Contractors can go into 2016 with confidence that their skills will be highly sought after, as this month’s crop of labour market and economic data points towards a well-rounded and sustained growth trend in terms of contractor demand. Continued confidence in improving market conditions means clients are keen to use contingent staff to increase productivity and fill strategic skills gaps, whilst skills shortages are creating a contract-rich environment in many sectors.
In this month’s ContractorCalculator Market Report:
- Contracting’s core disciplines feature prominently in the contractor demand league table from the Recruitment and Employment Confederation (REC)/KPMG Report on Jobs for November 2015
- Contractors are considered essential to the attempts of many clients to take advantage of favourable economic conditions, according to the Recruitment and Employment Confederation (REC) JobsOutlook for December 2015
- IT contractor demand is set to increase in 2016 as buoyant market conditions fuel unrest amongst employees, suggests Hays UK Salary & Recruiting Trends 2016
- Morgan McKinley’s London Employment Monitor for November 2015 reveals a dip in contractor demand, as businesses migrate away from the capital
- The UK’s IT contractor market is amongst the most popular in the world, according to recent Experis IT Skills Research.
Contracting’s core disciplines take centre stage in the latest Report on Jobs
Contracting’s core disciplines were prominent within the demand league table in the latest Recruitment and Employment Confederation (REC) and KPMG Report on Jobs for November 2015, with finance, IT and engineering occupying the second, third and fourth place respectively.
Skills shortages are worsening, with the number of candidates declining further – this time at the sharpest rate in 18 years, as KPMG Partner Bernard Brown highlights: “November saw a further tightening of labour market conditions, with few sectors remaining immune from the effects of ongoing skills shortages.
“Recruiters will hope the annual influx of job hunters in January will reinvigorate the market and replenish the rapidly diminishing pool of available talent.”
Contractor rates are profiting from the shortfall in talent. Rate increases reached a three-month high during the month, with one in four contractor recruiters benefitting from an increase in pay.
In contrast to the strong demand growth in the permanent labour market, construction remains fixed near the bottom of the contractor demand league table, in eighth place. This may be down to firms adopting a skills hoarding approach, enticing workers onto the payroll to soften the impact of acute skills shortages.
Contractor prospects continue to benefit from favourable market conditions
Contractors look to set capitalise on sustained confidence in the economy going into the New Year, as clients look to exploit favourable market conditions by taking on more contingent workers.
This is according to the Recruitment and Employment Confederation’s (REC) JobsOutlook for December 2015, which shows that 82% of businesses consider economic conditions to be improving.
As a result, 99% of contractor clients plan to either maintain or increase their contractor headcount over the first quarter of 2016, the third consecutive month that clients have been making such predictions. Meanwhile, a similar level of engagers (97%) are reportedly planning to maintain or increase contractor headcount over the medium-term (4-12 months).
“2015 has been a vintage year for the labour market. Employers are confident, hiring has been steady and pay has increased for many people as the benefits of economic growth filter through,” highlights REC director of policy Tom Hadley.
Contractors working in technical and engineering positions can expect to see significant demand for their services in 2016, with 15% of contractor clients expecting to see a shortfall in candidates with these skills.
Meanwhile, an anticipated shortage in the availability of contractors with professional and managerial experience is also of concern, with 13% identifying this as the area with the most severe shortfall.
IT contract market set for expansion as employees look to make switch
Contractors in the IT sector look set to benefit from favourable market conditions, with demand expected to increase as a result of an exodus of permanent staff leaving posts in search of alternate opportunities within the sector.
This is according to the Hays UK Salary & Recruiting Trends 2016 report, which suggests that staff retention is set to be a major problem for clients, as buoyant market conditions fuel unrest amongst employees.
This, coupled with the serious scope for expansion within the sector as well as skills shortages, suggests that savvy IT contractors will be able to exploit current conditions to negotiate lucrative contracts in exchange for their expertise.
72% of surveyed IT firms expect business activity to continue its trend of growth in 2016, whilst three quarters of clients plan to increase their headcounts as a result. However, as Director of Hays Information Technology James Milligan highlights, clients may have enough trouble retaining current staff.
“IT companies face an alarming number of staff departures next year as employees move on in search of even better salaries and career progression, prompting an escalation in the war for talent which is already raging in the IT sector.”
Notably, the report identifies the wealth of available contracts and the “ever-increasing rates” that contractors receive as a significant factor affecting the number of employee departures.
Contractor demand in the capital softens due to business migration
Contractors in London experienced a premature dip in demand for their services during November, which saw a 32% decrease in opportunities, month-on-month. This has been partly attributed to a recent rise in the number of businesses choosing to move operations outside of London.
Morgan McKinley’s London Employment Monitor for November 2015, also shows that demand for professionals in the capital has cooled by 13%, compared with this time last year.
“The numbers were somewhat disappointing,” notes Hakan Enver, Operations Director at Morgan McKinley Financial Services. “We normally see a drop mid-way through December as people prepare for Christmas, but it seems that this time the drop, not Christmas, has come early.”
A significant factor impacting this decline is considered to be the recent business migration away from the capital. The report highlights that, over the past few years, far more companies have been setting up offices outside of London to make savings on costs and recruitment.
Birmingham, Edinburgh and Liverpool are identified as cities whose financial sectors are showing especially strong growth.
IT contractor use in UK amongst highest in the world
Contractor prospects within the UK IT sector are amongst the best in the world, as a recent study shows that the use of IT contractors in the UK is the fifth highest internationally.
Experis IT Skills Research shows that 76% of UK businesses use IT contractors extensively, exceeding the proportionate use of countries such as the US (66%) and Japan (65%).
“More UK organisations are using contractors as a go-to workforce planning solution, rather than a temporary means to cover shortfalls in permanent positions,” explains Experis Europe Managing Director Geoff Smith.
“The recognition exists that the use of contractors can bring greater long-term cost savings and flexible work flow options.”
The report goes on to identify the integral part that the use of IT contractors can play in transforming the sector into a strategic agent of change, as opposed to the “operational cost centre it was once seen as”.
With IT contractor use expected to continue to rise in 2016, Experis predicts a fiercer market due to a rise in millennials fast-tracking their careers straight into contracting roles. Highly skilled baby boomers are also expected to capitalise on the market, contracting past retirement age on a part-time basis.