Contractor clients operating with no spare capacity for additional work have risen from a quarter to third between March and April 2014. This suggests that the contract market will continue to strengthen as contractors are hired to expand capacity in the short term.
This improvement in prospects is confirmed by April 2014’s Recruitment and Employment Confederation (REC) JobsOutlook, which reports that half of all contractor clients plan to increase 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.
However, he noted that the balance of power has tipped towards contractors, so clients must ensure they are offering competitive rates: “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.”
Skills shortages continue to worsen, with clients finding that technical, engineering, computing, IT and telecoms are the toughest skills to source. The report says that one in five clients are “predicting a problem finding people to fill technical and engineering roles in the next three months, and one in four predicting significant shortages in the next 12 months.”
Green’s concern is that the worsening skills shortages could have a broader and negative economic impact: “Skills and talent shortages could jeopardise the recovery. Employers, recruiters and the government need to do more as this issue is intensifying every month and spreading to new sectors.”
Although large client organisations continue to be the greatest consumers of contractor services, a quarter of microbusinesses are “now stating an intent to engage at least one agency worker in the next quarter”.
The report notes that: “The demands of high volume and incidental users will create an interesting counterbalance – adding competitive dynamics to both pay and agency margins.”
Demand from this new quarter is unlikely to lead to price competitions between large and small clients, but it does indicate contractors should consider looking at the small to medium sized enterprise (SME) market as a potential source of contracts.