The result of the EU referendum seems to have taken the contracting sector by surprise, and with markets still processing the implications, it’s still too early to fully judge the impact on the contracting market, or on the economy as a whole. However, with the exception of the financial services sector, the demand for contractors continues to grow, with skills and candidate shortages across many areas. Not only is contracting growing in popularity as a career choice, a major trend has been a marked increase in women moving to contracting.
In this month’s ContractorCalculator Market Report:
- Contractor placements continue to rise in May, with demand for contract staff increasing month-on-month, according to the Recruitment and Employment Confederation’s (REC) Report on Jobs for May 2016
- IT contractor engagement is seen as key to the growing prominence of London as a global hub for technology according to Ernst and Young’s 2016 Attractiveness Survey
- The contribution of the contingent workforce to the economy of the EU is seen as vital in a report by the Association of Independent Professionals and the Self Employed (IPSE), ‘Understanding Independent Professionals in the EU, 2015’
- Morgan McKinley’s London Employment Monitor shows that the finance sector may be experiencing a downturn, although there are signs that a need for recruitment may be growing again
- The UK’s contingent workforce contributes roughly £109bn to the economy each year, according to IPSE research, ‘Exploring the UK Freelance Workforce in 2015’, which also notes some important changes in the contingent workforce.
Contractor agency billings continue to rise
Contractor placements continued to rise in May, with demand for contract staff increasing month-on-month, according to the Recruitment and Employment Confederation’s (REC) Report on Jobs for May 2016. This showed contingent staff were the favoured option for many businesses, with permanent placements rising at the slowest rate in eight months.
REC chief executive Kevin Green believes the increase in contractor demand demonstrates the worsening skills shortages that Brexit threatens to intensify:
“UK businesses are now facing candidate shortages in nearly every sector of the economy. We need more people with the right skills for the jobs that are available. Sourcing workers from outside the UK is going to be an ongoing necessity if we are to continue seeing the British economy grow.”
Green’s belief is borne out by the facts. Contractor availability actually fell even further in May. The rate of decline may have eased, but the gap between supply and demand continues to become wider.
These factors have helped to support average contractor rates. These have risen for the fortieth month in a row, and while the rate of growth may has eased a little from April’s nine-month high, it has remained strong, with contractors in the North enjoying the strongest increase in rates.
Contractors driving IT innovation deserve more Government backing
IT contractors are delivering innovation that is making London a magnet for foreign investors, yet all they get from the Government is red tape and tax challenges believes ContractorCalculator CEODave Chaplin.
London is now regarded as the FinTech capital of the world, with a recent Government report estimating that it generated £6.6bn in revenue in 2015 alone, and attracted £524m in investment.
Ernst and Young’s 2016 Attractiveness Surveyfound that London is considered the city with the second best chance of producing the next technology giant: 23% of investors from more than 440 international companies saw London as the top tech city, just behind 29% opting for San Francisco/Silicon Valley.
London’s rise in prominence since 2015, overtaking New York, speaks volumes about the tremendous energy and diversity of skills and expertise offered by the UK IT sector, despite a global and ongoing talent shortfall. Contractors are helping to ensure businesses who do not have the necessary skills in-house continually innovate by providing cutting edge skills and putting them to work across multiple clients.
The oil and gas sector may be struggling, and skills shortages may be slowing down construction projects. Worries about what Brexit will really mean may cause concerns stifle the economy, IT is one of few UK sectors that could be said to be thriving. But what is the Government doing?
Chaplin’s view is “nothing positive”. He sees the government’s only objective to increase tax revenues. If instead HMG gave IT contractors the backing they deserve, the return on investment, which includes foreign investment, and benefits multiple other sectors and the economy as a whole, would far outweigh any short term costs.
Contracting popularity continues to grow as contingent staff flood European market
Contractor numbers across the UK and European Union (EU) have grown steadily since 2008. This marked rise comes at a time of a largely stagnant labour market. It is a finding that indicates that proves that attitudes are changing towards flexible working, and that many more individuals and businesses are recognising the benefits.
This is according to new research commissioned by the Association of Independent Professionals and the Self Employed (IPSE). ‘Understanding Independent Professionals in the EU, 2015’, shows that the numbers of contractors and freelancers across the EU have risen by almost a quarter from 7.7m to 9.6m between 2008 and 2015. This equates to 99% growth since the start of the millennium.
“Right across the EU, huge numbers of people are seeing the benefits of being their own boss and they’re finding the confidence to launch new business. An increase of almost a quarter in just seven years is making these professionals a force to be reckoned with,” comments IPSE CEO Chris Bryce.
These statistics are all the more marked when it is remembered that t the EU workforce as a whole reduced from 223m to 218m in the same period. The importance of the contracting sector to the economy cannot be ignored.
“The emergence of contingent working in the UK was long attributed by some to economic instability caused by the 2008/09 financial crisis and the subsequent lack of permanent jobs,” notes ContractorCalculator CEODave Chaplin.
“However, the continued growth of the contracting sector since then - not only in the UK but in other successful EU economies - goes to show that this is an increasingly popular way of working which offers exponential benefits to both worker and client.”
The effect of Brexit on the freedom for contractors to work anywhere in Europe has yet to be assessed. Whatever the final agreements made, it looks as though the vital need for contractors must be accommodated.
A challenging financial sector
Contractors in London’s financial sector might need to be wary of a downturn, according to the latest Morgan McKinley London Employment Monitor. A sombre outlook for financial jobs voiced in April translated into real numbers in May, with declines in available jobs and professionals seeking new roles. Jobs decreased 5% from 8,070 in April to 7,695 in May “The performance of many institutions has not been encouraging. However, last month we did see an increase in appetite from organisations to interview professionals looking for a new role,” observedHakan Enver, Operations Director, Morgan McKinley Financial Services.
The news comes asinvestment banks suffered their worst quarter since the financial crisis.Data released by industry analytics firm Coalition revealed that revenues from the 12 largest investment banks fell by 25% in the first quarter, compared to the same period last year. Since 2011 revenues from fixed income, currencies and commodities are now down 49% with head count down 33%.
The industry has been by commodity prices, low and negative interest rates, ongoing regulatory changes and now fears about what Brexit might mean.
However, the news is not all bad, with other sectors thriving. The UK’s employment rate reached a record high with an increase of 40,000, according to the Office for National Statistics (ONS).
Contractors continue to benefit the economy
IPSE research, ‘Exploring the UK Freelance Workforce in 2015’, estimates that the UK’s contingent workforce contributes roughly £109bn to the economy each year – and notes some important changes in the contingent workforce.
“Independent professionals are usually highly educated and in highly-skilled positions, and they’re vital to a booming economy,” IPSE CEO Chris Bryce explains. “The biggest countries have the most established services sectors, so they’re naturally seeing the most new independent professionals. But the newer EU entrants are catching up fast. The trend towards working this way looks set to continue well into the future.”
Around 30% of contingent staff operate in professional, scientific and technical activities. 8% work in information and communication, with 5% work in finance. Other service activities occupy 13% of the contracting workforce.
One trend supporting this growth is the growing number of women entering the contractor market with a 29% increase since 2008. This has led to a virtual closing of the gender gap, with 47% of all contractors and freelancers now women.
Sector-by-sector, women are under-represented in traditionally male-dominated industries such as information and communication where eight in ten staff are men. However, they now account for 38% of contingent staff in professional, scientific and technical sectors.
“It’s great to see greater gender balance in the contracting sector,” commented ContractorCalculator CEODave Chaplin. “Whilst divides still clearly exist in sectors such as construction and IT, women are evidently making up the ground in other areas.”