Contractors continue to benefit from cross-sector skills shortages, not only in the UK but on a global scale, as shown by this month’s key market statistics. Clients are recognising the tangible benefits provided by contractors, and are increasingly using contingent staff on a more strategic basis to take advantage of favourable market conditions. Meanwhile, continued long-term growth in terms of contractor demand points towards a broad-based workforce shift as more workers embrace the ‘gig-economy’.
In this month’s ContractorCalculator Market Report:
- Contractor rates continue to climb as clients invest more to secure badly needed skills, shows the Recruitment and Employment Confederation (REC)/KPMG Report on Jobs for December 2015.
- Clients are increasingly using contractors to drive business growth and take advantage of buoyant market conditions, reports the REC JobsOutlook for January 2016.
- ManpowerGroup’s 2015 Talent Shortage Survey reveals contractors are well placed to take advantage of worsening skills shortages worldwide.
- Finance contractors could benefit from improved optimism and an expansion in business volumes within the sector, reports the Confederation of British Industry (CBI)/PwC Financial Services Survey for December 2015.
- Contractor demand continued its long-term growth trend in December, recent figures from the Association of Professional Staffing Companies (APSCo) show.
Contractor agency billings growth not enough to close supply and demand gap
Contractor skills shortages remained pronounced at the tail end of 2015, as the gap between contractor supply and demand widened. As a result, a contract-rich environment continues to grow and contract rates continue to rise.
The Recruitment and Employment Confederation’s (REC)/KPMG Report on Jobs for December 2015 reports that, whilst contractor agency billings continued to rise, they did so at a much slower rate than November’s five-month high.
Meanwhile contractor demand increased at a similarly moderated pace, whilst availability continued its marked decline, compounding the shortfall in terms of candidates.
The disparity has played into the hand of contractors, who saw their average rates continue to climb in December as clients committed to investing more to secure the right talent.
The finance sector held onto second place in the demand league table, whilst IT and engineering slipped to fifth and eighth respectively. As Bernard Brown, Partner at KPMG notes, IT contractor demand has been boosted as a result of cybercrime, suggesting this is an area for IT contractors to target for new skills acquisition:
“In the wake of several high profile breaches, companies are investing heavily in their cyber security teams and demand for IT specialists surged in December.”
Contractors increasingly recognised for contribution to innovation and growth
Contractors are increasingly being recognised by clients for the tangible benefits they offer in aiding business innovation and growth, with contractor demand set to rise as a result.
This is according to the Recruitment and Employment Confederation’s (REC) JobsOutlook for January 2016, which reports that 82% of clients engage with contractors in order to gain short-term access to key skills.
Meanwhile, the notable drop-off in terms of firms highlighting their use of contractors in managing peaks in business indicates that clients are increasingly using contractors on a more strategic basis.
As a result, more businesses are looking towards contractors as they seek to take advantage of favourable economic conditions, with 99% of contractor clients planning on either maintaining or increasing contingent headcount over the next three months.
This comes in spite of the fact that 94% are operating with limited capacity to take on more work, further emphasising the value that contractors provide as catalysts for business growth.
“As long as the economy remains buoyant and businesses continue to seek out opportunities for expansion, contractors should find sourcing new contracts less of a challenge,” highlights ContractorCalculator CEO Dave Chaplin.
Contractor demand boosted by global talent shortfall
Contractors are set to benefit from rising global demand for contingent workers with the rights skills, as the number of international businesses negatively affected by skills shortages continues its six-year growth trend.
The 2015 Talent Shortage Survey from ManpowerGroup reveals that 38% of worldwide firms now report difficulties filling roles, a 2% increase compared with 2014.
Despite reports of deepening skills shortages, ManpowerGroup finds that only 14% of UK businesses report difficulties sourcing sufficient talent, way below the international average. As ContractorCalculator CEO Dave Chaplin points out, contractors who are struggling to acquire UK-based contracts may be better placed looking abroad:
“Looking at the comparisons, Hong Kong could prove a prosperous destination for finance contractors. Whereas closer to home, engineering or construction contractors may consider taking advantage of the considerable demand for talent in Germany.”
Further, one in five affected businesses aren’t actively pursuing strategies to address shortfalls, compounding shortages whilst leaving contractors better placed to take advantage of growing demand.
“Inevitably, companies will look to contractors more and more when they find that they haven’t got the necessary skills within their employees’ ranks,” Chaplin concludes. “As a result [contractors] will find themselves increasingly able to command more lucrative fees.”
Finance and IT contractors set for bright start to 2016
Contractor prospects in the finance and IT sectors look promising going into 2016, despite a disappointing end to last year, two key market reports have indicated.
The Confederation of British Industry (CBI)/PwC Financial Services Survey – December 2015, shows that optimism in the finance sector rose by 6% during the final quarter of 2015.
This comes in spite of a 33% decline in contractor demand in the capital in December, month-on-month – as highlighted in the latest London Employment Monitor from Morgan McKinley.
Optimism in 2016 has been so far vindicated as Morgan McKinley financial services operations director Hakan Enver points towards strong January figures with regards to business activity on behalf of contractors and clients.
Meanwhile, CBI/PwC indicates that an overall expansion in business volumes – particularly in areas such as life insurance and investment management – looks likely to drive demand growth in the finance sector, potentially opening up contract opportunities in the process.
The finance sector also looks likely to prove a buoyant hub of activity for IT contractors, with concerns amongst finance firms about cyber-crime driving IT investment up by an estimated 54%, suggesting those with cyber-security experience could find their skills particularly sought-after.
Contractor demand records strong year-on-year growth
Contractor demand continued its long-term growth trend in December 2015, as recent data from the Association of Professional Staffing Companies (APSCo) shows that contract vacancies were up by 4% compared with the same period the previous year.
Again, the driving force behind this growth was found to be the finance sector, where contractor demand saw a 66% year-on-year increase. This has been largely attributed to a sharp increase in workload amongst clients prior to the financial year-end.
Suggestions that the sustained long-term growth trend is indicative of a workforce shift towards a new ‘gig-economy’ has been vindicated by the latest figures from the Office for National Statistics (ONS) which show that the number of self-employed workers rose by 98,000 in the three months to November 2015, year-on-year.
“Contract vacancies are once again strong across the professional sectors. As we have long predicted, [organisations now] recognise that a flexible workforce enables them to implement change, manage fluctuations in demand and bring on board niche skill sets,” highlights APSCo Chief Executive Ann Swain.
“The recruitment profession is under no illusions that contractors are the new dominant force in the labour market and the way we work is changing to reflect this.”