Growing IT contractor demand cooled in June, as inflationary fears moderated

The inflationary boost that lifted the IT contractor jobs market in May petered out in June, although demand for tech skills on a temporary basis is still firmly growing, an index shows.

Back in May, the thinking from index producers the REC was that soaring costs were compelling nervy engagers to hire contractors, who can be let go easily if conditions worsen.

Those inflationary jitters helped growth in demand for IT contractors spike from 63.7 in April to 66.1 in May, but for last month, the agency body has allocated a lower score -- 64.7.

While that index score means demand for tech skills on a freelance basis still grew in June (the REC says any score over 50.0 signals a monthly gain), the rate of growth relaxed.

'Past the peak'

One suggestion is that, thanks to moves from the Bank of England to get inflation more under control, engager confidence has firmed up from just knee-jerk hiring non-permanent techies.

Another potential explainer of the dip in temporary IT billings’ growth is that the one engine which has been driving much IT contractor recruitment activity of late is switching off.

Neil Carberry, chief executive of the Recruitment & Employment Confederation (REC) explained: “We are likely to be past the peak of the post-pandemic hiring spree.

“That pace of growth was always going to be temporary. The big question now is the effect that inflation has on pay and consumer demand over the course of the rest of the year.”

'Competition pervading'

Also writing in the agency body’s Report on Jobs, Claire Warnes of KMPG warned that the “current economic pressures are impacting employers’ confidence to grow.”

Head of education, skills, and productivity at KPMG, Warnes also spoke of ‘competition for candidates pervading,’ on the back of candidate availability continuing to decline.

In the report, Mr Carberry reflected on the labour market overall: “Whether we will see the market settle at close to normal levels, or see a slowdown, is unpredictable at this point.

“Part of the reason for unpredictability in the market is a slower economy accompanied by severe labour and skills shortages.”

'Hiring difficulties'

According to Hays, such shortages are now affecting more than nine in 10 end-users, up from eight in ten last year,

The FTSE-listed recruitment agency made the finding after polling 600 IT contractors and their clients.

“As a result of hiring difficulties,” the agency said, “70% of employers say they have struggled to effectively deliver projects, whilst close to half say productivity has dipped”.

'Remote work widens access to talent'

A separate study covering the period of the REC’s data suggests one answer to skills shortages is something the pandemic has accelerated.

Pawel Adrjan, director of economic research at Indeed.com, which carried out the study said: “Embracing remote work means employers can widen their access to talent”.

Yet it  is another r-word not ‘remote’ work which is bothering Glassdoor UK economist Lauren Thomas.

'Tech roles may be cut'

“Jobs that are the least vulnerable to recession -- are those in industries currently facing major shortages,” she told The Telegraph, in a reading which sought-after IT contractors will welcome.

Thomas added: “Highly skilled technical skills may also help buffer employees from recessions; although many roles in tech may be cut during a recession, employees are likely to find new jobs quickly as demand for these skills greatly outweighs their supply.”

In June, REC’s member agencies said Automation Testing, Development, Software Engineering, Technology, Digital and IT were the computer contractor skills “in short supply.”

The confederation’s full-time staff agencies were also short last month of Development, Technology, Digital, IT and Software Engineering skills, alongside a dearth of Analysts, Cloud Engineers, Data Engineers, Media, Software and Technical Sales applicants.  

'Tight market'

“The government should be thinking about how to ensure all its departments enable greater labour market participation and encourage business investment funds to help address this [skills gap],” recommended Mr Carberry.

“[But] it is important to note that plenty of hiring is happening in this tight market – there are candidates out there for firms who get it right.”

Yet it’s recruitment agencies too who need to get it right -- and are trying to get it right, but not always without a bit of condescension, at least according to one bolshie candidate.

'Totally inappropriate to give interview tips'

Agency boss Jack King, of Ambis Resourcing Partnership reflected: “I send interview tips to candidates before they have interviews. I have done it for years.

“Recently I had a candidate who replied and told me it was ‘totally inappropriate’ to send the notes because he was ‘highly experienced’ at interviews and it was ‘insulting.’

“[However] two days later, I got the interview feedback: ‘He was outside and it was windy so we couldn’t hear him!’ So [candidates], keep an open mind when given advice. And if you have a telephone interview make sure you can be heard!”

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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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