Contractors are embarking on yet another year of uncertain prospects and polarised demand, although there are reasons to be cautiously optimistic about contract market prospects. The UK’s private sector is soaking up those contractors being shed by government departments and local authorities. However, what is really needed for the UK contract market to fly throughout 2013 is for the UK’s big corporations to unleash their huge cash piles and make their long-awaited business investments.
In this month’s ContractorCalculator Market Report:
- The Monster Employment Index shows that online demand for contractors is increasingly polarised as the contracting sector enters 2013
- Contractor hiring prospects look twice as positive in the first quarter of 2013 compared to the same period in 2012, predicts ManpowerGroup
- Third quarter demand for interim management contractors suffered from London 2012-induced project postponements and delayed decision making, reports the Ipsos MORI Interim Management Association Market Audit Q3, 2012
- Hot IT contractor skills for 2013 and beyond will be social, mobile and cloud, forecasts Gartner in its Top Industry Predicts 2013 report
- The latest Ernst & Young ITEM report claims that the UK economy, and contracting, won’t reach their full potential unless business investment increases, which in turn needs the right government policy framework.
Online demand for contractors increasingly polarised
Online demand for contractors is diverging, with disciplines such as engineering and interim management showing strong year-on-year growth, of 16% and 10% respectively.
In contrast, banking, finance and insurance is one of the poorest performers, falling by 12% compared to the same period 12 months ago, according to November 2012’s Monster Employment Index.
Construction and extraction is not faring much better, with demand falling 9% in a year. And online demand for IT contractors only achieved a modest 2% increase over the same period.
Contractor demand by occupation paints a similar picture. According to Monster’s classifications, most engineers will fall into the ‘professionals’ category, which is showing 4% growth year-on-year.
As most IT contractors do not have formal professional qualifications regulated by a professional institute, they are classified as technicians and associate professionals, and online demand for this category has fallen by 1% since November 2011.
Contractor hiring prospects have improved two-fold since Q1 2012
Contractor hiring prospects across most core contracting disciplines look set to improve in the first quarter of 2013, with client hiring intentions improving two-fold since the same period, the first quarter, of 2012. Construction is the notable exception, where contractor hiring intentions have slumped deeply.
This is according to the Manpower Employment Outlook Survey Q1/2013, which identifies the finance and business services sector as having the strongest hiring prospects, closely followed by mining.
Interestingly, and in contrast to other labour market data, such as the Monster Employment Index above, Manpower forecasts that the finance sub-sector will pick up in 2013. If true, that bodes well for financial IT contractors.
There has been a seismic shift in the nature of employment, with many of the new roles created being temporary or part-time positions
Mark Cahill, ManpowerGroup UK
“There has been a seismic shift in the nature of employment, with many of the new roles created being temporary or part-time positions,” commented ManpowerGroup UK managing director, Mark Cahill on the survey’s findings.
“The message to jobseekers is clear: If you want to get ahead in the 2013 jobs market, you need to accept this as the new reality...”
Interim management contractor assignments fall as a result of London 2012
The total number of interim management contractor assignments in the third quarter of 2012 fell by 13% compared to the previous quarter. According to the Ipsos MORI Interim Management Association (IMA) Market Audit Q3, 2012, the decline was down to project postponements and delayed decision making resulting from London 2012.
The interim sector continues to diversify away from public sector clients; the private sector now accounts for more than two thirds of all interim management assignments – a level not seen since 2007. Banking and finance continues to dominate the interim sector, with 46% of all private sector assignments originating from financial services.
Jason Atkinson, chairman of the IMA, warns that the third quarter slump may not be a blip:
“With the slowdown in [interim assignment] growth in Q3, coupled with the economic uncertainty, it is tough out there. The sector is still growing, but the growth has slowed [and 2013] will be another tough year. We will still see growth, but it will be the flattest we have seen.”
Despite his gloomy predictions, Atkinson remains upbeat about certain interim markets: “Interim management will make big strides into the small to medium sized enterprises (SME) space, supporting young businesses in their growth plans. While a talent shortage exists, there will always be demand for interims.”
Hot IT contractor skills for 2013 will be social, mobile and cloud, predicts Gartner
The hot IT contractor skills for 2013 and beyond will be in social networking, mobile communications and the cloud and information. Technology analyst Gartner’s view, in its report Top Industry Predicts 2013:The Nexus of Forces Will Drive Massive Transformation in Many Industries, is that these skills will enable organisations to “face massive changes during the period from 2013 through 2015”.
Kimberly Harris-Ferrante, Gartner vice president and analyst, explains what form these changes might take: “The social commons, mobile communications, cloud computing and information [sectors] will be especially important factors in driving even greater industry transformation, challenging existing business models and processes and opening up greater competitive and other threats."
If Gartner’s forecasts are accurate, IT contractors with these ‘hot skills’ – or prepared to invest in developing them – will find contract opportunities. These are likely to arise across the multiple sectors that are adopting the new technologies, which include the automotive sector, medical devices, financial services, utilities and the public sector.
To reach its potential, contracting needs business investment to recover in 2013
Contractors can look forward to another three years of uninspiring market recovery unless business investment picks up; and they risk losing clients relocating and offshoring to economies where investment is taking place.
This comes from the latest Ernst & Young ITEM Club special report on business investment, which highlights that the level of UK corporate business investment remains 15% below pre-recession levels.
Without capital investment, British businesses won't be able to develop the products nor build the capabilities necessary to create the competitive advantage that is required to penetrate new markets successfully
Mark Gregory, Ernst & Young
Variations in business investment have a disproportionate impact on contractor prospects. That’s because it is contractors who are typically first in the door with ‘turn-key’ skills to get business investment projects started. But UK businesses have stockpiled cash to the tune of £729bn, or 47% of GDP, and is not making these investments.
“Without capital investment, British businesses won’t be able to develop the products nor build the capabilities necessary to create the competitive advantage that is required to penetrate new markets successfully,” warns Ernst & Young chief economist Mark Gregory.
The only 2012 contracting bright spot identified by the report is that corporates are ‘flexing’ their workforces and increasing contract hires to meet capacity demands, rather than making capital investments. And according to Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, government has a key role to play to convince companies to invest and hire more contractors.
He says: “Bringing forward the Comprehensive Spending Review and establishing a clear strategy in areas that define the long term economic landscape, such as energy, transport and environment, will provide a more certain framework against which businesses can evaluate their options.”