A report from BDO has found M&A activity in the UK recruitment market fell in 2025, as economic headwinds dented growth prospects and softened investor appetite.
Last year, a total of 97 deals were completed in the market. This was down by 10 per cent compared to the previous year – a year that saw M&A deal volumes bounce back. Private equity investment also softened in 2025, with PE transactions declining from 17 per cent of total deals in 2024 to just 8 per cent in 2025. This highlights the impact of rising costs and economic uncertainty on business growth, making PE returns more difficult to achieve.
Overseas investment was also down on 2024 activity, falling to 13 per cent of total deals (20 per cent in 2024), demonstrating more caution from international buyers. However, VC transactions increased in 2025, representing 14 per cent of all deals during the year, with trade making up 62 per cent of buyers in 2025, with industrials, healthcare and IT subsectors leading the way.
The BDO 2026 Recruitment M&A Annual Report shows that recruitment technology continues to play a pivotal role in shaping the sector, with 92 per cent of VC investment in this space during 2025. This is consistent with a sector that is becoming more focused on AI, data analytics and other technology.
James Fieldhouse, M&A Partner at BDO, the accountancy and business advisory firm, said: “2025 proved to be yet another challenging year for the recruitment industry with many businesses focusing their efforts on streamlining inhouse processes and keeping costs down. Investment into recruitment was put on hold for many as businesses tried to navigate the ongoing economic headwinds.
“It also proved to be a difficult year for the recruitment M&A market,” he continued. “Deal volumes were down in 2025 as businesses focused on weathering the economic storms, with capital being allocated to structural and operational changes as opposed to acquisitions. This represented a significant opportunity for those acquirers willing to deploy capital in a temporarily less competitive market.”
Despite the drop in transactions, there were a number of standout deals in 2025. Taskmaster, a UK industrial staffing firm backed by Adama Capital, acquired RE People, an industrial recruitment firm providing blue and white collar staffing solutions; RCapital Partners acquired a majority stake in Gap Personnel, the nationwide industrials recruitment agency; and Org Group, the Ireland-based organisational engineering services provider acquired Venturi Ltd, the UK-based IT recruitment firm.
Fieldhouse commented: “Technology continues to play a pivotal role in shaping the future of the recruitment industry. Those who have failed to adopt will no doubt have suffered over the last few years, but many have successfully implemented technology into their processes, streamlining operations and cutting costs when headline growth has been challenging. We continue to see recruitment platforms and software to be a highly sought after part of the market and unsurprisingly the majority of deals involving venture capital were in this space.”
He continued: “As we move forward in 2026, the feeling is one of stabilisation. Employers are moving away from volume recruitment to a more strategic approach focused on critical roles. Recruitment demand continues to vary by sector, with further activity expected in areas such as digital and AI, green energy, healthcare and advanced engineering.
“While it remains to be seen what impact the war in the Middle East will have on investment appetite and how that translates into the market, M&A activity is expected to rise in 2026 – subject to economic uncertainty easing and interest rates continuing to fall. We also expect to see more interest from private equity as they drive activity through buy and build strategies to increase scale and capability. Companies with strong management teams and high quality of revenue visibility in growing end markets, will command premium valuations. Success will also be driven by operational efficiency and increased use of technology within the recruitment process.”
The BDO report highlighted that the UK recruitment market declined in value by 3 per cent to £25 billion in 2025 – the first reduction since the pandemic, with permanent job vacancies also falling during the period. However, the overall recruitment market outlook remains optimistic, despite annual compound growth forecast to fall over the next six years from 3.7 per cent to 1.4 per cent.
