Contracting continues to benefit from the ongoing renaissance in the UK’s manufacturing sector. Although demand for IT contractors fell slightly in October, contractors mostly continue to do well. Organisations tentatively investing in new capacity to take advantage of the economic recovery are looking to the skilled flexible workforce to create low risk, short-term capacity. However, the full impact of the public sector cutbacks has yet to be felt and the true picture is clouded by increases in consumption driven by the festive season.
In this month’s ContractorCalculator Market Report:
- Contractors across most core disciplines are benefiting from a surge in online opportunities, as October’s Monster Employment Index increases by 6%
- The CIPD/KPMG Labour Market Outlook reveals unwelcome trends in IT recruitment and the huge cost of public sector redundancies
- Manufacturing continues to outperform sluggish construction and services sectors, although the positive news is all three are in positive territory, according to November’s Markit/CIPS indexes
- IT contractor demand fell slightly in October, with demand focused on narrow specialisms, according to the KPMG/REC Report on Jobs
- Contractors should be an essential component to secure the UK’s future prosperity, according to a radical plan proposed by McKinsey.
Online demand in core contracting disciplines increases sharply
Online job opportunities increased sharply in the core contracting disciplines of IT & telecoms, engineering, marketing, management and consulting, according to the Monster Employment Index for October. IT features in the top five industries for month-on-month and year-on-year growth, being fifth and second respectively.
The month also showed demand increases in other key contractor sectors, including construction and extraction, production, manufacturing, maintenance and repair. Overall the index, which measures the UK’s online recruitment trends, rose by 6% on the previous month and is showing an annual growth rate of 21%.
According to Monster UK & Ireland managing director Julian Acquari, the sharp increases in online opportunities extends the trend of long-term labour market improvement in the UK: “The majority of UK regions and industries reported elevated online recruitment activity in October.”
The majority of UK regions and industries reported elevated online recruitment activity in October
Julian Acquari, Monster UK & Ireland
Migrant IT professionals put UK contractors under competitive pressure
UK IT contractors are under increasing pressure to keep their skills updated and be more competitive, as a recent study shows that 26% of UK organisations are filling IT vacancies with migrant workers, and just under a quarter of those workers are recruited directly from overseas. Over half, 56%, of migrant workers are likely to be recruited from the European Economic Area (EEA).
This is according to the Chartered Institute of Personnel and Development (CIPD)/KPMG Labour Market Outlook, which also forecasts that the UK’s IT contractors could be hit by the fact that 16% of private firms plan to offshore UK roles, 78% of them choosing to move to India. Of those planning to outsource offshore, 97% are doing it for cost reasons and 12% for access to skills and knowledge.
The report also reveals the startling cost of making employees redundant, highlighting that contractors are a highly attractive option for organisations that have fluctuating or uncertain demand. Redundancies cost UK businesses an average of £9,350 per employee, rising to £19,600 for each public sector employee.
Services and construction sector contractors lag behind those in manufacturing
Contractors in the services and construction sectors are experiencing sluggish growth and falling contract opportunities compared to those working in the manufacturing industry.
The Markit/Chartered Institute of Purchasing and Supply (CIPS) Purchasing Managers Index (PMI) for Manufacturing, Services and Construction are all in positive territory, showing continued growth in November. But manufacturing continues to lead the pack, showing record jobs growth.
According to CIPS CEO David Noble, the outlook for businesses that feed into the buoyant manufacturing sector is much better than those relying on consumer and public sector demand. This may be an important pointer for contractors moving contracts and looking for more buoyant sectors.
“Businesses that are heavily reliant on consumer and public sector spending will increasingly become the poor relations,” explains Noble, “particularly compared with those in transport, communications and business services, who have benefited this month from better growth in the manufacturing sector.” He warns of: “A mixed picture of the economy overall, with no cause for celebration yet.”
IT contractor demand suffers surprise, but limited, fall
Softening public sector demand is thought to be behind the slight fall in IT and computing contractor demand in October, reports the latest KPMG/Recruitment and Employment Confederation (REC) Report on Jobs. But recruiters are reporting that certain skills remain in high demand, including those held by net developers and business analysts.
Blue collar temporary workers are in greatest demand, presumably resulting from the manufacturing surge reported by the Markit/CIPS PMI in Manufacturing. Engineering and construction contractors rank third in the worker demand league, with IT and computing contractors falling to seventh from being in second place a year ago.
Overall, October’s report shows that, whilst the permanent and contract employment markets are still growing, that growth is stalling. REC chief executive Kevin Green explains: “…the UK jobs market is still growing. However, the rate of growth was the weakest for 14 months and vacancies remained on a downward trend, rising at the slowest pace for 12 months.”
Contractors hold the key to future prosperity in the UK, says McKinsey
Contractors are a vital component in taking the UK from its current austerity back to prosperity, according to international consulting firm McKinsey, which has created a plan that recommends seven actions ‘to move from near-term austerity to long-term prosperity’.
According to McKinsey’s research, the UK’s productivity lags well behind the USA and Germany. Its report says this issue must be addressed by building a flexible workforce that better aligns skills with industry need, whilst at the same time investing in infrastructure and removing regulatory barriers.
McKinsey’s plan further advocates unlocking infrastructure investment, requiring huge sums to be poured into the UK’s transport and energy infrastructure. This would in turn provide a long term and growing source of contracts for engineering, construction and energy contractors, plus those that support them, such as IT contractors.