ContractorCalculator Market Report October 2011

Contractors are receiving mixed messages from the UK labour market, with contract opportunities becoming increasingly stratified in specific sectors. Although demand for contractors in the core disciplines of IT and engineering faltered over the summer, skills shortages in IT and engineering are still acute in some sub-disciplines. Demand for interim management contractors has rebounded and, whilst confidence has taken a battering in the financial sector, the UK’s medium-sized firms are upbeat with their growth and labour demand forecasts.

In this month’s Contractor Calculator Monthly Report:

  • Online demand for contractors in core contracting disciplines was flat or declining over the Summer, according to August’s Monster Employment Index
  • A drop in financial sector hiring stalls the UK’s labour market recovery, reveals the Manpower Employment Outlook Survey 4th Quarter 2011
  • Contractors targeting manufacturing and retail could be tapping a rich seam of future contracts, according to labour market data from Working Links
  • This year’s ECI Growth Survey suggests that smaller firms – those with turnovers from £10m to £200m – could offer contractors a fast-growing new market to target
  • Interim management contractor demand in the private sector returned to pre-recession levels earlier this year, reports the Interim Management Association’s (IMA) quarterly IPSOS Mori Q2 2011 market audit.

Online demand for IT and engineering contractors falters over the summer

Online demand for IT contractors was flat between July and August, increasing by only 0.8%, and demand for engineers over the same period actually declined by 1.3%. However, according to the Monster Employment Index for August, year-on-year online demand for IT and engineering contractors has increased by 25% and 28% respectively, so it may be that the poor performance of these sectors in August was seasonal.

Despite the poor performance of the sectors in August, Monster UK & Ireland’s spokesperson Michael Gentle remains upbeat about the longer-term prospects for IT and engineering, as well as the marketing, media and PR sectors, which have a high population of contractors and freelancers.

“IT and Marketing, Media and PR are recovering strongly,” says Gentle, “while the industrial sectors such as engineering and transport and logistics continue to forge ahead, as a result of investment in industrial sectors.”

Not surprisingly, sectors dominated by the public sector have seen sharp year-on-year falls: the public sector, defence and community category has fallen by 13%; healthcare and social work has fallen by 11%; and education, training and library by 1%.

Specialist IT and engineering sectors continue to experience severe skills shortages

Specialist IT and engineering continue to experience severe skills shortages, offering opportunities for contractors to fill the gaps. This is despite the poor performance of the online contract and jobs market in these sectors over the summer, shown by the Monster Employment Index.

However, the Manpower Employment Outlook Survey 4th Quarter 2011, a forward-looking survey in which participants forecast their hiring intentions for the next quarter, shows that hiring in the UK is stalling. The survey blames a collapse in bank hiring, which is bad news for IT contractors whose numbers in contract tend to directly correlate to the labour market conditions in the UK’s financial sector.

“Six months ago it looked like the banks were going to lead the way out of recession and could even have filled the hole created by the slowdown in the public sector,” explains Mark Cahill, Manpower UK’s Managing Director. But, he continues: “We’ve seen almost 50,000 jobs go in banking.”

Conversely, the utilities sector is still hiring strongly and is in need of qualified engineering contractors. Clients and recruiters in the sector are experiencing skills shortages due to a lack of suitably qualified candidates in the right locations.

Contractors may find future contract opportunities in manufacturing and retail

Contractors may find that the manufacturing and retail sectors become a contract-rich environment, according to September 2011’s Working Links Quarterly labour market intelligence report. The increased activity in the retail sector is explained in part by the fast-approaching Christmas period.

The manufacturing growth predicted by Working Links correlates with forecasts by the Confederation of British Industry’s (CBI) latest monthly Industrial Trends Survey and KPMG’s 2011 Global Manufacturing Outlook. Both of these paint a positive picture of the UK’s manufacturing sector and the prospects for contractors.

According to Working Links Director Karen Masterson, there is increasing evidence of an ongoing manufacturing renaissance: “We’re seeing different trends in each region across Britain, but it’s clear that many areas are seeing green shoots of recovery for the manufacturing industry.”

Smaller firms could pick up contractors where the public sector and large corporates left off

Firms with turnovers between £10m and £200m could be the growth market contractors need to replace collapsing public sector labour markets and stagnating corporate demand. This segment of the private sector accounts for an estimated 33% of the private sector workforce.

This year’s ECI Growth Survey asked over 250 CEOs of small to medium sized enterprises (SMEs) in this sales turnover range about their growth plans; the response was overwhelmingly positive, in direct contrast to other business surveys.

These firms present an attractive market for contractors, because 60% of respondents are predicting double-digit growth and 74% plan to take on new workers over the next 12 months. Flexible and skilled knowledge workers are likely to underpin this rapid growth.

Businesses in the software and IT services sector stand out, as 84% of firms questioned anticipate growth, with a third expecting to grow by more than a quarter in the coming year. This growth in IT services may help reverse any declines in IT contractor demand brought about by the current financial sector slow-down.

Private sector interim management contractor demand reaches pre-recession levels

Demand for interim management contractors in the private sector has reached pre-recession levels, according to the Interim Management Association’s (IMA) quarterly IPSOS Mori Q2 2011 market audit.

The buoyancy that we are seeing in the private sector is indicative of how companies are using specialist resource to help them drive economic recovery and build a platform for growth

Jason Atkinson, IMA and Russam GMS

Before the recession, around 70% of interim management contractors had contracts with private sector clients. By 2009 this had fallen to nearly 50%, when public sector use of interims shot up; it is now running at 61% in the private sector versus 39% in the public sector.

Banking and finance is the largest consumer of interim management contractor services, accounting for 40% of private sector assignments. Quarter 2’s survey also reveals that the length of assignments has dramatically increased. In 2006/2007, the average length of an assignment was 95 days, and this has nearly doubled to reach 174 days.

Jason Atkinson, chair of the IMA and managing director of Russam GMS, believes increased business confidence and growth plans are driving the growing demand: “The buoyancy that we are seeing in the private sector…is indicative of how companies are using specialist resource to help them drive economic recovery and build a platform for growth.”

Published: Monday, October 3, 2011

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