Merger and acquisition activity decreased in UK recruitment sector in 2025.

Merger and acquisition (M&A) activities in the UK recruitment industry experienced a decline of 10% in 2025, as outlined in the most recent release of BDO’s ‘Recruitment M&A Annual Report’. Against a backdrop of escalating costs, uncertainty, and an unfavorable economic landscape, the report for 2026 reveals that there were 97 M&A deals within the sector throughout the year, a slight decrease from the 107 deals seen in 2024.

In 2025, 13% of British businesses were acquired by international buyers, marking a decrease from the 20% seen in the previous year. Despite the overall reduction in deals, the recruitment platform/software subsector stood out as the most appealing sub-sector for international M&A in recruitment, with 53% of the 17 deals involving either overseas acquirers or targets.

Notwithstanding the decline in M&A deals, the recruitment sector managed to surpass the broader UK M&A market slightly. Meanwhile, the overall M&A activity in the UK experienced a dip of approximately 5% in 2025 compared to 2024, showcasing the sector’s vulnerability in times of economic instability.

The report stated that trade buyers constituted 62% of the buyers in 2025. Venture capital played a role in 14% of all deals that year, with 92% of these deals pertaining to recruitment platforms/software. However, private equity participation declined to 8% of all deals in 2025, down from 17% in the previous year.

The key sectors that stood out in the deals of 2025 were the ‘generalist, recruitment platform/software, and IT sectors’. Moving forward to 2026, James Fieldhouse, an M&A partner, mentioned a sense of stabilization within the industry. Employers are transitioning from volume recruitment to a more strategic approach focusing on critical roles. Various sectors such as digital and AI, green energy, healthcare, and advanced engineering are anticipated to witness further recruitment activity.

The report emphasized that data, analytics, and artificial intelligence (AI) are reshaping the recruitment sector at an unprecedented pace. There is a growing adoption of AI-based matching engines within the industry to connect talent to employers based on real-time skills, behaviors, and market demand, surpassing traditional CV processes. Recruitment firms are also utilizing predictive insights to anticipate labor shortages, identify emerging skills gaps, and understand wage pressures.

Looking ahead to 2026, BDO’s Fieldhouse predicts an increase in M&A activity within the recruitment sector, with a heightened interest from private equity firms expected. The industry is set to undergo changes driven by technological advancements and evolving market demands, shaping the recruitment landscape in the years to come.