Banking IT contractors 'face further rate drops'

Pay rates for IT contractors facing financial services will drop further before they recover, as freshly laid-off tech staff line up to join the sector's non-permanent IT ranks.

The warning, issued to CUK last night by a financial IT staffing boss, suggests the first round of 'take it or leave' rate reductions will "continue" before they abate.

Even if such pay ultimatums by banks and other financial outfits were to cease, downward pressure on contractor rates, exerted by an increasing line of redundant IT staff, will remain.

Alexandra Kelly, founder of Powerchex, which vets IT contractors for financial firms, reflected on what she admitted was a "quite bleak" outlook for the sector's IT job candidates.

"Several of the large banks are only at the beginning of their redundancy programmes, and I even hear of a large bank that is going floor-by-floor.

"Recruitment in other sectors is meanwhile flat", she said. "[So] daily rates will drop further, as recently unemployed full-time employees join the contractor ranks."

Almost serving as a case study, HSBC yesterday confirmed that it has announced plans to close 58 full-time positions from its UK Technology Services division.

Blaming "very challenging" economic conditions, the bank said the job cuts were unlikely to affect IT contractors, although a spokesman ducked the question of rate cuts.

Likewise, JP Morgan Chase has bemoaned the "challenging" environment though also declined to be drawn on a rate reduction of 10%, which its IT contractors must reflect from January 1st, 2012.

While details of the pay cut are largely under wraps, anecdotal evidence from two sources close to the US-headquartered bank suggests that all IT contractors across its global operations will be hit.

Ms Kelly, of Powerchex and at the EMEA unit of Hire Right, reflected: "Anyone that can get in a longer-term contract at current rates would be well advised to do so, as I expect further drops early next year.

"Having said that, contractors are in a better place than permanent employees and for the competent ones this is a big opportunity.

"Managers have no budget for perms, in fact they have to keep cutting, but they still have budget for consultancy and other expenses which do not result in headcount. I have heard this from several financial firms, so contractors should begin to see [some positive] impact."