Contractors are understandably nervous about what 2015 may deliver with the uncertainties that a General Election offers. However, the evidence suggests that underlying demand for contractors continues to grow. This growth is driven by a combination of strategic demand fuelled by structural changes in the UK’s labour market alongside short-term demand arising from election uncertainty. Surveys confirm that contractors will be in even greater demand during early 2015 as a risk management tool for clients to combat that very uncertainty that is limiting overall optimism.
In this month’s ContractorCalculator Market Report:
- December 2014’s Recruitment and Employment Confederation (REC)/KPMG Report on Jobs shows the UK contracting market at a quarterly high, and highlights that election uncertainty could impact on clients’ hiring decisions
- IPSE’s Freelancer Confidence Index shows cautious optimism over contracting sector prospects tempered by fears of election uncertainty impacting negatively on the overall economy
- Skills shortages in IT, engineering and technical disciplines are worsening, as contracting clients need more contractors to deliver on growth plans, says the latest Recruitment and Employment Confederation’s (REC) JobsOutlook
- Scotland’s contracting sector put in a solid performance at the end of 2014, with Edinburgh as the focus of contracting activity, according to the Bank of Scotland Report on Jobs for December 2014
- Marketing, IT and media contractors benefit from record levels of marketing spend, reports the latest Institute of Practitioners in Advertising (IPA) Bellwether Report.
Contracting market reaches quarterly high, despite election fears uncertainty
Contractors enjoyed the strongest increase in rates for three months alongside rapidly increasing demand during December 2014. When coupled with sharp falls in contractor availability and a three-month high in contractor agency billings’ growth, this suggests that the UK contracting sector was at a quarterly high at yearend.
The results from December’s Recruitment and Employment Confederation (REC)/KPMG Report on Jobs also suggest that uncertainty over the election outcome may impact negatively on the UK labour market.
Economic growth for 2015 looks sustainable. However the concern now is that political uncertainty could spook the market as we approach a general election
Kevin Green, REC
“Economic growth for 2015 looks sustainable,” explains REC chief executive Kevin Green. “However the concern now is that political uncertainty could spook the market as we approach a general election.”
The UK’s flexible workforce of contractors and independent professionals is most likely to benefit from any uncertainty pre- and post-election, as clients choose to hire contract workers to manage their employment risk.
Contractors cautiously optimistic about prospects for 2015, says IPSE survey
Contractors appear cautiously optimistic about 2015 prospects and a third expect contract numbers and fees to increase in the coming year. The latest Freelancer Confidence Index published by the Association of Independent Professionals and the Self-Employed (IPSE) notes that the forthcoming General Election is contributing to the caution.
“The survey shows a strong end to 2014 with freelance businesses performing well,” explains Suneeta Johal, IPSE research Manager and co-author of The Freelancer Confidence Index. “The results suggest the number of contracts will continue to grow and capacity for freelancers will increase as demand for services rises.”
She continues: “However, business confidence among freelancers has fallen and the general perception is the economy will perform only marginally better in 2015, although their own businesses will remain stable. Nearly half of the respondents expect there will be no change in revenue and over half expect input costs to rise over the next twelve months.”
Contractors with scarce IT, engineering and technical skills in high demand
One in five contractor clients are predicting that shortages of hard to source skills will worsen over the next 12 months. This includes IT, engineering and technical skills, and contractors with these skills are enjoying increasing demands for their services.
This is according to the Recruitment and Employment Confederation’s (REC) JobsOutlook for December 2014, which also reports that contractor clients are now principally using contractors to support their growth plans. The focus in recent months has been to use contractors as a “source of short-term access to key strategic skills”.
REC chief executive Kevin Green highlights the challenges UK contracting clients are facing: “Businesses are increasingly thinking about expanding their numbers and many are telling us that they can’t take on more work without more staff
“At the same time, the UK is suffering from skills shortages across the economy and it’s getting harder for hirers to attract and retain the talent they need.”
Scotland’s contracting sector puts in a solid performance at 2014 yearend
Contractor activity in Scotland ended 2014 with a solid performance. The latest Bank of Scotland Report on Jobs for December 2014 shows the core contracting disciplines of IT & Computing, engineering and construction and accounts & financial in third, fourth and fifth place respectively in the demand league table.
The report also placed Edinburgh at the centre of contracting activity during the month. The city had the highest level of contractor agency billings for the second consecutive month, alongside experiencing the most marked drop in candidate numbers.
“The focus of activity on Edinburgh is consistent with the financial sector’s renaissance, particularly when we see continued strong demand growth in the IT and finance sectors,” notes ContractorCalculator CEO Dave Chaplin.
Although IT, engineering and finance ended 2014 positively, the interim market performed less well. The category slipped one place into eighth and last place in the demand league table. The executive and professional market in Scotland has consistently underperformed when compared to the UK as a whole throughout the last 12 months.
Marketing contractors benefit from record budget growth during 2014
Marketing, IT and media contractors benefitted from record growth in marketing budgets and the resulting stream of lucrative contracts during 2014. Overall growth slowed during the final quarter of the year but in key areas of spend, such as internet, budgets increased.
The Institute of Practitioners in Advertising (IPA) Bellwether Report for the fourth quarter of 2014 highlighted that there was “an indication amongst companies for more cost-efficient marketing solutions”. This resulted in an18 month high in internet marketing budgets.
What is also encouraging for contractors is that clients in the sector are positive about future prospects, highlighted by the report: “Supporting the overall increase in marketing budgets was ongoing optimism amongst companies regarding their own financial prospects. Nearly 46% of the survey panel have become more optimistic.”