Contracting remains relatively unscathed following the Comprehensive Spending Review (CSR) in October, but key market surveys and research have yet to capture the full impact and implications of the spending cuts announced by Chancellor George Osborne. Most market data this month reveals that demand for contracts across all disciplines is on the rise. And contractors may find themselves benefiting from a new wave of outsourcing driven by a public sector keen to maintain services in the face of recruitment freezes and job losses forecast to reach half a million by 2015.
In this month’s ContractorCalculator Market Report:
- The Monster Employment Index remains in positive territory, increasing by 1% and demonstrating online demand for workers continues to rise
- Manufacturing and services sector businesses are facing skills shortages and are turning to flexible workers to plug skills gaps, says research by the British Chambers of Commerce
- The Confederation of British Industry (CBI)/Harvey Nash Employment Trends Survey highlights that it was the UK’s flexible workforce that prevented the recession from being deeper than it was
- Recruiters suffered deeply during 2009-2010, but research for the Recruitment and Employment Confederation (REC) and Barclays Corporate reveals that those in the contract and temporary staffing sectors suffered much less than counterparts in the permanent placement sector
- The Comprehensive Spending Review and resulting public sector job losses will fuel demand for outsourcing and contractors to maintain service levels, says PricewaterhouseCoopers.
Sustained online demand for workers in key contracting sectors
Overall online demand for workers has increased slightly, as the Monster Employment Index rose one point (1%) in September. The index has hovered around a two-point range for five months with no major movement up or down, although year on year online worker demand has risen by 22%.
Online demand has also increased in the key contracting sectors of IT, telecoms, construction, marketing, management and research and development, with IT showing a 28% increase over the last twelve months.
“The gradual economic recovery continues … where the long term trend has improved substantially over the past 12 months,” explains Monster UK & Ireland managing director Julian Acquari. “Online recruitment trends improved in a number of sectors, with more demand emerging for professionals, having been concentrated largely in lower-skilled and blue-collar job functions earlier in the recovery.”
Contractors key to preventing double-dip recession
Economic growth is slowing but still in positive territory, according to the British Chambers of Commerce (BCC) Quarterly Economic Survey for the 3rd Quarter 2010. According to the survey, services firms are choosing temporary staff, including contractors and freelancers, to plug skills gaps. This is particularly true in the managerial and professional category, with large services firms driving the growth in the sector.
Confidence in the manufacturing sector is at its highest since the third quarter of 2007, with firms reporting serious problems recruiting skilled technical staff. Growth is being driven by small and medium sized businesses which may offer some contract opportunities as smaller firms manage their risk by using flexible workers rather than permanent employees.
“Growth remains in positive territory, and a new recession can be avoided. But the UK will face huge challenges over the year ahead,” says David Kern, BCC Chief Economist. “Reducing threats of a double-dip recession must be the main policy priority.”
Flexible workforce softened recession and provides a platform for growth
It has been the UK’s flexible workforce, including contractors, which has prevented the recession from biting much deeper than it might have, according to the Confederation of British Industry (CBI)/Harvey Nash Employment Trends Survey. Not only that, but contractors and other flexible workers are providing the support firms need to prepare for growth as the economy improves.
“Comparing the UK’s labour market with others around the world, it is its flexibility and agility that has protected the country from the very worst possible outcomes during the recession,” explains Harvey Nash CEO Albert Ellis. “[The flexible workforce] has also provided a robust platform for an increase in demand for recruitment.”
The survey goes on to say that employment regulation is viewed by 81% of employers as the “greatest current threat to labour market flexibility”. As contractors are outside employment legislation, this fear potentially provides them with scope for new contracts.
Contractor recruitment sector outperformed permanent sector during recession
Demand for contractors and other flexible workers fell only slightly during the economic downturn when compared to a huge slump in demand for permanent employees, according to the Recruitment and Employment Confederation (REC) and Barclays Corporate Recruitment Industry Trends Survey 2009/10.
Recruitment activity in the temporary and contractor sectors fell by 10.4% by value, compared to a fall in 27.6% by permanent recruiters, between April 2009 and March 2010, the mid to late stages of the recession. The number of flexible workers placed in 2008-2009 was 1.07m, falling 17.7% to 879,302 at the end of the 2009-2010 financial year.
Not surprisingly, those contractors in greatest demand were in areas ‘where skills are often less widely available’, proving once again that contractors who invest in their own continuing professional development are more likely to stay in contract through downturns.
REC Chief Executive Kevin Green forecasts growth will return during 2010-2011: “Despite the potential impact of public sector cuts we expect to see a return to growth in next year’s report and look forward to seeing the industry bounce back.”
Public sector reduction in non-core operations to create contracting opportunities
Contractors fearful that the public sector is forecast to shed nearly half a million workers by 2015 might be cheered by new PricewaterhouseCoopers (PwC) research that says this job-shedding will provide employment and contracting opportunities in the private sector as outsourcing increases.
Government and public sector organisations will look to reduce their non-core and fixed cost operations by increasing the use of private and voluntary sector organisations for the delivery of front-line services
John Sibson, PwC
Commenting on this latest PwC research, which is published in a report called “Sectoral and regional impact of the fiscal squeeze”, PwC’s head of public sector Jon Sibson suggests: “... organisations with flexible supplies of labour, such as manpower service providers, will have new opportunities in the future.” The message is that public services will continue to require a delivery mechanism, and with likely freezes and reductions in public sector workforce headcount, this means the roles are likely to be filled by workers ‘off the books’, like contractors.
Sibson continues: “Government and public sector organisations will look to reduce their non-core and fixed cost operations by increasing the use of private and voluntary sector organisations for the delivery of front-line services.”