Contractors continue to receive mixed messages about the health of key contract markets, particularly in the IT sector, which appears to be experiencing short-term fluctuations in demand. However, 83% of contractor clients remain committed to maintaining or growing their flexible workforce. And the UK’s medium-sized businesses (MSBs) may generate renewed contractor demand to take up the slack where demand in ailing sectors, such as finance, is faltering. Contractor demand from the oil and gas sector and its supply chain has been hit by the Chancellor’s ‘windfall tax’, but promises to improve over the longer term.
In this month’s ContractorCalculator Monthly Report:
- The Monster Employment Index shows online demand for IT contractors has fallen by 4% between August and September, but demand for engineers bounced back
- In contrast, the latest JobsAdsWatch figures show that advertising for IT contractors increased by 4.7% during July, August and September 2011
- Despite the fragile economy and the newly introduced Agency Workers Regulations, October’s Recruitment and Employment Confederation (REC) JobsOutlook shows “the overall picture…changing for the better”
- Oil and gas contractor prospects continue to suffer from the ‘windfall tax’ imposed on the sector, reveals the latest Oil & Gas UK 2011 Economic Report, although the longer-term future of the sector holds greater promise
- The UK’s own ‘Mittelstand’ of medium-sized businesses (MSBs) could provide the contract growth markets over the next decade, according to research by the Confederation of British Industry (CBI) and McKinsey.
Online demand dips for IT contractors, but rises for engineers
Online demand for IT contractors fell by 5 points, or 4%, during September, reports the latest Monster Employment Index (MEI). But although the overall index fell for a second month running, engineering contractors bucked the trend as online demand bounced back after a slight fall over the summer.
Construction contractors are also enjoying an upswing in their fortunes, with online demand in the sector increasing steadily over the last four months, up 24% compared to September 2010. The blips in demand for engineers and IT contractors could be just that – blips – because both sectors show strong year-on-year demand. Online demand for engineers has grown by 30% and for IT contractors by 19% since September 2010.
Monster UK & Ireland spokesperson Michael Gentle suggests that seasonal factors have depressed demand. “Despite a slowed level of recruitment activity in the Index following the summer months, it’s not all doom and gloom, with some sectors paving the way to increased job opportunities.”
Advertising for IT contract assignments increase by 4.7% in Q3 2011
IT contractors are still experiencing demand, as the number of advertised assignments increased by 4.7% in the third quarter of 2011, according to the latest figures from JobsAdsWatch. Permanent assignments increased by 1% over the same period, suggesting the IT contract market is currently more bullish than the permanent sector.
These quarterly figures are in contrast to the fall in monthly online demand shown by the latest Monster Employment Index (MEI). However, JobsAdsWatch’s data lends further weight to the argument that the MEI’s fall in demand was a blip, because JobsAdsWatch also takes its data from online advertising, and any falls in September demand were outweighed by demand in the previous months to give an increase over the quarter.
Despite a slowed level of recruitment activity in the Index following the summer months, it's not all doom and gloom, with some sectors paving the way to increased job opportunities
Michael Gentle, Monster UK & Ireland
Software houses/consultancies and the finance sector dominate demand, with each exhibiting an order of magnitude greater demand than any other sectors (8,176 and 6,175 IT contract ads in the quarter respectively). However, it is the retail sector that has shown the greatest growth in demand over the quarter: 24.4% compared to 23.9% growth in advertised contracts by software houses/consultancies and 16.5% growth in contracts advertised by the financial sector.
82% of contractor clients plan to maintain or increase their use of temps and contractors
Despite the fragile economic conditions, depressed labour market and the introduction of the Agency Workers Regulations on 1 October 2011, contractors are still very much in demand, as this month’s Recruitment and Employment Confederation’s (REC) JobsOutlook shows.
82% of contractor clients “are planning to either maintain or increase their use of temporary staff in both the short and longer term” reveals the survey, which samples 600 contractor and temp clients on a three month rolling basis. Public sector respondents are less positive, with 63% saying that the impact of public sector cuts will have either a “quite serious” or “very serious” impact on their hiring intentions.
And some clients are clearly positive about future prospects, as REC Director of Research Roger Tweedy explains: “The underlying trend this month is one of improvement in employers’ optimism about their future hiring intentions. Ongoing feedback from recruitment professionals confirms that businesses in many sectors are still looking to attract workers with the right talent, despite the difficult economic climate.”
Oil and gas contractors continue to suffer from government’s ‘windfall tax’
Oil and gas contractors have lost out on new contracts due to the ‘windfall tax’ imposed by the Treasury in the 2011 Budget. According to the Oil & Gas UK 2011 Economic Report, published by trade body Oil & Gas UK, the new 81% top rate of tax on oil and gas production resulted in a quarter of projects in “technically challenging, small or remote fields” being cut overnight.
Oil & Gas UK Chief Executive Malcolm Webb believes the tax has damaged the sector’s prospects: “A heavy tax rate…and greater uncertainty over future tax treatment, has not helped the industry’s case in proving attractive to international investors.” And this is likely to be counter-productive as a tax-raising measure, as a fifth of all corporation tax received by the Exchequer in 2010 came from the oil and gas sector.
Despite the negative effects of the ‘windfall tax’, the report says that the UK’s oil and gas sector supports over 440,000 jobs, including a substantial number of ongoing contract opportunities. There are a further 24 billion barrels of oil that remain to be extracted from the UK’s North Sea fields which, when added to forecast decommissioning activity, should maintain a steady stream of contracts over the next several decades.
Medium-sized businesses: the contract growth-market of the next decade?
Contractors seeking alternative sources of contracts to ailing sectors such as finance and manufacturing may find the UK’s medium-sized businesses (MSBs) a potentially under-exploited contract market. The Confederation of British Industry (CBI) has conducted research with McKinsey that shows businesses with a turnover of between £10m and £100m could inject up to £50bn into the UK economy by 2020, creating significant new contract potential for contractors.
Further research by innovation thinktank NESTA (National Endowment for Science, Technology and the Arts) shows that just 6% of MSBs create 60% of new jobs and contracts in the MSB sector. Contractors targeting these high-growth MSBs could tap into a potentially lucrative stream of contracts as these businesses hire interim expertise to help manage growth.
“I want the UK to have its own version of the German ‘Mittelstand’ – a backbone of medium-sized firms which export, innovate and generate growth,” explains CBI Director General John Cridland. “These future champions would help the UK weather unexpected economic shocks, and act as a new engine for growth.”