Contractors could be entering an extended summer of elevated demand for their services as markets that are traditionally strong consumers of their services begin to pick up. However, recovery is fragile and government austerity measures have sent confidence plunging in some sectors. But contractors often see an upturn in demand in similar circumstances, as they provide a short-term, low risk solution to increased capacity. So, uncertainty that prevents firms from recruiting employees tends to work in contractors’ favour.
In this month’s ContractorCalculator Market Report:
- The Monster Employment Index bounces back after its fall last month, showing increased demand for contractors across the board
- Fortunes in financial services are picking up, according to the CBI/PwC Financial Services Survey, meaning IT contractors can expect improved demand
- Services output weakens, but manufacturing and construction stay firm in this month’s Markit/CIPS Purchasing Managers Index
- The oil and gas sector continues to recover, leading to greater demand for contractors in engineering, oil & gas, offshore and IT
- Manufacturing remains strong, with export and domestic demand fuelling output, according to the EEF/BDO Manufacturing Outlook.
Financial sector boosts job index
The Monster Employment Index shot up 7% in May, following a slight dip in April. Strong performance across the board drove the upswing, with financial services sectors, including banking and accounting, showing above-average performance. This is clearly good news for IT contractors depending on the sector for new contracts and renewals.
Year on year, the index was up 19% on May 2009, reflecting an increased demand for workers compared to a year ago, as Monster UK & Ireland MD Julian Acquari explains: “Business investment improved in the first quarter of this year, and we can see increased levels of online job availability compared to this time last year.”
IT was the fourth-best performing sector, after transport, education and legal, with demand for IT workers increasing by 11% on the previous month. Both the engineering and construction sectors also saw demand increase, albeit at a slower pace than IT.
Bullish forecasts predict improved fortunes for financial services
More good news for IT contractors supplying financial services firms, as the CBI (Confederation of British Industry) and PwC (PricewaterhouseCoopers) Financial Services Survey shows modest growth in the last quarter, to be followed by a higher activity over the next three months.
According to CBI Deputy Director General John Cridland, the upswing in business should impact positively on staffing numbers: “The modest pick-up in activity in the financial services sector in the past three months fell short of expectations. But firms hope that activity will strengthen over the coming quarter and are now planning to expand their staff numbers.”
Further opportunities may arise for contractors as a result of the increased compliance expected in the sector. Compliance and governance are areas of operations that traditionally draw heavily on contractors to set up and maintain the IT systems required to implement and monitor new rules.
CIPS Market data paints mixed picture for contractors
This month’s Markit/CIPS (Chartered Institute of Purchasing and Supply) PMIs (Purchasing Managers Index) for Services, Manufacturing and Construction present a mixed picture for IT, engineering and construction contractors.
Despite a small decrease in the PMI and a dip in export orders, UK manufacturing is still healthy. The last six months of strong output has supported the fastest rate of job creation in the sector since 1995 and continues nine unbroken months of improved operating conditions in the sector.
The domestic housing sector has increased at its sharpest rate since December 2003, contributing to an overall increase in the Construction PMI. However, government cost-cutting and the forthcoming hike in VAT has impacted negatively on confidence in the sector.
In fact, fears of austerity measures resulted in a huge drop in confidence in the services sector, with the services PMI showing that growth in the sector is at its slowest rate for ten months. “Purchasing managers voiced grave concerns that budget cuts and VAT rises will tip the scales and amplify the likelihood of the UK slipping back into recession,” says David Noble, CIPS’ CEO.
Confidence soars in oil & gas sector
The latest Oil & Gas UK Index shows the oil and gas sector has emerged from recession, with Q1 2010 showing the highest confidence levels since the survey began. The drilling and well services subsector is performing particularly well. The index, which measures the confidence of firms operating in the sector, shows that oil & gas, offshore, engineering and IT contractors all stand to benefit from a robust UK oil and gas sector.
Brian Kinkead, Oil & Gas UK’s supply chain director, says: “It is encouraging to see this continuous upward trend in business confidence, which is a clear indicator that our industry is emerging out of the recession with renewed drive, confidence and optimism.”
Despite the up-beat results this year, confidence has not reached levels seen at the peak of the economic boom a few years ago. Kinkead explains: “The Q1 2010 results are encouraging, but there is obviously still some degree of fragility within the industry. Despite the positive signs, the overall index of 61 suggests that although business confidence and activity are improving, the outlook is still not where it was some two to three years ago.”
Manufacturing recovery gathers pace
According to the latest EEF/BDO Manufacturing Outlook, manufacturing output and orders are at their highest level since the survey began in 1995, further reinforcing the good news for contractors working in the sector.
The steadily improving trends in manufacturing look set to continue in the coming months and the upswing is being felt right across industry
Lee Hopley, EEF
The survey reports that over the last three months, both output and new order balances were at record levels of +30% and +34% respectively, up from 8% and 2% in Q1. Demand for workers in the sector has risen commensurately, as EEF Chief Economist Lee Hopley explains: “The steadily improving trends in manufacturing look set to continue in the coming months and the upswing is being felt right across industry.
“Manufacturers are pulling in more export orders on the back of a recovering world economy and a better outlook for the domestic market is giving companies some confidence to recruit again.”