IT and engineering have slowed slightly during the holiday season, but demand is still being driven by the skills shortage and contractor pay is still on the rise. Construction is in a slight lull soon to be overtaken by the Olympics and the UK economy is still growing albeit dogged by concerns about inflation.
- Engineering is up 90% year-on-year
- IT is up 2% year-on-year due to holiday slowdown
- Private construction is up 13% across UK
- UK economy
Holiday Season Slows Demand
Despite the onset of the holiday season when, traditionally, recruitment activity starts to slow down, the number of vacancies offered to contractors in June held up remarkably well, according to Karen McDermott, a director at the Colchester-based job board Jobserve.
''Although numbers were slightly down in engineering and IT by 6% and 8% respectively, compared to last month, the year-on-year figures showed a different picture,'' McDermott says. Engineering saw a 90% increase year-on-year, reflecting the solid buoyancy within this industry as new projects continue to generate jobs across all categories. This is also reflected in the number of job applications received – up 57% compared to June 2006. Advertised vacancies within the IT sector grew by a modest 2% compared to June last year, but electronics fell by 16% with 3,226 vacancies, although applications were up by 6%."
But contractor pay is still on the rise even though job demand is down in the holiday season. According to Reed's Market Index, contractor pay continues to spiral slowly upward although it has been volatile in the past year, ranging from the GBP40-60 area for the areas of contracting most in demand.
There is still good buoyancy in the IT industry
Karen McDermott-Jobserve
But Skills Shortage Drives Market
The skills shortage continues to daunt CIO's, driving up demand for contractors and continues as one of the principal drivers behind the contractor pay rise. The shortage, most notable in IT and engineering, has no short-term solution according to the Association of Technology Staffing Companies. The shortage is slightly offset by offshoring and by training efforts, but neither of these have impacted it significantly nor will they in the coming year.
According to the Office of National Statistics, the average pay rise in the UK was 8% for IT staffers and contractors, as opposed to 4% for those in other sectors.
Says Julie-Anne Brooks, director at the London-based recruitment agency JM Contracts: ''The financial sevices continues to drive the most demand, as banks tool up to enjoy the booming private equity markets and to cope with increased European regulatory pressures. We noticed that there were significant increases in the demand for support service type roles predominantly at a junior level. At the senior level however we felt demand was fairly stagnant on last year. Looking forward we expect the next 6 months to continue in the same direction with continued increases in rates as demand outstrips supply.''
We notice significant increases in the demand for support service type roles predominantly at a junior level
Julie-Ann Brooks-JM Contracts
In engineering, the union of scientists and engineers known as the Prospect Union has repeatedly warned that both public and private UK projects are threatened by the lack of skilled personnel. According to the Union, engineering positions are the fourth-hardest to fill in the Uk labour market.
Record Demand in Australia
High-tech contractors should note that demand in Australia is expected to rise significantly in the fourth quarter of this year. The Sydney-based recruiter Best International are predicting close to a 15% shortage in skilled workers due to the retirement of a large group of older workers.
Lull in Construction
Construction was also down significantly on Jobserve, with 1,653 jobs published, but, interestingly, the number of applications for these vacancies grew by 71%, McDermott adds.
Construction is in a bit of an odd phase at the moment as contractors wait for the Olympics projects to get off the ground. Further, costs have risen in the key London area and that has slowed private construction projects. According to a study released in June by the London-based EC Harris consulting company, building tender price inflation in London is forecast to run at 6.3% over the next year and by 6.5% the following year, some three times the expected rate of consumer price inflation.
The capital accounts for 15% of all UK construction activity according to EC Harris, and with private commercial workload across the UK up by 13% in the past year, tender prices in London have been increasing well above the national average where tender prices rose by 4 - 4.5% over the past year.
But EC Harris says that there can be little doubt that construction activity in the capital will continue to ride high in the foreseeable future. Almost two years after London was awarded the Olympics, construction is building up to deliver, although most of the contracts placed to date have been inffrastructure or enabling works. Nevertheless, as more Olympics schemes come through, they will be competing with the very busy commercial market for a limited supply of labour, EC Harris points out.
UK Economic Strength Tempered By Inflation
Economic factors should not slow demand in any sector in the UK, economists say. Bank of England policymakers, who have raised interest rates four times in less than a year to curb inflation, do not expect a marked slowdown due to inflation, which they believe to have under control All the same, high rates of interest will dampen some economic activity in the remainder of the year.
There were signs that UK domestic demand is slowing with the total new orders index slipping to 54.7 from 55.5 in May to reach its lowest since January, according to the Office of National Statistics. But the strong sterling does not appear to have dented demand for British goods abroad, with the export orders index rising to 54 from 53.6.
There was no sign of decline in the IT, engineering or construction sectors which do not depend on consumer demand. In short, B2B continues strong and that's where most contractors work.
