Contractor UK Market Report - Rates gently rise

The Euro is on the brink of collapse, the global economy is staring down a full-on depression, and the summer months have been the wettest for decades. Yet as September finished with a fortnight of barbecue weather, and supermarkets ordered extra stocks of burger buns and rose wine, contractor rates enjoyed an Indian summer of their own.

The average hourly rate for the ten most commonly requested contractor skills has shifted from £30.84 at the end of June to £31.25 today, a modest rise of just over 1%, but a rise nonetheless. Given the deluge of distress tumbling down from the financial pages, any increase is to be applauded.

But the good news does not reach everywhere. London and the south east are looking in much better shape than the rest of the UK, and the private sector (and finance in particular) much healthier than public.

One firm, ReThink Recruitment has recently released figures claiming that four in ten new IT contract roles in the UK are London based. This may not sound disproportional, but before the fall of 2008, London accounted for just one third of IT roles.

Michael Bennett, a director at the firm, notes that London is, “emerging as a major hub for high-tech IT start-ups – with several heavy hitters including Cisco and Google recently investing in Shoreditch. In comparison with other high-tech centres, London still offers relatively cheap rents”.

Part of the appeal is the broader economic troubles in the US. “Venture capital firms, who are key funders for most of these tech start-ups, are increasingly finding that investments in Silicon Valley are over-priced. With speculative talk of a second dotcom bubble, many are deciding that Europe, and London in particular, is a safer place to invest,” he explains.

Figures from recruitment firm CV Screen partially support this, with south-east based techies typically earning up to 20% more than their northern counterparts. In London, IT staff typically pick up 14% more than the UK average.

Again, while such differences are not in themselves surprising, it is the scale of disparity that is new. CV Screen did similar research in 2008, says MD Matthew Iveson, explaining that, “when we look into the regional variations, it is the South East that sees the greatest change. In 2008, salaries in the South East were 3% higher than the UK average; in 2010 it shot up to 10.1%.”

Part of the imbalance can be blamed on the relative robustness of IT contractor roles in the financial services sector. In one of its regular surveys to take the pulse of the industry, giant has found that 33% of contractors think financial services will create the most jobs over the next year, up from 28% 12 months ago. As MD Matthew Brown notes, “in areas where banks expect to make significant productivity gains, such as cloud computing, demand for IT skills has risen sharply.”

More broadly, APSCo figures about finance in general back him up.  They claim a surge of 65% in demand across the sector as a whole in the last year, with new regulatory concerns the main driving force. “Increased regulation,” says chief exec Ann Swain, “is fuelling demand for candidates in both the banking and insurance industries. Many financial institutions are bolstering compliance teams.”

Perhaps unsurprisingly, given the times, public sector roles are limited and confidence low in comparison. Just 9% of IT contractors expect the public sector to create the most jobs over the next 12 months, according to giant’s figures, compared to 17% in Q2 2010 and 30% in Q2 2008. 

Figures from the National Computing Centre’s annual benchmark of IT spending confirm the divide. Across the whole of the UK workforce, average spending on IT per end user has dropped to £3,135, down from £3,227 in 2009 and £3,275 in 2008. The drop is all the starker, given that there are less and less of those ‘end users’ around as employment drops across the country. In finance, however, the spend is an average of £9,348 per end user.

But generally, employers’ financial constraints are good news for contractors. Firms can only muddle through for so long, and contractors tend to benefit when permies go. New figures from recruiter Randstad reveal that a massive 43% of permies expect to leave their job in the next 12 months. As director Richard Talbot points out, "this means companies are forced into hiring more IT contractors to fill the skills gaps”.

And this confidence permeates through to contractors. New numbers from the Professional Contractors Group show that 75% of contractors had been in work for at least eleven months out of the past twelve, and an impressive 84% expect even more work next year.

"It's been a tough road, particularly those who saw local public sector work dry up and had to revise their business plans,” reckons MD John Brazier, “but our members have demonstrated their adaptability by securing contracts in the private sector."

For the best rates, it seems, it’s not what you know that counts, but where you are.

Matt Farquharson

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