Are we at the point now where confidence is sufficiently high that growth is assured and contractors can look forward to sustained contract growth and real-term rises in rates of pay?
Two recent surveys, alongside a raft of other economic data and reports, suggest we might finally be there.
According to Deloitte’s latest Chief Financial Officer (CFO) survey, which acts as a bellwether for the attitude of the UK’s biggest companies, there is a “broad-based optimism and a new focus on growth”.
It goes on to say: “High levels of corporate cash and favourable credit conditions suggest that major corporates have the firepower to invest”.
The UK’s largest businesses, which are also typically the main consumers of contractor services, are starting to unleash the enormous cash piles they have built up over several years of poor confidence.
In the same way that the lack of confidence in economic growth became self-fulfilling over the last five years since the financial crisis and recession began, will the surging confidence have the same impact in reverse?
If so, that’s great news for contractors. If corporates are investing in new products and services – which Deloitte says is a priority for 40% of CFOs – then they will need to rapidly assemble teams to build, test, market, launch and fulfil orders for these products and services.
Many companies, particularly the larger ones, simply can’t hire the right people quickly enough to fully staff these new initiatives with permanent employees; they will need to hire contractors.
Then, when companies slow to respond to the economic recovery see their competitors launching new products and services, they will respond with new product and service portfolios of their own. This will generate further demand for contractors.
Are we making too many assumptions off the back of only a couple of business surveys? Well, these are only two of the most recent surveys with positive news to tell. There have been many others that, over the last three to six months, have been steadily improving.
We’ll know whether the recovery is sustainable for contractors when skills shortages emerge and rates start to rise, and that’s already starting to happen in some sectors and niches.
Rates are the ultimate test, because they are driven by market forces.
In many contracting markets, such as in IT, contract rates were heavily eroded during the economic downturn. We’re starting to see them improve, and in some hard-to-find skills areas, rate growth is accelerating.
In the interim sector, the latest report by Executives Online actually shows rates and the amount of time contractors spend in contract approaching pre-recession levels. Interim demand is also an indicator of how well the economy is doing, because many interims are hired to manage specific new projects and change management.
So, has confidence turned a corner and will the recovery become self-fulfilling as a result? Quite possibly it has, and the next few weeks of the post-summer new contracting season will show us whether the contracting market has recovered.