Contractors are experiencing contrasting fortunes as clients’ hiring intentions are affected by concerns over the looming EU referendum, according to this month’s key labour market statistics. Whilst some contingent staff are seeing rising demand as firms seek short-term hires to reduce risk in the event of a Brexit, the finance sector has suffered a sharp downturn in contractor demand. However, opportunities are available within niche markets for contractors with specialist skills.
In this month’s ContractorCalculator Market Report:
- Contractor placements are accelerating as risk-averse clients seek to meet demand without leaving themselves vulnerable in case of a Brexit, shows the Recruitment and Employment Confederation’s (REC) Report on Jobs for April 2016.
- Finance and IT contractors are being encouraged to target niche markets as economic uncertainty causes fluctuating demand, reports Morgan McKinley’s UK Salary Guide 2016.
- New Kingston University research shows sustained growth in the UK contract sector, which contributed more than £100bn to the economy in 2015.
- The Fintech sector offers a promising source of contracts, as overall contractor demand falls as a result of Brexit fears, Morgan McKinley’s March 2016 London Employment Monitor shows.
- New survey data from the Association of Professional Staffing Companies (APSCo) suggests that contractor demand has virtually flat-lined as clients await an EU verdict.
Contractor demand buoyed by Brexit concern
Contractors are the beneficiaries as firms make temporary hires to help meet rising demand without leaving themselves vulnerable to an unfavourable outcome in the EU referendum.
The Recruitment and Employment Confederation’s (REC) latest Report on Jobs reveals contractor agency billings accelerated to a four-month high in March, in contrast with slowing growth in permanent placements.
“Temporary hiring is on the up as businesses seek to meet increasing demand while retaining the ability to react quickly to any threats that might be around the corner,” notes REC director of policy Tom Hadley.
Whilst vacancies continued to rise and contractor availability continued to decline, both did so at moderated rates, suggesting that skills shortage pressures may be easing.
Core contracting sectors continue to feature prominently in the contractor demand league table. The finance sector climbed to fourth place, followed by construction in fifth. The IT sector rose by one spot to eighth.
Demand for engineers appears to have plummeted – the sector sitting bottom of the table – but findings from the REC’s JobsOutlook for March 2016 suggest that engineer fortunes are likely to improve, with clients earmarking the sector as the one where they expect the most recruiting challenges in the near future.
Contractors encouraged to target niche markets in response to fluctuating demand
Finance and IT contractors continue to experience solid demand for their services, despite dampening optimism putting an effective halt to contingent hires in some sub-sectors.
Morgan McKinley’s UK Salary Guide 2016 attributes the moderated demand for finance contractors to numerous national and international factors, including concerns over the impending EU referendum and the freefall of global commodities prices.
However, the more risk-averse approach taken by many clients has spawned an increasing appetite for contractors with regulatory experience, such as risk management and compliance – the latter of which has seen contract rates rise by 20% on average.
IT contractors also have niche markets to target. Cyber-security specialists remain highly sought-after with contractors reportedly able to earn as much as £800 a day where a company has identified a significant risk.
The UK’s emerging Fintech sector also provides another source of contract opportunities, with Morgan McKinley citing recent instances where Fintech companies have doubled their developer headcount to match demand.
Contractor pay growth isn’t expected to match that of permanent employees in 2016 (5-10%, compared with 15-20%). Despite this, Morgan McKinley identifies a noticeable increase in permanent employees considering contract opportunities, adding:
“Organisations are also working hard to retain their contractors by imposing 12-month tenures so to offer longevity in their position.”
UK contract sector continues strong growth as clients benefit
The UK’s contracting sector continues its strong trend of growth, unabated by macroeconomic factors, as clients increasingly recognise the value added by skilled contingent workers.
A new study by Kingston University, Exploring the UK Freelance Workforce in 2015, shows that there are currently an estimated 1.91m contractors currently operating in the UK, accounting for 6% of all employment.
This marks a 36% increase from the 1.40m contractors who were active in 2008, with the study highlighting that the contracting sector was the only area of employment which maintained steady growth during the financial crisis of 2008/09, adding:
“Macroeconomic circumstances exert an influence on the demand for, and supply, of freelance workers. The benefits to end-users of hiring freelancers continue to be evident with the economic upturn.”
Clients aren’t the only beneficiaries, with contractor-owned companies estimated to have generated roughly £109bn in turnover last year. This figure is based on the estimated sales figures for businesses without employees in 2015 (£237bn) and the portion of those that are contractor-owned (46%).
However, the study also notes that this contribution may be even greater, given the ability of contractors to generate larger revenues due to their knowledge and skillsets.
Fintech sector provides bright spot as contractor demand dips
Finance and IT contractors continue to benefit from opportunities courtesy of the capital’s emerging Fintech sector, despite a slump in overall demand.
Morgan McKinley’s London Employment Monitor for March 2016 reveals a 13% reduction in vacancies, month-on-month, and a 21% decline in demand for professionals compared with March 2015.
Attributing the dip in fortunes to concerns over the outcome of the upcoming EU referendum, amongst other macroeconomic factors, Morgan McKinley Financial Services operations director Hakan Enver says it could take a few months for hiring to recover:
“The referendum is at the end of Q2, so any pickup in jobs activity will be dependent on the polls ahead of the referendum. If it’s very close, we might have to wait until hiring gets going again. However, it is quite precarious out there.”
Relief comes courtesy of the Fintech sector, where firms are still actively seeking out top talent. With rising numbers of firms trading in their traditional business model for an digital one, contractors can expect the sector to remain a prosperous source of opportunities for the foreseeable future.
Contractor demand softens ahead of EU referendum
Contractor demand growth in the UK has largely flat-lined, new figures suggest. The slowdown in demand comes after months of rapid growth for the contracting sector, and is being attributed to economic uncertainty caused by the looming EU referendum.
The latest survey data from the Association of Professional Staffing Companies (APSCo) shows that contractor demand has risen by just 1%, year-on-year. Meanwhile, contractor placements are up by 2%. Yet again, finance has proven to be the best performing sector, recording a 30% increase in contractor vacancies, compared with last year.
“While contractor vacancies often counterbalance a fall in demand for permanent talent, the fact that all hiring activity has close to flat-lined is indicative of the extent to which uncertainty linked to the EU referendum is deterring companies from taking on new staff,” notes APSCo chief executive Ann Swain.
“It seems that British business has well and truly pressed the ‘pause’ button while it awaits the outcome on the UK’s future in Europe.”
One positive for contractors is that the next few months could eventually be chalked off as an anomaly, should a favourable outcome in the EU referendum be reached – in which case the market is expected to make a swift recovery.