IT contractor demand lost its footing in April 2025

The UK’s temporary market for technology jobs lost its footing last month, due to the “bow wave of costs firms faced in April,” says the REC.

Speaking after yesterday’s Report on Jobs, REC’s Neil Carberry said despite “still weak” demand, last month’s cost rises were “not as bad” as feared.

Mr Carberry was referring to the agency jobs market as a whole in April, but his characterisation fits the IT contractor jobs market as well.

In fact, despite higher hiring costs stemming from the employer NIC changes, IT contractor demand in April 2025 fell by just a fraction, from 46.6 to 45.6.

‘Combo of higher taxes and domestic costs increases’

Nonetheless, the dip brings to a halt two consecutive months of IT contractor demand nearing the (50.0) growth threshold, show the REC’s data obtained by ContractorUK.

The Recruitment & Employment Confederation (REC) blamed a “combo of higher taxes, business activity taxes” and the “threat of further domestic cost” hikes.

The Employment Rights Bill is one such threat, added REC’s CEO Mr Carberry, as it is “lacking in details that might reassure businesses.”

‘New immigration rules play into narrative that Labour is anti-business’

Labour’s new immigration plan for 2029 is troubling too, amid “a risk” it “plays into a narrative…[that the] government isn’t helping businesses and growth.”

A separate index of the temporary staffing market in April -- also downbeat rather than despairing -- was released on Thursday by APSCo.

Blaming “US tariffs” for ‘adding to difficulties in the UK recruitment market,’ APSCo said contractor jobs fell back in April 2025 by --6%.

‘Contractor placements stood at –11% in April 2025’

The Association of Professional Staffing Companies (APSCo) said contractor placements (as a whole not just in tech) declined too, abating by --11%.

“These latest figures follow a previously optimistic report in March of marginal increases in hiring,” said APSCo, in line with the picture from the REC.

“There’s no doubt that much of the news coming out of the US is hindering some of the recovery previously noted”.

‘Highly-skilled people still hard to come by’

But APSCo boss Sam Hurley said most UK businesses were increasingly aware of the “need to be able to adapt and respond” to fluctuations.

“That includes ensuring blips like this don’t lead to unnecessarily rash decisions,” Ms Hurley says.

“Good people -- particularly those in highly skilled remits -- are still hard to come by.”

‘US tariffs influenced UK hirers in April 2025’

Andy Ingham, of staffing software firm Bullhorn, said the association’s April data indicated global tariffs from the US “influenced” UK hiring sentiment.

“[Despite the] decline in…temporary jobs, the market should remain vigilant and exercise patience, not react in haste,” he recommends.

APSCo stressed its concern about the Employment Rights Bill, citing five key ways it “could be damaging to businesses.”

‘Remove highly skilled contractors from Employment Rights Bill Schedule 1’

To nullify one of the five, “higher skilled contractors” should be removed from the scope of the guaranteed hours provisions in Schedule 1 of the bill.

According to APSCo’s Tania Bowers, inclusion of contractors is part of the regrettable “one-size-fits-all approach” taken by ministers towards workers.

“[It] leans too far in the direction of protecting the relatively small segment of the labour market identified by the government as on exploitative contracts.

“And [it] risks unintended negative consequences on the broader labour market,” warns Bowers, “such as employers taking risk-averse hiring decisions and considering alternatives to hiring, such as more reliance on technology or offshoring.”

‘Employment legislation not supportive of corporations or growth’

APSCO’s global public policy director, Bowers clarified: “We support the government’s decision to take a firmer stance on protecting workers’ rights.

“The delivery so far, though, hasn’t been ideal. The government is looking to make its mark and deliver against promises quickly, but speed without appropriate due diligence will leave UK businesses and recruiters with an employment legislation landscape that simply isn’t conducive to corporate or economic growth.”

The REC’s Mr Carberry is similarly concerned for professionals working on a temporary basis.

‘UK labour market fundamentals may be ok, but…’

He says: “My takeaway [from the UK labour market in April 2025] is that the fundamentals…may be ok.

“Cost of capital [is] coming down; households have cash -- but [they are] not yet ready to spend -- [and the] UK global trading position looks better than it has for a while.

“[But] a [clear] business voice on new visa changes, practicality in the ERB, and partnership working around the skills we need -- and how only our flexible labour market can really deliver them, would all help to remove barriers to investment.”

‘April 2025 saw only muted recruitment’

Jon Holt, partner at KPMG, signals such ‘barriers’ led to “muted” recruitment in April 2025, at the same time as the number of job-searchers increased.

“Businesses facing several pressures due to current global economic uncertainty and rising costs…[means] it is unlikely to lead to a sudden turnaround in the market in the near term,” cautioned Holt, who added:

“Starting salaries increased again in April, as a new national minimum wage took effect.

“But the fact that the pace of growth continues to remain below the long-run average will support the Bank [of England]’s decision to decrease interest rates this month.

“While the inflation outlook has shown some improvement, businesses will be looking for more signs of market stability before committing to any major spending.”

‘Bank of England’s well-timed interest rate offers relief to businesses’

The REC’s Mr Carberry described the BoE’s move last Thursday to cut interest rates to 4.25% as “well-timed,” in wake of “the bow wave of costs firms faced in April.”

Carberry said the cut to the base rate offers “some relief for businesses, with pay pressures now more contained.”

‘Uncertainty is biggest drag factor’

Potentially referring to April 2025’s lower pile of agency contractor billings, he reflected: “The biggest single drag factor on activity right now is uncertainty.

“Some of that can’t be helped, but payroll tax costs and regulation design are in the government’s gift.

“Businesses have welcomed positive discussions with ministers on the Employment Rights Bill, but now it is time for real changes to address employers’ fears and boost hiring.

“A sensible timetable and practical changes that reduce the red tape for firms in complying with the bill will go a long way to calming nerves about taking a chance on someone.”

‘Numerous technology skills in April 2025 were in short supply’

The REC’s report for April 2025 lists 19 skills in “short supply” for full-time technology roles.

The 19 are; AI Developers , Analysts, CAD, Cloud Computing, Cyber Security, Data Engineers, Data Platform Engineers, Data Scientists, Developers, Digital, IT, Security Operations, Server Engineer, Software, Software Architects, Software Engineers, Technical Roles, Technical Sales and Technology.

REC’s technology sector member agencies hiring for temporary roles were similarly short of Analysts; Cyber Security consultants, Data Engineers, Developers, Full-Stack Developers, Software Engineers, as well as contractors skilled in Software, IT/Technology, Technical and Software Sales.