Contractors are in demand across all major contracting disciplines this month, with key sectors experiencing a return to cautious optimism. IT contractors are set to benefit from an upturn in fortunes of the financial sector, while construction is maintaining its strong growth in the commercial and civil engineering sectors. The renewables and oil & gas sectors are also buoyant, looking forward to future expansion on and offshore. So, on the face of it, this is all good news. But with this week’s Conservative Party’s conference revealing major cuts that will impact on consumer confidence, and results of the government’s spending review due to be announced later this month, it is far from certain that UK contractors will continue to enjoy optimism in their sectors.
In this month’s ContractorCalculator Market Report:
- The Monster Employment Index returns to positive territory over the summer, with a surge in demand for workers in the financial services sector
- The Markit/Chartered Institute of Purchasing and Supply (CIPS) and the Purchasing Managers Indexes (PMI) in construction and manufacturing remain in positive territory, although growth in manufacturing is slowing
- According to the latest survey of the financial services sector by the Confederation of British Industry (CBI) and PricewaterhouseCoopers (PwC), the outlook is improving
- The Oil & Gas UK Index shows confidence returning to oil companies and oilfield services firms, although independent exploration and production businesses are less confident about the future
- UK wind energy production passes an important milestone as two major wind farms come on stream, with contractor futures secured by further planned development.
Online demand for finance professionals soars
According to the latest Monster Employment Index, the demand for workers in accounting, audit and tax increased by 9%, contributing to the one-point rise in August and reversing the fall of two points seen in July. Overall, the index is up 19% compared to the same period in 2009.
In addition to positive marketing indicators for interim management contractors in finance and accounting, demand for workers in IT, engineering and construction has also increased, but at a more modest rate; however, telecoms worker demand was flat.
According to Monster UK & Ireland managing director Julian Acquari, the modest increases reflect reluctance on the part of employers to commit to permanent employees, which is likely to provide opportunities for contractors and freelance professionals.
“The long-term trend indicates the rate of growth has reached a plateau,” explains Acquari. “The steady 19% annual growth rate suggests conditions are widely improved from a year ago, but the fact that it is not accelerating faster likely reflects employers’ hesitation to expand too rapidly in the uncertain economic environment.”
Civil engineers lead construction growth – but demand for contractors unchanged
Engineering and construction contractors have enjoyed another month of increased construction growth. The Markit/Chartered Institute of Purchasing and Supply (CIPS) UK Construction PMI increased in September, driven by the commercial and civil engineering sectors.
However, employment in the sector fell sharply, while the use of sub-contractors, such as contractors and freelancers, remained unchanged since the summer. This could be a double-edged sword for contractors, with ongoing demand but at lower rates. CIPS CEO David Noble explains that employee costs are under pressure: “Firms continue to nervously reassess their resourcing requirements, suggesting that staffing costs will be squeezed for the foreseeable future.”
The Markit/CIPS UK Manufacturing PMI shows that growth in manufacturing has slowed, and “although remaining solid, the rate of overall expansion was the weakest since September 2009 and well below the fifteen-and-a-half year high seen in March.”
Firms continue to nervously reassess their resourcing requirements, suggesting that staffing costs will be squeezed for the foreseeable future
David Noble, CIPS
“September saw the weakest expansion of UK manufacturing for a year,” says Rob Dobson, Senior Economist at Markit and author of the UK Manufacturing PMI, “but some reassurance can be gained from the fact that growth has merely slowed from an exceptionally strong rate in the first half of 2010.”
Financial services IT ‘most positive since December 2007’
IT contractors working in the financial services sector are set to be on the receiving end of a significant period of investment, as the Confederation of British Industry (CBI)/PricewaterhouseCoopers (PwC) Financial Services Survey reveals that financial services firms are planning the largest spend on IT since September 2007.
The survey also highlights that the financial services sector, which is the largest UK consumer of IT contractors’ services, has experienced growth at the highest level since June 2007. CBI Chief Economic Adviser Ian McCafferty explains: “Activity picked up in the financial services sector in the last three months at a pace not seen since before the credit crunch.”
In addition, employment in the sector rose for the first time since December 2007. This could prompt an increase in demand for IT contractors responsible for supporting the infrastructure required by new financial services workers.
Worker demand and confidence increase in oil & gas sector, but not rates
Increased confidence and demand for workers will benefit offshore and oil & gas contractors as, according to the Oil & Gas UK Index, the sector is experiencing a surge in activity. However, day rates are flat or falling and exploration and production firms are less positive.
Oil & Gas UK’s supply chain director, Brian Kinkead, says: “It is heartening to see continued optimism, especially within the supply chain community, which has registered the highest ever levels of business confidence since the survey began in early 2009.”
Firms in the sector’s supply chain – which includes drilling and well services, marine and subsea and facilities engineering, operations and maintenance – all report increasing activity, but exploration and production companies report falling confidence. “It will be important to monitor the Q3 and Q4 results closely,” continues Kinkead, “especially in the light of the drop in confidence by exploration and production companies in Q2.”
Increasing pace of wind energy growth blows more work contractors’ way
The UK’s wind energy sector passed a significant milestone in September, as for the first time generating capacity exceeded 5 gigawatts (GW), enough electricity to power 3m homes. The increased capacity comes from two major wind farms coming on stream, off the Kent coast and in the Scottish Borders.
Offshore, engineering and IT contractors with contracts in the wind energy sector are likely to benefit from future projects, as a further 18 GW of capacity are planned to be built. This, together with existing capacity, will fulfil over a third of the UK’s total power requirements.
“Five gigawatts is an important milestone for two reasons: it takes us within reach of our 2010 targets on renewable electricity, while showing that each successive gigawatt takes less and less time to deploy,” says Maria McCaffrey, Chief Executive of industry body RenewableUK. “Renewable energy generally and wind energy in particular is not alternative energy any longer - it is absolutely mainstream.”