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ContractorCalculator Market Report September 2013

Contractor prospects continue to improve. Client organisations are moving swiftly to expand capacity and capabilities to ride the wave of the economic recovery. Skills shortages in some sectors, such as engineering and oil and gas, continued to be a problem throughout the recession and are now worsening. That’s good news for contractors but less welcome for UK plc, which needs the right talent in place across all sectors to keep all of the economic engine’s cylinders firing in sync.

In this month’s ContractorCalculator market report:

  • Contractor demand increased during July, with construction putting in a particularly strong performance, shows the latest Recruitment and Employment Confederation (REC)/KPMG Report on Jobs
  • Record levels of North Sea investment are promising a secure future for oil and gas contractors, although falling productivity is an emerging threat, says Oil & Gas UK’s Economic Report 2013
  • July’s Recruitment and Employment Confederation’s (REC) JobsOutlook predicts a third of contractor clients will be hiring new contract workers over the coming year, but engineering skills shortages are worsening
  • Contractor demand across most core contracting sectors enjoyed sustained demand during June 2013, according to the Association of Professional Staffing Companies’ (APSCo) Monthly Trends data, with engineering and construction putting in particularly strong performances
  • Contractors are predicted to account for 24% of all new hiring during the remainder of 2013, highlights the latest Labour Market Outlook from the Chartered Institute of Personnel and Development (CIPD).

Contractor billings rise at their fastest pace for 29 months

Contractor demand continued to increase during July, reaching new highs according to the latest Recruitment and Employment Confederation (REC)/KPMG Report on Jobs. All core contracting disciplines were in positive growth territory, with construction sustaining the impressive gains it made during the previous month.

“The jobs market continues to skyrocket, with permanent employment and temporary placements at three and two year highs, and vacancy growth accelerating to a six year high,” notes REC’s chief executive Kevin Green. “A combination of confidence returning to the UK economy and higher employer demand have contributed to this impressive set of figures.”

Engineering contractors experienced a slight easing in demand growth, leading to the sector dropping to fourth place in the demand league table. Demand for IT and computing contractors increased sharply, but other sectors grew faster, relegating IT to sixth place.

The jobs market continues to skyrocket, with permanent employment and temporary placements at three and two year highs, and vacancy growth accelerating to a six year high

Kevin Green, REC

Recruiters report they are experiencing shortages of oil and gas workers, civil and structural and railways engineers. Construction white collar contractors are also in short supply, as many may have left the industry during the downturn. On the IT front, business analysts and developers across a range of languages are in particular demand.

Oil and gas contractors to benefit from record levels of North Sea investment

Record levels of investment into the UK Continental Shelf (UKCS) looks set to benefit the future of oil and gas contractors “for decades to come”. Oil & Gas UK’s Economic Report 2013 shows that capital investment in the North Sea is predicted to reach £13.5 billion during 2013, a rate of investment “not seen since the 1970s”.

Oil and Gas UK predicts a reverse in the deep slump in exploration, which was the lowest for a decade during 2012, and highlights the potential of undiscovered reserves.

The Department of Energy and Climate Change (DECC) has published data suggesting that there may be between six to 17 billion barrels of oil equivalent (boe) of ‘yet-to-find’ resources. These could create tens of thousands of new contracts and jobs throughout the supply chain to support exploration and production.

A fly in the ointment for contractors highlighted by the Economic Report is that North Sea productivity is falling rapidly. The concern is that if oil prices fall significantly, some fields will become uneconomical to run, and the result would be lost contracts and jobs.

Contractor clients to maintain hiring, as engineering skills shortages worsen

Contractor demand is predicted to increase at a third of clients over the next 4-12 months, with a further 60% planning to maintain headcounts. However, the latest Recruitment and Employment Confederation’s (REC) JobsOutlook also highlights that despite hiring intentions, clients are concerned about the worsening engineering skills shortages.

“As this month’s figures show, flexibility has enabled our labour market to flourish,” says REC chief executive Kevin Green. “Employers are growing increasingly confident in the UK economy and making positive hiring decisions as they look forward to next year.”

Less welcome news for contractors is the reduction in contractor use to cover peaks in demand: In July 2012, the primary use of agency workers such as contractors was for this reason, but during July 2013, covering leave was the principal reason.

The negative interpretation of this trend is that clients may be increasing permanent headcounts, so clients are better able to manage increases in demand without needing contractors.

Contractor demand sustained across most core sectors: engineering and construction pull ahead

The latest set of Association of Professional Staffing Companies (APSCo) Monthly Trends data shows that across most core sectors contractor vacancy growth and demand was sustained or grew, with engineering and construction starting to pull ahead.

“The ongoing resilience of the engineering sector is obviously being driven by the huge increase in activity in the upstream oil and gas arena,” explains APSCo chief executive Ann Swain.

“It is encouraging to see such an upswing in a sector that has suffered so much in the last few years,” she adds on the construction sector recovery.

IT sector performance was solid, if uninspiring, but the good news for the beleaguered financial sector is that, although placements are down 6% year-on-year, contract vacancies increased by 13%.

Contractors predicted to account for 24% of new hiring during second half of 2013

Contractors are forecast to account for 24% of all new hiring during the remainder of 2013, with recruitment sector and skills demand hotspots being transport and communications, finance, insurance and real estate.

The latest Labour Market Outlook from the Chartered Institute of Personnel and Development (CIPD) also shows that large organisations with over 250 employees are more likely to hire contractors.

“These results suggest we should see further jobs growth over the summer and autumn and hopefully reflect a degree of optimism about growth prospects for 2013,” says CIPD chief economist Mark Beatson.

“The challenge for the increasing proportion of employers looking to hire will lie in finding the right talent to fill their vacancies,” he adds.

Published: 03 September 2013

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