthy returns. Rising costs are a concern, but client demand remains consistent across most UK regions.
Commercial
Margin: 25.06% | Up 2.41% from Q4 2024
The commercial sector delivered a strong performance, with margins climbing from 22.65% to 25.06%—a 2.41% rise. Businesses across the UK are investing in customer service, finance, and admin support, often on hybrid or remote contracts. The return to steady operational routines has prompted companies to prioritise quality hires, offering agencies more scope for strategic placements. Recruiters providing value-added services such as onboarding and skills testing are seeing the greatest margin gains.
Driving
Margin: 18.85% | Down 0.48% from Q4 2024
Driving margins decreased from 19.33% to 18.85%, continuing a downward trend influenced by rising operational costs and complex client demands. Short-term and last-minute bookings are common, but client budgets remain tight. With competition intensifying and compliance requirements growing, agencies must optimise fulfilment processes and explore retention incentives to stabilise profit margins in this highly transactional sector.
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