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As we edge out of an uninspiring summer, contractor rates appear to be nudging back from last quarter’s stunning drop. But, the floods of unwelcome financial news offer little hope for a bright autumn. Average rates among the top ten most commonly requested IT skills have edged up to £31.45 per hour, up just more than 2% from the £30.77 of the beginning of June. The June figure was a clear indication of a catastrophic spring, in which rates had dropped by a quarter. With each fresh news bulletin bringing another indicator of economic carnage, the future did not bode well. But, there remains some hope to cling to. The tumble in rates at the end of spring was preceded by a surge in rates at the end of winter; compared to January’s £30.36, the £31.45 of today is a steady average rise. It seems clear that as markets for all things become giddy in the wider economic world, contract rates will surge and plummet. As long as the overall trend is upwards, contractors do not yet need to panic. And, it seems that this general upward trend will persist. Contractors bear the brunt of snap decisions by employers (witness the arbitrary 10% rate cut by Barclays Capital mentioned in last quarter’s report), be they positive or negative. Tough times lead to more knees jerking. But, poor economic performance can be good for contractors, as it tends to be permies that feel the squeeze from diminishing budgets, and their salaries, when viewed as a lump sum, can look heavy on the balance sheet. This general trend is noted by Phil Young, a recruiter of interim managerial staff. ‘What we tend to see at times of recession are companies flexing down the workforce to save money but they often flex too far,’ he says. ‘Once the companies have bottomed out they realise they need people’. While Young’s comments are about general managerial roles, they apply to IT as much as any other industry. As Alan Nolan, a director at KPMG says, ‘the slide in the UK economy continues to hit the jobs market hard – with yet another sharp drop in recruitment. UK employers are continuing to control payroll costs through redundancies’. His firm has just released its Report on Jobs, which found that through August, permanent placements fell at their sharpest rate since November 2001. Clinging to such news as a positive may seem a stretch, but some holes will need to be filled, and it could mean contractors soon find their phones ringing more regularly. One area where cuts have been harsh is finance. While the London Stock Exchange may now be a good spot for contractors to be touting their talents, broader issues around the credit crunch do not bode well. And adding to last quarter’s glum news from Barclays Capital, HBOS appears to be planning a contractor rate cut and headcount reductions as part of a money saving exercise. But the perception among contractors is not all glum. Recruitment and umbrella firm Giant group's research suggests, ‘there is no sign of panic among contractors. Sentiment is on the wane, but few are expecting a repeat of the mass bloodletting we saw in the 2001/02 downturn’, says its managing director Matthew Brown. He echoes Young’s sentiments by saying, ‘there is often robust demand for contractors during challenging economic conditions as organisations put off hiring permanent IT staff’. One particularly encouraging sign is the bump in rates for business analysts. Last quarter, we noted that their rates had dropped from £39.10 to £29.88. However, things now seem to be shifting in the right direction, and rates have climbed back to £35.33. The sharp drop in BA rates was seen as a sign that new projects were being scrapped across the board, and that long term, the picture was bleak. The step-up suggest that many employers realise that they have been hasty in cutting back. The phrase ‘business analyst’ is now mentioned in almost 9% of all advertised contract roles, and rates are up almost 1% on last year. One area that might take up the slack form banking is the public sector, according to recruitment outfit Parity. Alwyn Welch, CEO of the firm notes that, ‘as investment in IT in the public sector is essential to deliver overall cost savings, it's unlikely that hiring in skills will face material cutbacks’. So, there is hope. Consider too, that summer sees a number of decision makers away on their hols. This typically slows the recruitment cycle, and so to see a slight rise over summer brings better news than the weather men have managed in the last few months. Matt Chester Data sources: Sep 10, 2008 Email this article Printer friendly page Previous Page
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