IT contractor jobs market in March 2025 moved closer to growth

The IT contractor jobs market in March 2025 made a good fist of defying a near-washout four weeks for UK hiring.

While demand for IT workers on a contract basis didn’t grow last month (again), the foothold it carved out in February 2025 was built upon.

According to Recruitment & Employment Confederation (REC) data, IT contractor demand measured 46.6 in March compared with 41.3 in February.

That represents the second month in a row that the REC’s IT contractor jobs index has pointed upward, following its plunge to 38.9 in January 2025.

Any score less than 50.0 on the REC’s index means that billings are in negative territory, so 'in the red,' compared with the previous month.

‘Contractor assignments up 11%’

But standing at 46.5, March was the brightest month for IT contractors since November 2023 (49.2), according to the data, obtained by ContractorUK.

In a separate report, APSCo said its member agencies reported contract opportunities were up “11% month-on-month in March” 2025.

The 16-month high for IT contractors implied by the REC data is at odds with the generally gloomy findings for job candidates overall, however.

‘Hiring drops outside London, and cost management’

REC’s Report on Jobs says March hiring “drops” outside of London (where perm hiring overall rose) were not “as sharp as those…at the start of the year.”

Likewise, the “decline” in contract billings in the UK’s “still slowing [jobs] market” was “slightly” less severe than expected, said REC’s Neil Carberry.

And while “cost management” was the “focus” for UK employers in March 2025, “an improvement in the data in the near term” is “unlikely.”

This downbeat forecast was made in the REC’s Report on Jobs by Jon Holt of KPMG, which co-authors the report.

‘Government put up payroll taxes hugely in April with employer NICs rise’

Holt’s bleak forecast appears to be based on March being the last month before Labour’s “decision to increase payroll taxes hugely” took effect.

Alluding to the rise in employer NICs (which came into force on April 6th 2025) the REC’s Mr Carberry continued, by issuing a sort of appeal:  

“[Our March figures make it] even more important…that the government reconsiders the scale of rising costs of employment after this week’s rise in National Insurance.

“A full review of the impact of the Employment Rights Bill…would [also] be welcomed by businesses across the country.”

‘More labour market confidence’

APSCo’s new managing director, Sam Hurley, noted “more confidence in the labour market” on the eve of the National Insurance “increases” taking effect.

Both Hurley and Carberry were speaking in formal reports that their agency bodies released based on their member firms’ billings.

After publication, though, the REC’s chief executive took to LinkedIn to explain the mood ‘on the ground.’

And to contextualise what the REC describes in its report as the UK jobs market now being “subdued for almost two-and-a-half years.”

‘Employment Rights Bill is listening-mode-opportunity’

“My sense is that businesses are waiting to assess the impact of April cost rises and the [Trump-China] tariff wars,” began Mr Carberry.

“For now, the government doing more to build employer confidence matters.

“The Employment Rights Bill and the Industrial Strategy are opportunities to show they are listening.

“But for businesses, focusing on what they can do and not getting distracted is essential.”

‘No meaningful redundancy notification uptick’

On April 1st 2025, Indeed.com said concerns that “increased employment costs” would lead to a spike in job eliminations have “still…not materialised.”

Indeed.com’s economist Jack Kennedy reflected: “The number of planned redundancies notified to the government hasn’t shown a meaningful uptick in recent months, despite downbeat business surveys. 

“The economic outlook remains uncertain, and it remains to be seen how the UK labour market both absorbs April’s domestic policy changes and weathers turbulence in the global economy.

“It has shown resilience so far, but will need to continue to do so in the face of strong headwinds. For employers, staying agile in a changing market continues to be necessary.”

‘Citigroup reducing IT contractor hires to 20%’

Last month, Citigroup reportedly outlined plans to reduce its proportion of IT contractors from 50% of its tech workforce to just 20%.

The bank gave no timeline for the cull, but added in an internal presentation that full-time IT headcount would rise by 2,000 to 50,000 by the end of 2025.

“With cost management a focus, those employers who are hiring are focused on securing the best talent,” says KPMG’s Mr Holt.

