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Demand For IT Contractors Still Soaring: But Why?

by Richard Turner

The demand for staff is a recurring factor that is often changing within the world of contracting and general employment; but these latest statistics are more startling than usual.

The figures essentially state that change may be on the horizon in the vast job market universe, as the recent news could result in implications; particularly for IT contractors.

It's evident that there has been no midsummer slowdown in the demand for IT contractors, and job agencies are under more pressure than ever following a near all time high in July.

Standing at 61.1, the index score of IT contractor demand by the Recruitment & Employment Confederation is only marginally lower than in May earlier this year, which peaked at 61.9.

Traditionally, the Summer can be a challenging period for IT contractors, as end client decision-makers leave their work behind to go on holiday or on annual leave. Contractors often do the same, which prompts hiring managers to follow. The beauty of being a contractor is choosing when to take vacation time and when to head back to work; and some often take a break from work for months at a time - usually during the warmer Summer months. This provides agencies with less talent to source, and therefore contributes to the increase in demand.

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Is Brexit To Blame?

However, it could be that Brexit is the culprit behind the atypically high demand as parts of the economy are still mostly reliant on EU workers, especially for IT based roles. In short, the strain of such workers leaving the UK and returning home has led to a very noticeable crack on agents and their abilities to place contractors in these high-demand jobs.

In its July Report on Jobs, the REC also said: “Employers are having to work even harder to fill jobs as vacancies rise and candidate availability shrinks.”

Across the IT sector, employers are actively seeking full-timers who are skilled in areas such as Cyber Security, Development Ops and Java coding. Generalist IT positions are proving hard to fill too, as are roles for SC/DV Cleared Staff.

Last month’s shortages of IT contractor skills are similarly spread. IT generalists were keenly wanted for example, as were IT Security experts, Software Developers and even Testers.

London in particular is feeling the Brexit effect more than other major cities around the UK, and Brexit might mean that these temporary IT skills fetch less in the capital than expected, even in spite of them being scarce.

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On one hand, hiring statistics within London are still growing, but at a much slower rate in comparison with every other region of the UK. Financial services, a crucial part of the London labour market, are not hiring in their usual quantity as the doubts caused by Brexit makes them hesitant.

The 'up in the air' attitude of agencies and hiring managers is more obvious than ever due to the uncertainty of where exactly Brexit will lead us. REC’s chairman Kevin Green seemed to support these statements, saying in the report that Britain "must make it easier, not harder" for firms to get the skills that they really need.

The Skills Shortage

Many UK employers have also had to pay well above market rate to attract employees over the past year as the IT skills shortage intensifies across the market.

A recent survey done by the Open University has suggested that almost all firms have found it difficult to find workers with the skills they needed over the last year.

It’s now been calculated that the problem is costing some companies around £2 billion a year, and the aforementioned uncertainty surrounding Brexit is the main cause of the issue, as it’s dramatically exacerbating the skills gap.

The survey has also suggested that people already in work were reluctant to change employer, while some EU nationals did not want to take a UK role because of the lack of clarity over the future immigration rules. To paint a picture of the impact on the employment sector in general, you'd only need to know that the number of EU workers in the UK fell by 50,000 to 2.3 million in the last three months of last year; according to official statistics.

However, the silver lining of it all is that companies are being encouraged to turn to agencies for help, which is good news for recruiters; particularly those who specialise in the IT sector.

A Popular Market

Developer jobs in particular are being sought after in huge proportions lately, and are looking to continue doing so for the foreseeable future. For example, in Sweden, programming is now the most popular and highly sought occupation.

Something that can be sold to contractors who are looking for IT roles is the promise of job security. It’s very unlikely that your job is at risk as a developer or a programmer. Yes, due to technology, many jobs disappear. Often because they can be replaced by computers and software; but all those new programs still need to be developed and maintained, so the opportunities for these jobs will always be open. Not only that, but the IT industry in general is quickly transforming into a hub of modern, trendy jobs. Gone are the days when positions in IT were reserved for the quiet, awkward teenager wearing a hoodie and glasses. This stereotype has become a thing of the past, and there’s much more room in the industry now.

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Students are studying IT related subjects at universities and colleges now too, which means that the number of future IT brainiacs is growing year after year. Something that- hopefully - stands us in good stead of lessening that skills shortage and shrinking the future demand.

Something else that might sweeten the sting of this news for contractors is that IT contractors' daily rates are growing at an exceeding rate; even as Britain heads towards what a lot of us thought would be a downfall for our country and economy.

It’s predicted that one in five contractors' rates are currently increasing and are very much on the rise, according to a recent survey of 600 contractors that compared the first half of 2016 to the second half after the vote to leave the EU.

Nixon Williams found that more rates are increasing than decreasing, with 20.5% seeing their rates rise compared to 16.6% whose rates fell post-June.

The 20.5% whose rates increased after the Brexit vote beats the 19.4% whose rates grew before it. The percentage of respondents whose rates fell after Brexit - 16.6% - was lower than before the referendum too, when it stood at 18.6%.

The survey also found that a mere 30% of IT contractors were feeling downbeat about the UK's prospects outside of the EU, whilst the vast majority remain optimistic or neutral about it.

Contractors seem to be faring better than full-time staff, with the UK's average engineering salary falling from £55,709 to £45,964 last October, according to figures from Balderton Capital.

The figures also come as public sector bodies prepare to crack down on those who will be affected by the HMRC's IR35 legislation, which seeks to tax contractors as full-time staff.

Public bodies will be responsible for enforcing IR35 among their contractors from next month, and it will target contractors who pay themselves through dividends of their own companies, thereby avoiding National Insurance payments. IR35 will tax them as regular employees, meaning they could lose up to 25% of their earnings. This was a decision that was announced at the recent Annual Spring Budget and caused a lot of unsettling nerves in the contracting industry, with many limited company owners feeling that they’d been hard done by.

RELATED: Has The Budget Brought More Bad News For Contractors?

But with all of this new research in mind, it appears that those with in-demand skills can now charge more to make up for the shortfall in earnings. Alongside this, contractors are likely to see more frequent and multiple contract offers, as well as bidding wars for their placement in a role.

There are compelling arguments for and against the impact of a Brexit result on the IT contractor market, and the aftermath was always going to create changes for most UK companies.

If, as an IT contractor, you are ever at a bit of a loose end and you want to give yourself the upper hand, KnowNetwork is a great place to show off your skills, work, expertise and interests.

A KnowNetwork membership delivers a host of bespoke benefits, privileges and rewards exclusively tailored for your contracting work-life and lifestyle. If you're a contractor or know someone who is, don't miss out. Take a look at what we can offer you here.


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