Contractors across several contracting disciplines are operating in sectors that are forecasting growth and suffering from skills shortages. This powerful mix should offer savvy contractors an ongoing and long-term stream of new business, which may be against a backdrop of a fresh economic downturn. Despite contradictions across key labour market surveys, they do agree that there are opportunities in sectors that continue to perform well. And thinktank Reform goes one step further, by including labour force flexibility as one of its solutions to preventing the UK from suffering a ‘lost decade’.
In this month’s Contractor Calculator Market Report:
- Online demand for the core contracting disciplines of IT and engineering bounces back in October after a September slump, reveals the Monster Employment Index
- The latest Confederation of British Industry (CBI)/Harvey Nash Employment Trends Survey show that contractors’ prospects may be damaged by the Agency Workers Regulations, as clients cut temp hiring
- Economic uncertainty has left employers locked in ‘wait and see mode’, says the Chartered Institute of Personnel and Development (CIPD) Quarterly Labour Market Outlook, but skills shortages and deferred hiring will benefit contractors
- The 15th Aberdeen & Grampian Chamber of Commerce Oil & Gas Survey suggests that acute skills shortages in the oil and gas sector are likely to reverse the damage done to contractors’ prospects by the Budget 2011 ‘windfall tax’
- Flexible knowledge workers, such as contractors, have a key role to play in preventing the UK from suffering a ‘lost decade’, says thinktank Reform in its latest policy paper on increasing UK economic growth.
Online demands in contracting’s core engineering and IT sectors back into growth territory
Online contractor demand in the core contracting sectors of engineering and IT returned to growth territory in October. The latest Monster Employment Index (MEI) shows online demand for IT contractors bouncing back after a fall in the previous month, and online demand for engineers, which had flattened, has also increased.
This growing demand for contractors was matched by an increase in the overall index, the first since a nine-month peak in June, albeit at only 1%. Over half of the 21 occupational categories monitored by the index saw increases in October, and these include other contracting disciplines such, as management and consulting and marketing and media.
According to Monster UK & Ireland spokesperson Michael Gentle, the increases in online demand leave “the market as a whole on a better footing than a year ago.” But Gentle warns that the eurozone crisis is having a negative impact on the UK’s online recruitment, with employers less willing to recruit in the UK.
AWR – Contractors’ prospects on a knife edge: will clients treat them as temps or suppliers?
Contractors’ prospects may yet be adversely impacted by the Agency Workers Regulations (AWR), according to the results of a new survey, which says “the outlook for temporary recruitment is much less positive as the Agency Workers Regulations kick in.”
The latest Confederation of British Industry (CBI)/Harvey Nash Employment Trends Survey, Staying the Course, reveals that more clients are planning to fire temporary workers (20%) than hire them (16%). Prospects for permanent staff hiring are significantly more positive, especially within small to medium sized enterprises (SMEs), with 47% forecasting an increase in headcount over the next 12 months.
Clearly the challenge is on for limited company contractors, contracting service providers which have adopted AWR-friendly employment practices, and recruiters to convince clients that AWR simply does not apply to much of the contracting sector.
However, the survey does identify sectors where strong growth can be expected. “Recruitment plans are most robust in the ‘knowledge economy’ – highly skilled sectors such as professional services, science, high-tech and IT,” says Albert Ellis, Chief Executive Officer of Harvey Nash Group.
Contractor opportunities may arise from clients locked in ‘wait and see’ mode
Contractors may benefit from the uncertainty gripping UK firms as permanent hiring decisions are deferred and employers hedge their bets. In its Quarterly Labour Market Outlook (LMO), the Chartered Institute of Personnel and Development (CIPD) shows that whilst private sector firms remain strongly positive about hiring intentions, the pace of growth is slowing and recruitment is being slowly scaled back.
Many firms appear to be locked in 'wait and see' mode
Gerwyn Davies , CIPD
Skills shortages also look set to provide contractors with opportunities. Forty-two per cent of survey respondents across the private and public sectors are experiencing difficulties recruiting for vacancies because candidates lack the necessary skills. The top four types of vacancies hardest to fill are in engineering, management, sales and marketing, and IT; all core contracting, interim and freelance disciplines.
In direct contrast to the findings of the CIB/Harvey Nash Employment Trends Survey, the CIPD is predicting further deterioration in the UK’s job market, with the eurozone crisis and a weakening global economy a significant contributory factor.
CIPD Public Policy Adviser Gerwyn Davies explains: “Many firms appear to be locked in ‘wait and see’ mode, with some companies scaling back on all employment decisions against a backdrop of increasing uncertainty as a result of the eurozone crisis and wider global economic turmoil.”
Skills shortages may reverse ‘windfall tax’ damage to oil and gas contractor prospects
Skills shortages in the oil and gas sector are likely to reverse the damage done to oil and gas contractor prospects by the Budget 2011 ‘windfall tax’. The 15th Aberdeen & Grampian Chamber of Commerce Oil & Gas Survey highlights falling investment and confidence in the North Sea following the government’s tax-grab. But at the same time, the survey identifies that a shortage of skills may become an even greater barrier to growth.
“The industry continues to rely on recruiting from within and, as a result, is driving up pay for individuals rather than looking to recruit people from other sectors into the industry,” says Aberdeen & Grampian Chamber of Commerce Chief Executive Robert Collier.
“This may be good for the contractors, but it is not in the long-term interests of the sector, adding to the problems of skills shortages and rising staff costs,” he adds. Pay increases in the sector have been higher in 2011 than 2010, as have recruitment and retention problems.
The good news for contractors is that the majority of operators are predicted to increase headcounts over the next three years. This is due to expanding upstream and downstream activities domestically and internationally throughout the supply chain.
Contractors form part of the solution to prevent the UK entering a ‘lost decade’
Contractors, and the flexible knowledge-based skills they supply, are one of the key pillars of a dynamic, highly productive economy. This is according to a new report, The long game: increasing UK economic growth by thinktank Reform, which sets out the economic strategies that will prevent the UK suffering a ‘lost decade’ of economic stagnation.
Alongside a flexible labour market, Reform identifies that productivity growth through innovation and the ‘creative destruction’ of organisations and industries is vital for economic growth. Highly skilled and flexible contractors can play that vital role in introducing innovation to organisations, and managing its implementation.
Reform also proposes tax reform specifically to put more money in the hand of individuals, such as contractors, enabling them “to invest their own resources to develop their careers and add to their own capability”. A stable tax regime will also encourage businesses to invest, which would provide both fresh contracts and employment.