Growth in IT contractor demand cools to its lowest level in 18 months

IT contractors saw the cooling of growth in demand for their skills consolidate in July 2022.

Compared to a more robust 66.4 in June, demand for IT contractors registered last month at 61.4, representing the lowest index score since February 2021 – 18 months ago.


While that means demand for IT contractors still grew in July (any score over 50.0 indicates a monthly gain), a report on the index explains that engagers are “hesitant about their hiring plans.”

“We’ve seen that rising fuel and energy prices, inflation and labour shortages are impacting employer confidence,” echoed Kate Shoesmith of the REC, which administers the index.

In the report, Claire Warnes of KMPG says employers are correct to be tentative with their hiring because amid a cost of living crisis, “the trend of uncertainty” in the jobs market continues.  

'Cooling in tech hiring'

But specifically in the technology sector, where IT contractor demand in Q1 was running at a breakneck pace, all the signs are of a correction rather than any crisis.

Reflecting on July 2022, job website said it had witnessed a “notable cooling in tech hiring.”

“The software development category peaked in February [2022] at 48% above the pre-pandemic baseline, but has now slipped to 24%,” the site said in an update.

“IT operations and helpdesk, and information design and documentation which includes business analysts, IT security specialists and user experience designers, have also cooled.”


But mirroring the REC data showing IT contractor demand as still growing healthily, Indeed's economist Jack Kennedy described tech as a ‘pandemic-winner experiencing a correction’.

Several healthcare categories, food service, and manufacturing are other covid-boom sectors that are also now experiencing a “normalisation” in demand-levels, he said.

It remained the case in July, therefore, that finding the right people for the right roles was still “a tough gig,” blogged Ms Shoesmith, following publication of the REC’s report.


Deputy chief executive at the Recruitment & Employment Confederation, she added: “We're not seeing the same excessive levels of demand as we saw when we emerged from lockdowns in 2021.

“[But] this is the steadying-off you would expect after the turbulence of the last two-plus years. [Nonetheless] it remains the case that…staff availability is still low.”

In July, availability of tech workers was lowest for assignments requiring Development, Software, Technology and IT skills, as these four were scarce on both a permanent and contract basis.

'Short supply'

REC member agencies, albeit those only placing full-timers, also said they were in “short supply” of Analysts, Cloud Engineers; Data Professionals, Software Engineers.

Six tech-sector skills were additionally scarce for permanent positions, namely BI, C#, CAD, Design (Manager-level), Digital and Technical Sales.  

Reflecting on this 14-strong list of permie tech skills which the confederation’s agencies had difficulty sourcing in July, Ms Shoesmith said it was “vital” government and employers act in unison.

'£39billion blow to economy in skills shortages'

“Our latest report shows that these constraints could cost the UK economy up to £39 billion a year if we don’t work to fix these issues now," she said.

“We know what needs to be done: there should be improved provision of skills training, increased employment from under-represented groups, and we need good transport, childcare and immigration systems.”

But also, agencies need to challenge their clients, according to one recruiter who took to LinkedIn to assert that “candidates with transferable skills are almost always the best hires.”

'Challenge your client'

“Recruiters -- you need to challenge your client if they refuse to interview a candidate from a different sector,” posted the recruiter, Kate McCarthy Booth, managing director of McCarthy Recruitment.

“Because if the candidate is in hospitality and has a passion for people, chances are they can work in HR.

“[And] because if the candidate is in retail and is great with stock-take, there is a high chance they can work in operations.”

'Failed to read'

Some fellow agents responded that “automated portals and AI” fail to allow for anything more than a box-ticking selection process.

But a head of workforce transformation and improvement, Paul Smith, said face-to-face conversations are being had – it’s just that CVs too often get skim-read.

“I was told I was ‘too public sector’ for a role within a private IT organisation,” he recalls. “What they failed to read was that I have been in IT recruitment  transformations for over seven years and have led on digital improvement projects and teams for over 500 hires.”

Editor's Note: Search IT contract jobs here 

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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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