The Agency Workers Regulations (AWR) and the Midlands are unlikely bedfellows on the contracting sector’s radar and for opposite reasons. Labour market data points to the Midlands as being the current hotbed of IT and engineering contractor demand, but provides no indication as to why. And an increasing body of evidence suggests that AWR is damaging and not helping the flexible workforce, by turning off clients from using contractors. However, the latest research from the Recruitment and Employment Confederation (REC) suggests that the long-term prospects in all core contracting disciplines are positive and that the shock fall in IT contractor hiring experienced in May was just a blip.
In this month’s ContractorCalculator Market Report:
- Engineering contractors are leading annual growth in a “stable” online recruitment market, reports May’s Monster Employment Index
- May’s Recruitment and Employment Confederation (REC)/KPMG Report on Jobs shows a sharp fall in IT contractor demand
- The latest Manpower UK Employment Outlook predicts hiring growth in the utilities, finance and business services sectors
- One in four organisations, rising to nearly half of large contractor clients, have cut contractor use because of AWR, reveals the Chartered Institute of Personnel and Development (CIPD)/Hays Resourcing and Talent Planning survey
- Contractor prospects in the core contracting disciplines look positive over the long term, but AWR is causing clients to cut contractor numbers.
Engineering contractors drive year-on-year online demand growth
Online demand growth for engineers has increased by 20% over the last 12 months, and by 2.5% between April and May. And according to the Monster Employment Index for May, the IT sector’s performance is also relatively strong, with online demand growing by 10% year-on-year, although between April and May there was no change.
IT and engineering contractor demand growth was particularly pronounced in the Midlands, which the report says has experienced an annual growth increase of 15%, “supported by increased online recruitment activity across engineering, IT and sales.”
Monster UK & Ireland managing director Julian Acquari is encouraged by the results of May’s index: “The increase in online recruitment is led by the engineering sector, which has seen a 20% rise over the last year, as well as significant growth in a range of occupations, including…construction.”
“When we see opportunities spread across a range of industries in this way, it’s one sign of stability,” he adds.
IT contractor demand weakened by budget tightening and AWR
IT contractors experienced a sharp fall in demand during May. The demand index for IT fell below the 50-point mark for the first time since the final quarter of 2010. This is according to May’s Recruitment and Employment Confederation (REC)/KPMG Report on Jobs, which also shows contract and temp billings falling for the sixth month running.
“This month’s data shows employers are becoming more cautious about hiring,” says REC chief executive Kevin Green. “The temporary staff market has been contracting for the last six months. Clearly the economic backdrop and the eurozone crisis are making some employers think twice before taking on new staff.”
An index below 50 indicates that demand is weaker than the previous month, which in the case of IT is consistent with the MEI’s report showing no demand growth. In contrast, demand for permanent IT workers is at 57.1, demonstrating stronger month-on-month demand. Engineering contract demand is also strong, and regionally the Midlands again was high in the demand league table.
Recruiters have speculated in the report that budget tightening and the Agency Workers Regulations (AWR) may be contributing factors to falling IT contractor demand. However, evidence from past reports shows that demand for IT contractors can be cyclical, so May’s figures could be another blip, particularly as demand for engineering contractors remains positive.
Contracting growth markets include some ‘usual suspects’ – and the Midlands
Contractor hiring is likely to focus on the utilities, financial and business services sectors in the third quarter of 2012. This sectoral focus may lead to a welcome reversal in fortunes for financial IT contractors, as finance has the most optimistic hiring prospects since the fourth quarter of 2008.
The Manpower UK Employment Outlook survey also forecasts the East Midlands as showing the greatest growth in contractor and permanent hiring in the third quarter of 2012. Projected hiring growth is more than twice as strong as the next closest regions, but the report provides no explanation as to why.
Although ManpowerGroup UK managing director Mark Cahill is bullish about hiring prospects, he acknowledges that to secure growth, the right skills need to be in place, which will deliver opportunities for contractors.
“When you’re going head to head with a return to recession at home and a burgeoning eurozone crisis, by rights the jobs market should be in free fall; but that’s not what we’re seeing,” says Cahill. “However, if we want to pull ourselves out of recession, we’re going to need…the in-demand skills in order to allow start-ups and entrepreneurs to flourish.”
Contractor hiring cut in a quarter of client organisations due to AWR
Contracting continues to be negatively affected by the Agency Workers Regulations (AWR). The Chartered Institute of Personnel and Development (CIPD)/Hays Resourcing and Talent Planning survey reports that one in four organisations have reduced their use of agency workers since the new rules were introduced in October 2011.
When you're going head to head with a return to recession at home and a burgeoning eurozone crisis, by rights the jobs market should be in free fall; but that's not what we're seeing
Mark Cahill, ManpowerGroup
Of major concern to contractors is that this figure rises to two-fifths of larger organisations with more than 1,000 employees, and to nearly half for organisations with 5,000-plus employees. The public sector has also disproportionately reduced contractor hiring since AWR came into force.
Large organisations like these fit the classic core contractor client profile. This evidence lends weight to the claims by recruiters in the REC/KPMG Report on jobs that contractors generally, and IT contractors specifically, are experiencing falling demand due to the impact of AWR.
Sustained demand for contractors in core disciplines forecast for duration of 2012
Contractors in the core contracting disciplines of IT, engineering, energy, oil and gas look set to remain in demand for the duration of 2012, according to the Recruitment and Employment Confederation (REC) JobsOutlook for June. The report suggests that increased consumer demand and skills shortages will drive up demand.
“Consumer confidence is rising slowly, and the impact of that should filter through to businesses in a few months,” says REC research director Roger Tweedy. “Barring any terrible shocks from the eurozone…we could still be on track for slow improvements in job creation as time progresses.”
The report is less positive about the impact of the Agency Workers Regulations (AWR) on contractor prospects, highlighting that a fifth of clients are hiring fewer contractors since the regulations came into force in October 2012.
In a special feature on the impact of AWR, June’s JobsOutlook reports that half of contractor clients have changed their hiring behaviour as a direct consequence of the legislation; 21% have cut contractor numbers; and a further 20% have stopped using agencies to engage contractors directly.