This month IT contractors are mainly in the frame, with good news from the City and the Monster Employment Index defrayed by the threat of an IT contractor ‘brain drain’, according to the latest research from IT Job Board. And there seems to be no end in sight for the decline in construction activity, as the CIPS/Market results show. As for the wider economy, the service sector is booming and the rate of business failures is slowing, according to the new Insolvency and Distress Index from Experian.
In this month’s contractor calculator Market Report:
- The Monster Employment Index dips slightly and demand falls for engineers and telecoms contractors, but demand for IT contractors is on the increase
- The business failure rate may be slowing, according to the new Insolvency and Distress Index from Experian
- The improvement in fortunes of the UK financial sector might spell an end to the misery of City IT contractors?
- The September CIPS/Markit results show construction still in decline, but a bounce-back for the services sector
- Brain drain threat for IT contracting revealed in new survey by The IT Job Board.
Monster Employment Index
IT contractors have cause for celebration this month as the Monster Employment Index showed demand for IT workers increased by 3%. This is good news for the IT contracting sector, particularly when set against a backdrop of a slight fall in the index overall, and with overall hiring levels down by 35% on last year.
Interim management contractors in the marketing, management and consulting sectors may also see an increase in activity, with demand for marketing and sales professionals up by 6%. This goes some way to improving the fortunes of a sector that has seen demand fall further than the market average – by 49% compared to a year ago. In fact, the Index shows management and consulting is up by 2%.
However, contractors in telecoms, construction and engineering have good cause to remain concerned, as the index shows there has been a substantial decrease in demand for their skills.
“Although employer demand has remained largely stable since the beginning of the year, businesses have not yet resumed hiring,” explains Monster Worldwide’s head of research Hugo Sellert. “The level of vacancies across the UK is still insufficient to reverse increasing job losses.”
Business failures
Despite the UK business failure rate falling to its lowest level since September 2008, Rolf Hickman, Managing director of Experian firm pH, warns that every business must continue to be cautious in its dealings with other businesses.
The results of Experian’s new Insolvency and Distress Index show that, out of a total number of 1,796 business failures last month, those in top contracting sectors included:
- Oil – 8 or 0.4%
- Building and construction – 266 or 14.8%
- Engineering – 61 or 3.4%
- IT – 59 or 3.3%.
Not surprisingly, building and construction contractors are most likely to fall foul of a client going bust, but engineering and IT contractors face a significant risk, too. The best advice, even when the economy is at its strongest, is always to ensure you are contracting for a solid business with a healthy future ahead of it!
We have seen a significant increase in businesses monitoring the health of suppliers, customers and partners, as well as themselves, in order to ensure they do not suffer from the impact of another business becoming insolvent
Rolf Hickman, pH Experian
It would seem limited company contractors and other businesses are being prudent in this regard; according to Hickman: “We have seen a significant increase in businesses monitoring the health of suppliers, customers and partners, as well as themselves, in order to ensure they do not suffer from the impact of another business becoming insolvent.”
UK financial sector rebounds
The results of the latest CBI/PricewaterhouseCoopers financial services survey highlight that financial services firms are showing the first signs of recovery after nearly two years in the doldrums, although business volumes are still thought to be well below normal.
Does this mean that IT contractors will find their services in greater demand as the banks and financial services companies start to skill-up in anticipation of increasing business? According to Ian McCafferty, CBI Chief Economic Adviser, celebrations by IT contractors may be premature.
“Business volumes have increased, for the first time since the onset of the credit crunch, and a fall in running costs helped lift profitability,” he says. “This is concrete evidence of the gradual path to recovery that firms were anticipating in our June survey of the sector.”
But McCafferty warns: "Future demand is still a major concern for financial services firms, however, and further pain will continue to be felt in job losses and lower investment."
IT contractors were the first to go when the times got tough in the City and in other financial centres, but contractors are generally also the first to get taken on when the market turns due to their flexibility, short lead times and specific skill sets.
Construction down, services up
Woes continue to be heaped upon the ailing construction sector, with the Chartered Institute of Purchasing and Supply/Markit Purchasing Managers Index (CIPS/PMI) showing yet another decline in construction activity. And that is against the overall index showing five successive months of growth, with the services sector recording its best performance in two years.
David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply explains: “The UK construction sector continued to be heavily impacted by the recession as it deteriorated at its fastest rate since June.
“One of the few glimmers of hope appeared in the housing sub-sector, which registered a marginal rise in activity for the first time in twenty-two months. Moreover,” he continues, “as commercial and civil engineering showed further signs of decline, this collectively highlights the volatility of the UK construction industry.”
IT contractor brain drain?
The IT Job Board suggests that the UK’s IT sector is on the brink of a brain drain, driven by offshoring, rate reductions and IT contractors’ and workers’ worries over their long-term prospects.
Worryingly for UK-based clients, 80% of those surveyed claimed that the economic downturn is encouraging them to consider relocating, with the USA and Australia the most popular destinations.
“The UK IT sector cannot afford to lose key individuals with specific technical knowledge and skills,” says Jamie Bowler, head of marketing at The IT Job Board. His message to clients is stark: pay competitive rates or suffer the consequences.
“The responsibility lies with employers to maintain competitive rates…” he states. “Only then can we work towards avoiding brain drain in the UK IT sector.”