January’s IT contractor jobs market ‘tougher than well-cooked steak’

Optimistic sounds from the freelance tech hiring space in December 2024 didn’t translate into gains for IT contractors in January 2025.

The REC showed yesterday that demand for contract techies in this year’s first month was weaker than even the back end of lockdown.

The agency staffing body scored IT contractor demand in January at 38.9, on a scale where 50.0 indicates monthly growth.

The score represents the lowest reading on the Recruitment & Employment Confederation’s index for temporary IT/Computing staff since June 2020.

‘Staying businesses’ hands’

REC chief executive Neil Carberry says the uncertainty in the UK economy, which did not lift in January, “is staying businesses’ hands.”

After “an autumn of fiscal gloom” with “significant upcoming tax rises,” firms used the New Year to “work out how to navigate rising costs.”

And facing a “costly new approach to employment rights,” firms are also “slowing investment until they see more” growth, he added.

‘IT contractor jobs market tougher than very well-cooked steak’

Carberry was partly referring to the Employment Rights Bill, which, like employer NIC changes from April 6th 2025, threatens to hike employment costs.

Recruiter Matt Collingwood says the IT contractor jobs market in January was characterised by “endless” online posts as “tougher than a very well-cooked steak.”

However, his firm that places IT contractors, VIQU, said its pipeline is strong, with “two clients forecasting big growth for 2025/26.”

‘UK companies continue to hold back on recruitment’

Ahead of the new tax year from April 6th 2025, KPMG used the REC’s Report on Jobs (which it co-authors) to issue a glumly opposite forecast.

KPMG’s CEO Jon Holt said: “Businesses continue to hold back on recruitment, leading to…temporary placements falling steeply.

“[But] it is unlikely that we will see any significant improvements in the survey data over the near term, as hiring stays muted”.

‘Record job flows at the start of 2025’

An advisory to agencies in IT, Recspand, says its data for January 2025 indicates “it’s [not] all doom and gloom.”

“When I tell people outside of the recruitment agency industry that the market is good, they look at me like I am crazy.”  

Recspand’s boss Andy Hallett added on Thursday: “Some firms I am speaking to are experiencing record job flows at the start of 2025.”

‘Interest rate cut to 4.5% better late than never’

Hallett said the Bank of England’s quarter-point interest rate cut to 4.5% on Thursday was good, or at least “better late than never.”

KPMG’s Mr Holt said: “While firms [were] still willing to pay for top talent [in January], increased staff availability weighed on pay growth.

“This cooling may have encouraged the Bank of England’s decision to cut rates”.

‘Business confidence takes time to build’

Carberry described the February 2024 interest rate cut by the BoE as a “timely…way of boosting confidence.”

“The more central role of growth in government-thinking since the chancellor's speech last month will also help.

“But it takes time and real action to build business confidence,” he said.

‘Time for greater clarity from government’

Recruiters will join IT contractors on March 26th in hoping for a stimulus from Rachel Reeves when she unveils Spring Statement 2025.

Carberry said: “As well as the monetary stimulus to growth, it's time for greater clarity on how the government will use its industrial strategy to drive the growth of the whole”

REC member agencies reported numerous IT contractor skills as being “in short supply” in January 2025.

They were; Cyber Security, Data Engineers, Developers, Full-Stack Developers, Software Architects, Software Developers, Technical Administrators, Technical Roles, and Technology.

‘Slowdown isn’t a surprise’

REC agencies recruiting full-timers also reported a dearth of applicants in January for Cyber Security, Development, Full-Stack Development, Software Development, Technical, and Technology positions.

Permanent positions were additionally hit by a lack of applicants for roles requiring C#; CAD Modellers, Cyber, Data Scientists,  Digital, IT Project Managers, ML Engineers, Quantitative Developers, SMT Engineers, Social Media, Software, Software Engineers, and Technical Sales.

Taking to LinkedIn after the publication of Report on Jobs (where the roles in short supply are listed every month), Carberry told his online followers:

“Given that this [slowdown] reflects vacancies taken on in the autumn, [it is] no surprise that there is no pick-up here yet.

“There is always a fall-off of demand in January, but this one is notable.  

“A temporary [labour] slowdown like this is likely to be driven by firms maintaining position while they work out how to navigate rising costs. That's where the interest rate decision helps -- and the National Insurance changes don't.”