“While the rate of pay inflation has improved from last month’s four-year low, growth in starting salaries remains below the historic average.

“[And] recent global events have put pressure on any growth prospects in the UK”.

‘Trump’s trade tariffs curbing corporate risk-appetite’

Offering a decoding of those ‘global events,’ Mark Astbury of Morgan McKinley said yesterday:

“The formal introduction of new trade tariffs under [US president Donald Trump’s] administration has deepened concerns around protectionism and global economic fragmentation, dampening investor confidence and curbing corporate risk-appetite.”

The London-focussed recruiter reported a 12% increase in financial services hiring between the fourth quarter of last year and the first quarter of this year.

‘Seasonal rebound in financial services hiring’

But Astbury caveated it was a “seasonal rebound,” saying end-of-year budget constraints, holidays and strategic planning “traditionally give way” to “more active hiring” in Q1.

“Despite the quarter’s rebound, [an] 11% year-on-year decline in [financial services] job availability [between Q1 2024 and Q1 2025] points to underlying structural pressures within the industry,” he says.

“Persistent inflation, elevated interest rates and geopolitical tensions are fostering a conservative, risk-averse approach to hiring.”

‘Artificial Intelligence now reducing headcount in entry-level and support roles’

Morgan Mckinley’s director, Astbury added: “At the same time, Europe’s surge in defence spending is opening up long-term investment opportunities in areas like military technology and cybersecurity.

“Yet, this hasn’t translated into short-term hiring boosts, particularly as firms remain focused on efficiency.

“Many institutions continue to streamline operations through AI adoption and automation, often reducing headcount in entry-level and support roles that fall outside direct revenue-generation.”

‘Engineers supporting AI integration in strong demand’

The City recruitment boss described demand for talent in regulatory compliance, risk, audit, and data-focused functions as “strong”.

He said it was strongest for “analysts, developers, and engineers supporting AI integration.”

But targeted tax incentives by the government, in areas like fintech, “could stimulate innovation” even further.

‘Paying full employee tax while getting no perks or pension’

An AI and automation specialist, Mark Tindal, sounds far from stimulated.

“I’ve been working through an umbrella company for over two years now — and…this is what it means to be part of the squeezed middle in the UK”.

Tindal continued in a social media post: “Not poor enough for government support; not rich enough to shield income….[but] paying full employee tax [despite] funding employer costs yourself [while] getting no perks, no bonuses, no pension match, no security.”

‘Huge uncertainty'

Lucy Smith, of Clarity Umbrella, confirmed yesterday that “there is a huge amount of uncertainty in the industry over proposed legislation changes”.

Umbrella regulation 'unknowns' probably weren’t on Mr Holt’s mind when he warned of “uncertainty” in Report on Jobs, but regulating umbrellas is another strain on already pressurised end-hirers.

“At a time when global uncertainty is peaking, and businesses are assessing the impact of market volatility alongside rising employment costs, the latest [REC] data demonstrates how the economic reality continues to weigh heavy on the labour market,” said KMPG’s CEO, adding:

“Maintaining morale [of existing staff], who will also be concerned about uncertainty in the market, will ensure that businesses are ready to take advantage of any green shoots -- when they do appear.”

‘Corporate self-confidence despite greater risk’

The REC’s Mr Carberry said businesses were “FAR more confident” about “themselves than the wider economy,” at least according to a confederation poll on the eve of Spring Statement 2025.

“Acting on that [confidence] -- not worries -- matters,” he says. 

“There is more risk in the world now. We just need to get on with it.”

‘March 2025 technology skills in short supply included...’

Among permanent IT staff in March, tech “skills in short supply” included AI Developers; AI Prompt Engineers, C#, Cloud Computing, Cloud Engineers, Cyber Security, Data Scientists, Developers, Mobile Developers, Platform Engineers, Quantitative Developers, Software Developers, Software Architects and Software Engineers.

REC member agencies also reported a shortage of IT contractors, mainly for temporary assignments requiring CNC; Cyber Security, Data Engineering, Development, Software Development, Software Engineering and IT Project Management.