Contracting clients are running out of capacity but are experiencing increasing difficulties in finding contractors with the right skills and experience to meet rising demand. The impact has been sharply increased rates across the UK as candidate availability has fallen in all of the core contracting disciplines and in all regions. This is presenting contractors with a hugely buoyant market and excellent short-term prospects. But the concern is that increasing skills shortages could eventually put the brakes on economic growth.
In this month’s ContractorCalculator Market Report:
- Candidate availability fell at its fastest rate since December 2000, says April’s Recruitment and Employment Confederation (REC)/KPMG Report on Jobs, resulting in skills shortages that are threatening the UK’s economic growth
- Scotland has run out of contractors to meet increasing demand, shows April’s Bank of Scotland Report on Jobs, which is driving up rates and presenting an opportunity for contractors across the rest of the UK who are willing to relocate
- An increasing number of contractor clients are at full capacity, reports April 2014’s Recruitment and Employment Confederation (REC) JobsOutlook, suggesting strong forward prospects for contractors
- The 16th Harvey Nash CIO (chief information officer) Survey highlights that IT contractors seeking to work on the most lucrative and professionally rewarding projects need to focus on acquiring digital revenue-generating skills
- Contractor clients are dominated by large organisations across the public, private and third sectors, shows Chartered Institute of Personnel and Development’s (CIPD) Labour Market Outlook for Spring 2014.
Contractor demand increases as candidate numbers continue to fall
Contractor demand continued to increase during April 2014. However, the availability of candidates for new contracts fell at the steepest rate since 2000, according to the latest Recruitment and Employment Confederation (REC)/KPMG Report on Jobs.
REC CEO Kevin Green is concerned that the shortage of suitably skilled candidates is serious enough that it could impact negatively on economic growth: “The jobs market could be jeopardised with thousands of employers not able to find the skills and talent they need to meet increasing demand. The number of candidates available to fill both temporary and permanent jobs is falling at its fastest rate in a decade.”
Contractor availability fell for the tenth consecutive month, and according to recruiters the lack of contractor candidates was most pronounced in London and the south, where the UK's IT contracting sector is focused.
Engineering was first in the contractor demand league table, with construction in fourth place and the three remaining core contracting disciplines – IT & computing, accounting/financial and executive/professional – in fifth, eighth and ninth places respectively.
Contractor availability in Scotland fell in April, as rates grew at a six-year high
Contractor demand in Scotland increased at a marked pace during April 2014. As a result, rates increased at their fastest pace for six-years as “an acute lack of available candidates” continues to drive skills shortages.
The latest Bank of Scotland Report on Jobs also highlights a sharp increase in demand for IT & computing and accounts and financial contractors, pointing to the continued recovery of Scotland’s financial sector. Contracting pay rates in Scotland showed the strongest rise since May 2008, further confirming that demand is fast outpacing supply.
“The Scottish labour market continued to improve in April,” notes Bank of Scotland chief economist Donald MacRae. “Demand for staff was strong but accompanied by a lack of available candidates. Salary inflation picked up in the month, partially reflecting demand for staff.”
A third of contractor clients at full capacity, suggesting a strong contract market
Contractor clients operating with no spare capacity for additional work have risen from a quarter to a third between March and April 2014, highlights April 2014’s Recruitment and Employment Confederation (REC) JobsOutlook.
This indicates that contractor prospects are continuing to improve, as contractors are hired to expand client capacity in the short term. The report also notes that half of all contractor clients plan to increase their contractor headcounts over the next quarter, and two fifths believe demand will extend into the medium term.
“The economic recovery is having a real impact on the jobs market, as these are the best results we have seen since this survey began in 2009,” says REC CEO Kevin Green. “The labour market is becoming more candidate-led and it is vital that businesses look at their hiring processes to ensure that they are fit for purpose and will attract the candidates they are looking to hire.”
IT contractors must focus on acquiring digital skills to drive revenue growth
IT contractors seeking to target the next major growth area need to acquire the digital skills and capabilities to help their clients drive revenue growth, and move away from projects that generate cost savings and operational efficiencies.
This is one of the key conclusions of the 16th Harvey Nash CIO (chief information officer) Survey, which also identifies a new kind of client that contractors need to understand and target – the chief digital officer.
CIOs and technology leaders are seeing growing budgets and growing prominence in their organisation as CEOs are turning to technology to drive growth
Dr Jonathan Mitchell, Harvey Nash
“CIOs and technology leaders are seeing growing budgets and growing prominence in their organisation as CEOs are turning to technology to drive growth,” highlights Harvey Nash global CIO Practice chairman Dr Jonathan Mitchell.
Revenue generating projects are increasingly taking precedence, and the role of the CIO is evolving beyond providing IT infrastructure for the business. Just over half (51%) of UK-based CIOs now prioritise driving revenue growth.
Contractor clients dominated by large organisations and the public sector
Contractor clients are mainly large organisations in the corporate and third sector, and public sector hirers. This is according to the Chartered Institute of Personnel and Development’s (CIPD) Labour Market Outlook for Spring 2014, which also reveals that around 69% of all employers use workers on temporary contracts.
But when this figure is broken down, it shows that 83% of public sector clients and 65% of private sector businesses use contractors, whereas 51% of small to medium sized enterprises (SMEs) do not hire flexible workers. Nine out of ten public administration and defence clients, including government agencies and departments, report that they use contractors.
On average, CIPD survey respondents report that up to 10% of their entire workforce is made up of contractors or other flexible workers, such as freelancers, interims, consultants and agency workers.