RECRUITERS ARE anticipating increased levels of caution among small firms next year, as difficulties accessing credit and the economic slowdown will limit their capability for expansion and hiring new staff.

However, despite the difficult economic outlook, most believe recruitment in the small and medium enterprise sector will not grind to a complete halt in 2009.

"What we are predicting will happen is that a lot of small firms will cut the number of temporary staff on their books and freeze their intake of permanent staff members," says Mairead Fleming, the director of recruitment company Brightwater.

"Companies got a shock and cut their costs quite quickly when it became clear things were turning bad and many of them don't have any fat trim and will still need people to get things done."

Ms Fleming predicts recruitment among small firms could begin to pick up in the second or third quarter of 2009 when companies realise they are under-resourced in some areas.

"Initially I think they will increase the number of temporary and contract workers, but companies will always keep an eye out for good quality staff. They might take their time in identifying people and maybe go through three rounds of interviews rather than just two . . . but I don't believe it'll be a complete famine," she says.

James Hayes, the manger of banking and financial services with Robert Walters, says he expects some SMEs to continue recruiting for both natural growth and replacing staff that move on.

Mr Hayes says accountants with strong cash flow experience are in demand and many SMEs are hiring credit controllers on contract to resolve bad debt for the year.

"Many SMEs have been hit badly as a result of being a small business and clients not paying them on time, with their cash flow deeply affected and this is causing problems.

"But SMEs are now in a good position in that they are becoming quite attractive to work in as many experienced and successful professionals have been let go from multinationals and are looking for something more secure with a long-term future," he says.

Patricia Callan, director of the Small Firms Association, says the organisation's annual employment survey, which will be launched in January, could well make for depressing reading.

"The days of 50,000 new jobs a year are gone for now," she says.

"Companies still need talented people and many of them will continue to do well, but people are now being more sensible and focusing on managing their cost base effectively."

Ms Callan expects that smaller businesses will continue to seek "better people who will be more productive", but she believes the recruitment process will be carried out at a considerably slower pace.

"If you're buying an expensive piece of machinery you'll make sure to examine it thoroughly first. Now I believe companies will be doing the same when it comes to recruiting new staff."

Tom Keane, the managing director of recruiting firm Dal Riada, believes small companies are beginning "to look at performance clinically" before making appointments. He says recent redundancies from multinationals present small firms with great opportunities to hire experienced staff. There are "fantastic candidates" available who are "lowering their expectations", he says.

Shay Dalton, the managing director of Lincoln Search and Selection, says hiring requirements for small forms will most likely be for replacement rather than filling new jobs.

He predicts that many smaller firms will bring in experienced credit controllers and interim managers to help get them through the recession.

Experienced accountants who have seen recessions previously will be brought in to steady the ship, he says.