IT contractors are playing a vital role in delivering the innovation that is making London an increasingly attractive proposition for foreign investors, yet in return all they get from the Government is more red tape and reduced means of engagement.
The findings from Ernst and Young’s 2016 Attractiveness Survey reveal that London is now considered the city with the second best chance of producing the next tech-giant, behind San Francisco/Silicon Valley. Overall, 23% of the investors from over 440 international companies chose London as their top tech city, with 29% opting for San Francisco.
The fact that the capital has risen from fourth in 2015 and has overtaken New York in the process speaks volumes about the breadth and diversity of skills present in the UK IT sector, in spite of an ongoing talent shortfall.
We must not underestimate the part that contractors have to play in this. By applying their skills for multiple clients on a flexible basis, contractors are helping to ensure businesses who do not have the necessary skills in-house still have the capacity to continually innovate.
In particular, we’ve seen how the advancements enabled by IT innovation have revolutionised how the financial services industry operates. The UK is now considered the FinTech capital of the world, with a recent Government report estimating that it attracted £524m in investment and represented £6.6bn in revenue in 2015 alone.
The fact that tech is making inroads into multiple other industries is evidence that demand for professionals in the sector is only going to rise. As such, the extent to which the IT sector can benefit the UK economy as a whole is immeasurable.
The IT sector is heavily reliant on contractors. A recent report from IT resourcing company Experis claims that 24% of the sector’s workforce are contractors, with that figure expected to rise to 28% by 2020 as firms expect to increasingly look towards contingent staff to supplement progression.
Whilst the oil and gas sector struggles continue, skills shortages slow down construction projects and EU referendum concerns stifle the economy, IT is one of few UK sectors that could be said to be thriving. All of which begs the question: Where is the Government support?
The fact that the same Experis study notes that three quarters of IT managers struggle to source candidates with the necessary blend of skills to drive innovation should provide enough indication for the Government that it needs to back those with the essential skills.
Instead, contractors are bombarded with red tape and measures introduced to reduce the appeal of flexible working. By now, we’re all well aware of the recently implemented changes to dividend taxation and travel and subsistence expenses.
The Government has also been vocal about its own use of contractors recently. After seeing Government spend on contingent staff rise by between £400m and £600m since 2012, a National Audit Office (NAO) report set out ground rules for reducing contractor engagement, attributing the rising figures to ‘poor workforce planning’.
What looks likely to follow is a public sector IR35 reform that will see a large amount of legitimately outside-IR35 contractors taxed as employees as risk-averse clients protect their own backs. With all the evidence piling up, it comes as no surprise that a recent survey by The Pulse Umbrella Group found that only 17% of IT contractors feel that the Government is on their side.
The sooner the Government recognises the value of these workers, the better. Instead of adopting measures to cut IT contractor rates, it should be helping them to share their highly sought-after skills with those who need them most.
As usual, the onus for Cameron and co very much seems to be on tightening the purse strings. If the Government gave IT contractors its backing, the return on investment – when considering foreign investment and the wider impact upon multiple other sectors and the economy as a whole – will be far greater than the costs incurred.