IT contractor demand falling further in October 2023 signals ‘downturn must be bottoming out’

IT contractor demand slid further down the scale in October 2023, remaining ‘in the red’ while deteriorating to a level not seen since May.

But the slide down from 48.2 in September to 48.0 was so slight, that it might actually be a good thing -- on the basis it signals the low has been reached.

Neil Carberry of the REC, which produces these figures in Report on Jobs, says “anecdote[s] from recruiters” in October reveal “they can [now] see the bottom’ of this downturn”.

'Redundancies, as budgets tighten'

The report’s ‘unadjusted’ data (which omits seasonality) even indicates that IT contractor demand actually rose in October, underlining the very small scale of the deterioration from September.

But Report on Jobs’ narrative confirms that an uptick for IT contractors isn’t the case.

Some employers last month made “redundancies as they tighten budgets;” “many cannot commit to long-term” staffing, and all face a short-term but “weak economic outlook”.

'Economic uncertainty'

Claire Warnes, a partner for skills and productivity at KPMG made these observations in the report, which she said comes after “a year of cautious hiring due to economic uncertainty”.

A clue that October wasn’t going to emerge as a turnaround month actually came two weeks ago, at the start of November, when the first Christmas hires should have been made.

But the Recruitment & Employment Confederation (REC) spoke then of “cautious employers” only “just beginning” to hire holiday talent, versus August ordinarily.

“This is likely because of employers’ uncertainty about the level of anticipated demand for goods and services given the cost-of-living crisis”, REC said to explain the slower start.


Yet that crisis is accompanied by a “sluggish economy,” the “inclement weather in parts of the UK” and -- as if a further hiring deterrent were needed, “international political tension.”

This grim assessment by the REC’s Mr Carberry to explain the delay in hiring Christmas staff to cover the upcoming holiday period was echoed by

Pavel Adrian, the job site’s research director spoke of UK employers being “cautious,” due to “economic uncertainty and expectations of slow economic growth.”

'Best to get on radars early'

On LinkedIn, a project manager was among those who back in Q3 noticed that the economic clouds had lengthened the period IT contractors leave themselves to find a new role, from 4+ to 6+ weeks.

The PM, Tom Law, said because it’s “best to get on people’s radar earlier”, he was “warming my contacts up already” -- in August -- in the hope of landing a role in October.

Posting a few weeks ago in the heart of the period covered by the REC’s new data, he wrote: “I’m happy to share that I’m starting a new [role]…as IT project manager at [end-user name]”.

'Challenging, struggling'

Law has done well, given that the tech sector is one of the UK’s “challenging sectors,” and is “struggling,” according to Mr Carberry, the REC’s chief executive, speaking last week.

Moreover, project management was not identified in October as an “in short supply” technology skill, unlike eight others, which were on both a full-time and contract basis.

The eight scarce tech skills were; Automated Testing, Cyber Security, Data Engineering, Development, Digital, IT, Software Engineering and Technology.

Similarly identified by REC member agencies as being hard to source, albeit only on a contract basis, were Cloud Engineers, Data Professionals, Full stack Developers and Software Architects.

Also in short supply in October (when compared to the amount of full-time vacancies), were Analysts, Senior IT Engineers, Software Designers and CAD technicians.


Such a long list of technology skills not being generally easy to source is unsettling the confederation, and puts the onus on chancellor Jeremy Hunt to intervene next Wednesday.

“Looking to the Autumn Statement, businesses and government need to be aware that the return of growth will reveal shortages more widely -- action on skills, welfare-to-work programmes and immigration reform will be needed to prevent a return to growth being squandered,” said Mr Carberry, adding:

“A big focus from employers and government on helping people make transitions into ‘shortage’ sectors would [also] be worthwhile.”

Report on Jobs’ adjusted data (to factor in seasonality) shows IT contractor demand in October at 48.0 with any score over 50.0 indicating monthly growth. The last time the score was lower was May 2023 (47.6), which represented the lowest score since September 2020, when post-lockdown covid restrictions were introduced.

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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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