Contractors are facing potentially uncertain times, with the markets for contracting disciplines performing at highly variable rates. On the one hand, oil and gas contractors are experiencing a renaissance in demand that promises to extend well into the rest of the decade. Conversely, IT and engineering contractors have seen short-term falls in demand, yet engineers are consistently cited by clients and recruiters as the hardest of contractors to source. Contractors recognising this market volatility and rigorously applying their contracting skills to identify market hotspots are the ones who will stay in contract during 2012.
In this month’s ContractorCalculator Market Report:
- Online demand for IT and engineering contractors falters in January, but double digit year-on-year growth is suggesting a temporary ‘blip’: Monster Employment Index
- The uncertainty in the UK labour market highlighted by the latest Chartered Institute of Personnel and Development (CIPD) Labour Market Outlook is likely to work in contractors’ favour
- UK oil and gas contractors working in the North Sea are amongst the best paid globally and have good prospects, according to the 2012 Oil & Gas Global Salary Guide
- Contractors in the oil and gas, financial and video games sectors dominate the Scottish contracting scene, with the latest Bank of Scotland Report on Jobs reporting a surge in demand
- The weakening service sector revealed by the Confederation of British Industries’ (CBI) quarterly Service Sector Survey will benefit contractors up to a point, but may ultimately lead to a smaller pool of contracts.
Online demand for IT and engineering contractors plummets in January
Online demand for IT and engineering contractors fell sharply in January, by 4.6% and 8.5% respectively, compared to December 2011. And according to January’s Monster Employment Index, online demand for construction contractors showed a monthly fall of 12.9%.
Despite these monthly falls, all three of these core contracting disciplines appear in the top five sectors according to year-on-year growth: engineering demand has grown by 24% since January 2011; IT by 19%; and construction by 9%. This suggests that the January falls could be a ‘blip’ due to seasonal factors.
The headline index fell by 8.5%, which Monster UK & Ireland spokesperson Michael Gentle blames on the ongoing eurozone concerns: “The economic uncertainties across Europe seem to be taking their toll on the British labour market, which is reflected in the UK Index this month.”
Companies are still actively hiring, with opportunities for professionals in a number of sectors, like engineering and IT
Michael Gentle, Monster UK & Ireland
More positively, Gentle singles out core contracting disciplines as bright spots: “Despite this, companies are still actively hiring, with opportunities for professionals in a number of sectors, like engineering and IT.”
Contractors will benefit from ongoing labour market uncertainty
The ongoing uncertainties in the UK labour market, highlighted by the latest Chartered Institute of Personnel and Development (CIPD) Labour Market Outlook: Winter 2011-12, will benefit contractors, as clients are more likely to hire low-risk contractors rather than employees.
The report shows that hiring intentions have fallen to their lowest level since the recession, “primarily reflecting a further fall in confidence in the private sector”. Other labour market surveys, such as the KPMG/Recruitment and Employment Confederation (REC) Report on Jobs, demonstrate that the demand for contract and temp workers is increasing. That suggests employers are choosing to recruit contractors over employees, for now.
The finance, insurance and property sectors have the strongest hiring intentions over the next quarter, with demand forecast to be relatively strong for management, IT, sales and marketing, and business development roles. Firms are still hiring migrant labour from the European Union (EU) and outside the EU, with IT leading the migrant worker demand league table.
UK oil and gas contractors are well paid with good prospects
UK oil and gas contractors are among the best paid in the world, according to the 2012 Oil & Gas Global Salary Guide. They saw rates increase by up to 30% in 2011 to reach averages of £540 to £900 a day as hiring returned to the UK sector following the recession. Further rate increases are expected as the rapid recovery of the sector stimulates acute skills shortages, particularly in upstream disciplines, with exploration and production activity expected to ramp up significantly.
“Average oil and gas salaries in the UK are around 8% more than the worldwide average,” notes Duncan Freer, managing director of the guide’s co-author, Oil and Gas Job Search. “Greater activity is scheduled for 2012 and beyond, following a difficult period during the recession.”
Greater investment certainty is resulting in a larger proportion of permanent hires as companies gain the confidence to make long-term recruitment decisions. However, contractors are being used in new regions and countries where the fluctuation in revenues from these markets can be matched to the flexibility resulting from hiring contractors. So the use of contractors has become more widespread than in previous years.
Surge in demand for contractors in Scotland fastest since August 2011
The contract market in Scotland grew at its fastest rate since August 2011 and reversed a two-month run of declining demand. According to the Bank of Scotland Report on Jobs for January, although demand grew, billings fell marginally. This suggests a mismatch between demand and the availability of suitably skilled contractors.
IT and computing lead the demand surge in January, with engineering and construction in third place after nursing and medical care. Interim management contractors in the accounting and financial sector are fourth in the demand tables. Billings declined sharply in Dundee, suggesting that video games and financial sector clients based in the city might be making cut-backs.
“The Scottish labour market showed a small but important improvement in January,” explains Donald MacRae, Chief Economist at the Bank of Scotland, “despite slowing growth in the eurozone and the UK.”
Contracting in Scotland is dominated by three sectors and regions: the video games sector based primarily in and around Dundee; Aberdeen’s oil and gas and offshore engineering hub; and the financial sector with clients found mainly around Edinburgh. These centres of excellence result in the high level of demand for IT and engineering contractors in Scotland.
Contractors gain short term from a weakening service sector
Contractors will gain in the short term from a weakening service sector, as firms choose to hire flexible, low risk workers during times of uncertainty. But contractors need the UK’s service sector to expand again to sustainably increase the pool of available contracts.
The February Confederation of British Industries’ (CBI) Quarterly Service Sector Survey shows that business conditions have weakened in the UK’s service sector. However, the good news for contractors is that the decline in business volumes is slowing, and that headcounts are increasing in the business and professional services segment.
“Although volumes of business activity continued to worsen across the UK services sector in the past quarter compared with the previous quarter, there are some tentative signs that conditions may be levelling out,” CBI economist Ian McCafferty explains. “Firms providing business and professional services have seen business activity deteriorate, but not to the extent they had anticipated.”