ContractorCalculator Market Report July 2013

Contractors in core disciplines, such as IT and engineering, are within a ‘perfect storm’ of demand amid acute skills shortages and increasing rates. The scenario is great for suitably skilled contractors, but less positive for the growth of UK plc, which is being held back by the very skills shortages that are benefitting contractors. A similar scenario is brewing in the public sector, which is desperate for contractor services to maintain service levels in times of austerity without adding to headcount. Yet the off payroll rules are resulting in many of the most effective contractors losing their contracts, or choosing to leave for the private sector.

In this month’s ContractorCalculator market report:

• Three key labour market surveys from REC and APSCo – the Report on Jobs, Monthly Trends and JobsOutlook – paint an optimistic picture of contractor prospects for 2013
• A new report, Changing the pace: Confederation of British Industry (CBI)/Pearson education and skills survey 2013, identifies a skills gap in science, technology, engineering and maths (STEM) that contractors are ideally positioned to fill
• The Chartered Institute of Personnel and Development (CIPD)/Hays Resourcing and Talent Planning survey shows austerity policies are driving up demand for contractors across the public sector as service providers struggle to maintain services without increasing headcount
• The Oil & Gas UK’s Business Confidence Index Q1 2013 highlights that skills shortages, and the resulting hikes in pay rates, have put a dampener on North Sea operator confidence
• IT, engineering and energy sector contractors are both in demand and highly paid, according to Adzuna’s Job Market Report June 2013.

Contractor demand bounces back and recruiters are optimistic

The latest reports from three key labour market surveys paint an encouraging picture of contractor prospects across most key disciplines during 2013:

• The Recruitment and Employment Confederation (REC)/KPMG Report on Jobs shows recruiter billings increasing and contract rates rising
• APSCo’s monthly trends highlights resilient performance in engineering and recovery for accounting and finance
• The REC Jobs Outlook shows IT and engineering contractors are in second and third places in REC’s skills shortages table.

“This month’s data is a strong indicator that the jobs market, the unsung hero of the UK economy over the last 18 months, is picking up pace,” notes REC chief executive Kevin Green. “Recruiters tell us that employers are more optimistic and are planning to increase their temporary and permanent hiring.”

John Nurthen, executive director of international development for Staffing Industry Analysts, which compiles the monthly trends on behalf of APSCo, agrees: “Our expectation for the UK staffing industry as a whole was that a weak first half of the year would lead to a better second half.

“The first half certainly seems to have lived up to expectations and the latest data in the monthly trends report suggests we can be cautiously optimistic about the remainder of the year.”

Contractors ideally positioned to fill STEM skills gaps

Contractors across a broad range of disciplines, including IT and engineering, are ideally positioned to fill the UK’s science, technology, engineering and mathematics (STEM) skills gaps currently affecting two out of five contractor clients.

A new report, Changing the pace: Confederation of British Industry (CBI)/Pearson education and skills survey 2013, warns that the pace of the UK’s economic recovery and growth is threatened unless these skills gaps are addressed.

The report also says that “too many STEM-qualified applicants don’t arrive rounded, grounded and ready for work”, in contrast to contractors, who are able to rapidly understand workplace challenges and make a swift and effective impact.

“We’re facing a critical lack of skills in some key industries, just as the economy starts to pick up,” explains CBI director-general John Cridland. “Long-term, sustainable growth will come in part from rebalancing towards high-value products and services, which demand much better technical skills.”

Contractor demand across the public sector increases due to austerity measures

Contractor vacancies across the public sector are double those in comparably sized private sector organisations. This is according to the Chartered Institute of Personnel and Development/Hays Resourcing and Talent Planning survey, which also shows that the ratio of contractor to permanent employee demand is much higher, “reflecting the ongoing funding cuts as part of the Coalition Government’s measures to reduce the budget deficit”.

Overall, the survey finds that experienced and skilled managers, technicians and professionals are in greatest demand, with many organisations unable to hire the workers they need. “The main reason for recruitment difficulties was a lack of necessary specialist or technical skills,” says the survey.

“We are starting to see confidence slowly returning to the jobs market, with interesting and challenging opportunities available for those highly skilled professionals who are looking to make their next move,” says Hays Human Resources director Barney Ely. “Employers are facing a competitive market when trying to attract people to fill skills gaps.”

Skills shortages and labour costs dampen North Sea operator confidence

The acute skills shortages affecting the oil and gas sector, and the resulting sharp increases in labour costs, resulted in lowered confidence on the part of energy company operators in the North Sea during the first quarter of 2013.

However, in contrast, Oil & Gas UK’s Business Confidence Index Q1 2013 shows that the record levels of investment into exploration and production during 2013 have resulted in increased confidence across all major services company contractor segments. The only exception is drilling and well services, which is also suffering from skills shortages and increased costs.

“The consistently strong activity is increasing pressure on the existing skilled labour resource,” explains Oonagh Werngren, Oil & Gas UK’s operations director, “and operators and contractors alike have pointed to concerns regarding manpower shortages and rising day rates as factors which may hinder business growth.”

Core contracting disciplines are leading the UK’s contract and job creation

There were over half a million job ads for new IT contracts and permanent roles created in the UK over the last six months and more than 700,000 for engineers. That’s according to Adzuna’s Job Market Report June 2013, which also highlights that these sectors are outperforming others in terms of pay and vacancy numbers.

Remuneration for mobile app developers and web designers has seen a big increase over the same period, but oil and gas workers are paid the most, with average annual salaries up 3.7% since the start of the year to reach £47,980.

“On the salary front, Adzuna’s data confirms studies by the TUC and the Institute of Fiscal Studies, which have shown that general salaries, even for those staying in the same job, have been falling,” notes Adam Pode, director of research and analysis at Staffing Industries Analysts, which gathers the information for Adzuna. “However, the data for IT and energy sector workers shows what a demand there is for these skills.”