Growth, not flatlining, is the contract IT market's future

In the temporary computer jobs market, a lot can happen in a short time. Today, a turnaround in demand for IT contractors is on the cards, but just a couple of months ago their market was on a downward trajectory, having eased from its lofty heights in the first quarter when considering all but one of the 'hottest' IT contractor skills, writes Niall Cook, managing director of Computer People.    

Then, specifically in June, the pool of temporary IT contracts had narrowed - by 4.1% since the first three buoyant months of 2013. We weren’t alone – staffing body the REC found that February represented a new high for IT contractor demand. Taking into account indicators available to us at the time, we projected the shrinking from this peak would continue. While we found IT contractor pay rates to be marginally up, the market appeared to be heading for a flatlining in the third quarter.

But looking at the first half of 2013 overall, it is now clear that the IT contractor labour market is bouncing back and returning to the buoyancy seen in the run-up to the London Olympics of 2012.

Bearing this positive sign in mind, and with the gradual recovery of the UK economy, we anticipate a further increase in demand for IT contractors in the second half of 2013 – and potentially beyond. Either way, London and the South East will lead the way.

So the outlook for temporary IT workers is looking bright despite them moving into the historically challenging summer months, as we cautioned last week. In this period, while there is anecdotally a shoo-in for freelance and contract IT workers as ‘permies’ go on holiday, the reality of the vacation period is less auspicious for IT contractors, especially for those seeking their next opportunity.

This is because, typically, a business needs the approval of two to three stakeholders for final approval of funds for an external resource. With the summer being the time when the majority of UK professionals take their traditional 2-week holiday, it only needs one of these stakeholders to be absent to push the actual recruitment out of the summer, and into the autumn. Consequently, September is traditionally a busy month for businesses and contractors alike.

Aside from such seasonal factors, is the feel-good factor – which, thanks to a combination of events, is slowly coming back to have a positive impact on hirers if you’re seeking an engagement in IT. The warmer weather of late has rightly been pointed out, yet more influential, surely, is the UK’s healthier economic forecast. Employers’ organisation the CBI projects growth for the UK will this year be up to 1.2%.    

So companies that were previously reluctant to invest now have creditable grounds to look at expansion. From speaking to a number of our core clients, at least two-thirds of them are planning to maintain their IT contractor intake or increase output throughout the rest of 2013. The bulk of these outfits are now prepared to invest money in headcount, whereas in the downturn they stripped into their internal and external ranks aggressively, although that itself did provide some opportunities for IT specialists who work on a temporary basis.

Overall though, IT contractors will continue to help bridge the computer skills shortage and indeed, IT interim levels are now increasing month-on-month. Specifically, seven out of the top nine sectors have recorded an increase in IT contractor usage, with the largest rise in Web Development and Testing, particularly Software Testing which is a bright spot and outstripping the rise for permanent software testers.

Turning to the future, there is a growing belief that the traditionally quiet Christmas period will not be so this year – as it wasn’t in 2012. As demand in the economy has spiked, quickly and unexpectedly, there is now significant drag between what is required of IT services, and what can actually be delivered. It is anticipated that businesses will use the Christmas period to close this ‘demand gap,’ by working through December, so they can go into 2014 meeting their own customers’ delivery milestones. All being well, this in turn will continue to grow the already strong IT contract market into the New Year of 2014.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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