The economic picture for contractors is gradually improving. But, as the surveys we feature this month suggest, recovery is fragile and taking time to show the growth that UK PLC so desperately needs. There is some positive movement in the labour market, with interim management and oil and gas contractors having cause for tentative cheer.
In this month’s ContractorCalculator Market Report:
- The Monster Employment Index bounces back, jumping 7%, with increases in all major sectors except construction and telecoms
- Lay-offs ease but the UK jobs market is still ‘flat on its back’, according to the CIPD/KPMG Labour Market Outlook (LMO) Survey Autumn 2009
- The Interim Management Association’s Market Audit shows an increase in new interim contracts, led by banking and finance contracting assignments
- Mixed messages for oil and gas contractors following publication of the 11th Aberdeen and Grampian Chamber of Commerce Oil & Gas Survey November 2009
- Experian’s Insolvency Index shows that the financial health of firms has improved overall, with micro-businesses, such as those run by limited company contractors, the least likely to go under.
Monster Employment Index up 7%
Following months in the doldrums, the Monster Employment Index has leapt 7% to its highest level since February 2009, although it is still down 29% year on year. All major contracting sectors have increased, except for construction, which remains flat, and telecoms, which is down one point.
“Despite economic indicators showing that the UK remains mired in recession, the solid expansion in online recruitment activity… suggests the fourth quarter is off to a better start,” explains Hugo Sellert, head of economic research at Monster Worldwide. “The rise in online job openings to an eight-month high points to an early recovery in hiring demand.”
The public sector remains buoyant, actually increasing by 13% year on year, despite fears of a forthcoming cull in public sector spending. Engineering and technical contractors in production, manufacturing, maintenance and repair also have cause to celebrate following a 10% increase year on year.
‘UK jobs market generally still flat on its back’
The deterioration of the labour market is the slowest since the start of the recession in Spring 2008, mainly down to fewer firms laying-off workers, according to the latest (autumn 2009) quarterly Chartered Institute of Personnel and Development (CIPD) and KPMG Labour Market Outlook Survey.
Andrew Smith, Chief Economist at KPMG, says that rates of pay have suffered, as many contractors will know to their cost. “This recession has come through not only in job losses, but also in greater labour market flexibility, reduced working hours, pay freezes and outright wage cuts,” he says. Indirectly, contractors may benefit from the greater flexibility they offer as employers realise there are alternative models to employment.
But if the slow-down in lay-offs is a sign of recovery, it is a fragile one, as Gerwyn Davies, Public Policy Adviser at CIPD warns: “The UK jobs market remains flat on its back. The patient remains seriously weak, won't recover for several years, even if a return to robust economic growth provides the necessary tonic, and could easily relapse if the recovery is as fragile and anaemic as many economists fear.”
The UK jobs market remains flat on its back. The patient remains seriously weak, won't recover for several years, even if a return to robust economic growth provides the necessary tonic, and could easily relapse if the recovery is as fragile and anaemic as many economists fear
Gerwyn Davies, CIPD
Interim management contractors see growth
Banking and finance are leading the field. The results from the Interim Management Association’s Third Quarter 2009 Market Audit show that 680 new contracts were awarded, a 24% increase on the previous quarter. The private sector has regained the lead over the public sector, with 53% of all contracts being with private firms.
IT and telecoms account for 11% of assignments, a slight decrease from 12% in the previous quarter. Construction makes its first appearance in the audit since the third quarter of 2008, accounting for 4% of contracts, and apparently contradicting other market indicators.
Interim management contractors appear to be joining their clients for the longer term, as the average length of contracts was between 140 billable days – representing nearly two thirds of the working year – and up to almost four years.
Oil and gas operators to recruit more contractors
Against a backdrop of price instability, reduced investment by oilfield operators of the UK Continental Shelf (UKCS) and the overall economic downturn, the oil and gas sector has held up remarkably well. So says the 11th Aberdeen and Grampian Chamber of Commerce Oil & Gas Survey.
Rates are being squeezed and recruitment is mainly to replace personnel, rather than to fill new roles, but, according to Head of Energy Bob Ruddiman at McGrigors, the sponsors of the report, operators will be taking-on contractors to maximise flexibility. He says: “The report suggests the industry has tackled the recession better than many other sectors. It appears to have learned lessons from previous downturns and has been mindful of the need to have a skilled workforce to capitalise on future opportunity.”
And although the report says that, over the next three years, most operators expect to reduce staff, the good news is that 50% of oilfield services contracting firms expect to increase the number of contractors.
Micro-businesses lead business stability tables
Information services firm Experian’s November Insolvency Index shows that micro-businesses (those with one or two director/employees, which includes many contractor limited companies) have a lower failure rate and are on average more financially stable than larger businesses.
The index indicates a tiny increase in the overall business insolvency rate – 0.09% to 0.10% – showing that ten in every 10,000 are going bust. However, the average financial strength score is at its highest since October 2008, suggesting that businesses are becoming more financially secure and have a reduced chance of failure.
According to Rolf Hickman, Managing Director of Experian group company pH, these results continue a positive trend. “Throughout 2008, the average financial strength score had been seeing a downward trend, but 2009 has seen a reversal,” says Hickman. “The financial solidity of UK businesses has been improving over the year.
“This has impacted on the insolvency rate, which has remained fairly stable since July, with a slight increase in October,” he continues. “If the financial strength of businesses continues to improve, we could see insolvencies maintain a low level and even start to fall.”