IT contractors in London’s financial sector are the best paid in the UK, but the sector suffered a shock fall in business volumes and profitability in the three months to September 2012, which may have a negative knock-on impact on contractors. The financial sector also dominates the interim management contracting sector, so there are still opportunities for contractors with the right skills. Engineering contractors remain in great demand, but construction, marketing and media contractors are having a tough time as demand for their services fell during September.
In this month’s ContractorCalculator Market Report:
- Contracting is evolving into a two-speed market, according to August’s Monster Employment Index
- Contractor client confidence is ‘flat’, but the Recruitment and Employment Confederation (REC) predicts in its September JobsOutlook that contract numbers will grow
- Banking and local authorities dominate interim management, reports the Interim Management Association (IMA) in its latest member audit
- JobAdsWatch.co.uk shows that software houses and finance dominate IT contractor demand, in its July 2012 Quarterly Update
- Business volumes in the UK financial sector unexpectedly contracted in the quarter to September 2012, says the latest Confederation of British Industry (CBI)/PricewaterhouseCoopers Financial Services Survey.
Online contract market diverging into high and low demand
Online demand for contractors is evolving into a two-speed market, with diverging performance across key contracting sectors. IT and engineering showed showing solid growth in August’s Monster Employment Index (MEI), whereas online demand for marketing, media and construction contractors fell sharply.
Of greater concern to IT contractors was the performance of the banking, finance and insurance sector, which experienced its nineteenth consecutive month of falling demand. The UK’s financial sector is one of the largest consumers of IT contractor services, so falling hiring is likely to have a knock-on negative impact on hiring.
Austerity measures appear to be having limited impact on public sector hiring, as the public sector, defence and community category showed the highest year-on-year growth across all industries. Demand was 41% higher in August 2012 when compared to August 2011.
Contractor client confidence ‘flat’ but forecast to improve
Contractor client confidence was reported as “flat” in September’s Recruitment and Employment Confederation (REC) JobsOutlook, but the contract market is predicted to improve.
“We know that many employers are poised to hire when confidence returns,” says REC research director Roger Tweedy, “and there are signs that the outlook for temporary staffing could be improving. This month we’re looking at a period of stability rather than cuts in worker numbers.”
And the economic downturn appears to have had a positive impact on client’s contractor hiring sentiment. The survey reveals that “one in five employers is more open to flexible working as a result of the recession”, although there are fewer contract and temporary roles available than a year ago.
Client appetite for interim management contractors grows during Q2
Contractor client demand for interim managers grew during the second quarter of 2012, with the number of assignments in progress increasing by 7.4% when compared to the first quarter of 2012.
The Interim Management Association’s (IMA) Membership Audit for Quarter 2, 2012 also shows that the average length of assignments grew sharply, from 152 days in the first quarter of 2012 to 211 days in the second quarter.
Uncertainty about demand means that firms are scaling back their investment intentions for the coming year and reducing headcount
Matthew Fell, CBI
The banking and finance industry dominates private sector contracts, accounting for 48% of all assignments, followed by IT and telecoms, which accounts for 12% of all assignments. Local authorities consume the most interims in the public sector, representing 41% of all public sector assignments, with central government in second place, accounting for 18% of assignments.
IT contractor demand led by software and finance
Software developers and financial organisations are the two largest consumers of IT contractors, according to the July 2012 Quarterly Update by JobAdsWatch.co.uk; they account for 47.8% and 35.6% of demand respectively. London-based financial IT contractors are also the best paid.
In the second quarter of 2012, the number of IT contracts overall increased by 2.8%, when compared to the first quarter. The number of public sector IT contracts advertised grew by 2.3%, although the total number of vacancies is very low.
Permanent vacancies in the public sector fell by 4.4% over the same period. This suggests that public sector organisations may be hiring contractors as a stopgap whilst waiting for the right permanent hire. Alternatively, headcounts may be being frozen and contractors hired to perform vital tasks, without appearing in departmental headcounts.
IT contractor prospects likely to suffer as financial sector business volumes fall
IT contractor prospects are likely to worsen before they improve again, following an unexpected fall in business volumes and profitability in the UK’s financial sector. The Confederation of British Industry (CBI)/PricewaterhouseCoopers Financial Services Survey for September 2012 highlights that business volumes in the quarter to September 2012 remain subdued, down 44% compared to what is considered “normal”.
“Uncertainty about demand…means that firms are scaling back their investment intentions for the coming year and reducing headcount,” explains CBI director for competitive markets Matthew Fell.
Despite the existing challenging market conditions, there is a silver lining for IT and marketing and media contractors. Financial institutions are planning to increase marketing spend by 10% and IT spend by 14% in the coming quarter, and the fall in business volumes is predicted to be temporary.
“Companies expect this recent weakness in activity to be temporary, and anticipate that growth in business volumes and incomes will return to positive territory next quarter,” adds Fell.