Contractor prospects remain generally positive heading into Spring. Skills shortages and the desire to innovate continue to drive demand for contingent staff, while economic uncertainty caused by the impending EU referendum impacts different sectors with varying levels of severity. The finance sector looks set to remain quiet over the coming three months, while contractors elsewhere and particularly those in engineering and IT continue to benefit from a sustained positive economic outlook.
In this month’s ContractorCalculator Market Report:
- Contractors continue to help clients drive innovation and development through their unique skillsets, reports the Recruitment and Employment Confederation’s (REC) JobsOutlook for March 2016.
- The REC Report on Jobs calls for Government backing for the professional staffing sector as contractor demand and skills shortages continue to rise.
- Skills shortages, security fears and a reduced contractor talent pool are all helping drive demand for IT contingent workers, the Harvey Nash 2016 Technology Survey shows.
- Hays’ Oil and Gas Global Salary Guide 2016 encourages clients to continue to engage with contractors to avoid an industry “brain drain”.
- The latest Confederation of British Industry (CBI)/PwC Financial Services Survey suggests finance contractor demand may stabilise as clients await a decision on the EU referendum.
Contractor clients not deterred by EU uncertainty: REC JobsOutlook
Contractor prospects remain promising despite lingering concerns over the EU referendum, as clients continue to look towards contractors to supplement innovation.
This is according to the Recruitment and Employment Confederation’s (REC) JobsOutlook for March 2016, which shows that 79% of firms believe economic conditions are improving.
Hiring intentions remain positive as a result, with 97% of contractor clients expecting to increase or maintain contractor headcount over the next three months, whilst 95% plan to do so over the remainder of the year.
“Demand for permanent staff has dipped slightly – possibly as a result of Brexit concerns,” notes ContractorCalculator CEO Dave Chaplin. “However, the ad-hoc nature of contracting means clients will continue to engage with contingent staff, who can offer their services without fears of softening demand.”
Engineering contractors should have little trouble sourcing contracts, with the sector retaining the top spot when clients were asked where they expect to experience the most recruiting challenges.
As REC chief executive Kevin Green highlights, demand is set to rise further as a result of Government initiatives, but already existing skills shortages prompt concerns over contractor availability:
“The Government announced new major infrastructure projects in last week’s Budget, but there are question marks over how increased demand for skilled workers will be met when supply is already a problem.”
Contract market needs Government support: REC Report on Jobs
Contractor demand continued to outstrip availability in February, further intensifying skills shortages ahead of an important few months for the contract sector, underlined by incoming tax legislation and the EU referendum.
The REC’s Report on Jobs for February 2016 notes that the rate of decline in contractor availability has eased to the slowest seen in more than two years. However, this wasn’t enough to help offset pressures caused by skills shortages and continued rising demand, both of which could be intensified in the near future.
“The UK labour market is at a critical juncture. Demand for staff remains strong, and pay is going in the right direction – but serious threats are looming just around the corner,” notes REC chief executive Kevin Green, alluding to the March Budget and upcoming tax changes.
“It’s vital that we have an informed debate about the impact the referendum might have on jobs, both in the short and long term,” he adds. “All parties must remember that UK employers need access to the global labour market to thrive.”
Meanwhile, the Midlands led a broad-based increase in contractor agency billings, whilst the engineering sector fared well in the contractor demand league table, coming in second.
Global IT contractor prospects boosted by skills and security concerns
IT contractor prospects look increasingly promising, as skills shortages, cyber-security fears and a reduction in the contractor talent pool are all contributing to continued rising global demand.
The Harvey Nash 2016 Technology Survey indicates that improving market conditions are leading many firms to ‘skills hoard’, convincing contractors to join their permanent workforce with large pay packets. Overall, 71% of respondents are now in permanent employment, marking a 13% rise since 2012.
Given the increasingly varied scope for IT contract opportunities, this is surprising. However, it does suggest that remaining contractors have a better chance of standing out in a depleted talent pool.
Skills shortages continue to trouble contractor clients, who remain undeterred. Globally, 53% of firms report to have been impacted by a talent shortfall in 2015, whilst 88% expect shortages to either worsen or remain the same in the near future.
Despite this, firms look to remain active in the jobs market, with three quarters of businesses planning to either maintain or increase headcounts this year.
Meanwhile, cyber-security looks likely to prove a growing source of contracts. Security is seen as one of the biggest threats to the sector, as only 43% of technologists believe their company is making a sufficient effort to protect itself from security risks.
Oil and gas contractors key to sector survival
Contractors are seen as key to avoiding an industry “brain drain” in the struggling oil and gas sector, though opportunities in the immediate future look set to remain scarce.
This is according to Hays’ Oil and Gas Global Salary Guide 2016, which indicates that 72% of oil and gas workers who have been made redundant are exploring opportunities outside of oil and gas, prompting concerns over worsening skills shortages.
The likely dilution of the job market could signal eventual increased demand for contractors who choose to weather the storm. In response, Hays encourages contractor clients to continue to engage with contractors to “help bridge the [skills] gap and alleviate workplace pressure.”
Meanwhile, Oil and Gas UK’s Activity Survey 2016 identifies decommissioning as a potential local source of income for contractors. The report notes that decommissioning expenditure in the North Sea is expected to rise from £1bn in 2015 to £1.5bn this year, and in excess of £2bn in 2017.
Elsewhere, economic stability (56%) has overtaken skills shortages as the number one industry concern for the first time in five years, although a substantial amount of respondents expect talent shortages (22%) to pose the main threat to development this coming year.
Finance contractor demand to stabilise as client optimism dips
Contractor demand in the finance sector looks set to stabilise over the coming three months, as factors such as macroeconomic uncertainty and market instability impact client optimism.
This is according to the latest Confederation of British Industry (CBI)/PwC Financial Services Survey which shows that business volumes and employment within the sector over the past quarter have risen at healthy rates.
Overall, a positive balance of +26% of firms reported an increase in business volumes, whilst +15% had increased headcounts. However, this wasn’t enough to prevent business sentiment amongst firms from falling at the fastest rate since 2011 (-21%). CBI director for economics Rain Newton-Smith attributes this to several macroeconomic factors:
“Concerns over China and a volatile start to the year for markets, alongside uncertainty about a possible Brexit, have created a perfect storm to dampen optimism in financial services.”
Newton-Smith adds that investment decisions have been put on hold by many firms until after the EU referendum, suggesting that contractor prospects may once again pick up once a decision has been reached.
Despite the overall gloomy sentiment, the report notes that contractors working in the insurance or building society sectors can expect to see continued rising demand over the next quarter.