Bounce back in IT contractor demand from covid-19 'starting to ease'

The stellar recovery in demand for technology skills from covid-19 lockdown is starting to lose steam for IT contractors, an agency body signals.

The Recruitment & Employment Confederation scores IT contractor demand for October at 68.6, still way above the growth point (50.0), and only marginally down on September (68.8).

But the confederation confirmed yesterday that October represented the third month in a row when growth in demand for IT contractors cooled.

'Still rising, but starting to ease'

And that cooling to 68.8 has occurred from what is now quite a far-off peak – over 71.3 in July, which represented the highest REC index reading for IT contractors since 1998.

While that means demand last month for freelance tech skills was “still very buoyant and still rising,” it indicates engagers are past their initial tech-fuelled recovery from the pandemic.

“We are starting to see the initial bounce back in [IT contractor] demand starting to ease,” an REC spokesperson also said in a statement to ContractorUK.

'Slowdown isn't unexpected'

However, the REC caveated that such a “slowdown” for IT contractors was always going to happen, saying “it’s not unexpected.”

In Report on Jobs, which features the IT contractor demand index score, the confederation’s deputy CEO Kate Shoesmith confirmed, “we are moving into a new phase of the recovery.”

This new phase appears to be more sharply characterised by hiring companies keeping up with each other in the talent stakes, and keeping up with technology.

'Unable to keep pace'

A new report by Harvey Nash estimates that two-thirds of digital leaders in the UK are now “unable to keep pace" with change because of a dearth of talent.

The recruitment company pinpointed the two worst areas – cyber security (affecting 43% of the leaders, up from 33% in the last 12 months), and development (affecting 32%).

“Shortages continue to bite,” said Ms Shoesmith at the REC, which found IT contractors were scarce last month for Automation Testing, Development, Java, Software, Software Engineering, and Technology/IT/Digital opportunities.

'Higher salaries still being offered'

Claire Warnes of KPMG said in the report: “[As] companies compete to hire the staff they need…[they are] still offering higher salaries to attract and secure talent -- with starting pay inflation reaching another record high”.

However the REC believes higher pay “isn’t the answer to boosting productivity” and, unlike back in July, fatter wage packs aren’t now stopping “employees [being] hesitant to switch roles and sectors.”

The confederation’s Ms Shoesmith said: “As we move into the next stage of recovery, it's vital the government put measures in place that will help companies to invest and grow, stimulate the UK's productivity and support the levers that help those furthest from the jobs market into work.

“Last week's Budget was a start, but there needs to be a radical shift across government departments to collaborate in order to deliver a skills revolution in the UK. This will only be successful if government and business work together to plan for future workforce needs.”

'Need for a joined-up strategy'

Positively, an initial start on that industry-government collaboration appears to be underway.

“I had the opportunity on Friday to put forward a proposal to the minister for labour markets Paul Scully MP, about the need for a joined-up, coherent labour market strategy,” says Reed Recruitment director Keith Rosser.

Posting to LinkedIn, Mr Rosser continued: “I explained that the UK has a labour market enforcement strategy, but not a labour market strategy. [And it was] great to hear the minister take this idea away so positively and to commit to following up.”

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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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