‘Subdued’ IT contractor jobs market took third tumble in a row in August

The "sunnier outlook" among UK hirers in July 2025 may be starting to shine on IT contractors too, despite rays of growth in August 2025 remaining elusive.

According to agency staffing body the REC, demand for technology and IT skills on a temporary basis in August fell further into negative territory than in July.

'Additional contract talent' being eyed by 31% of UK companies

Yet one recruitment agency, Robert Half, last month disclosed that 31% of hirers intend to shortly use "additional contract talent" to maintain agility and tackle skills shortages.

Separately, but in the same month as the bright forecast, hiring group APSCo reported an 11% annual rise in new contracts, with contract placements similarly up on August 2024 — by four per cent.

Both the APSCo and Robert Half findings relate to the professional contract labour market as a whole.

How is demand for contractors with tech skills faring?

Is IT contractor demand getting better or worse?

REC's Neil Carberry added that, for the labour market overall, "August saw a softer decline than July."

It's a market reading that can be extended to IT contractors, given their declines of 1.2 index points in July-August and 2.2 index points in June-July.

However, Autumn Budget 2025 is now serving as a bung on all job candidates' prospects.

And at the same time, the Employment Rights Bill (ERB) is curbing the appetite to hire.

What issue is 'kicking' technology contractor hiring?

"The issue is client risk aversion," pinpointed Mr Carberry, the REC's CEO, speaking less guardedly in an online post.

"They've taken a kicking from [employer] NI [changes] and other business costs.

"And [employers] are worried about the Budget, [as well as the] impact of the Employment Rights Bill."

Will hiring patterns shift in October-November, with Autumn Budget 2025 just around the corner?

Jon Holt, CEO of KPMG, says "given the speculation around upcoming Budget measures," it is now "unlikely we'll see a significant shift in recruitment patterns in the near term".

Holt's assessment appears to be at odds with Robert Half's forecast — that almost a third of companies will turn to contractors for their staffing needs within the next six months.

At KPMG, Mr Holt says firms will instead likely use the run-up to the chancellor's Nov 26th statement to "evaluate investment strategies" in light of Labour "policy commitments and the rapid pace of change brought by AI".

Is there a shift in the IT contractor skills that UK organisations are seeking?

KPMG's boss isn't alone in acknowledging that a change of tack is incoming, and may even already be underway at the coalface of tech recruitment.

"We've seen a noticeable shift in client requirements from 'Technical' to a demand for 'Professional Services'", Pendy Hou, of tech recruitment firm First Point Group, said yesterday to ContractorUK.

"It is speculation [on my part but], perhaps [it's because] Professional Services positions are harder to offshore in comparison to technical roles, due to specific local market-experience required."

What frustrations do IT contractors have about the UK jobs market?

Asked about the mood among both First Point Group's clients and candidates, Hou said the consensus was that "recent frustrations with the job market" (from earlier in 2025), "remain valid."

Hou says those frustrations mainly relate to hiring budgets, increased competition due to high candidate availability, and a general "shortage of opportunities to apply for."

Another shift in the contractor labour market is bothering William Garwood, an IT contractor.

How is IR35 affecting IT contractors seeking work?

"It seems like the landscape has shifted, with many roles falling under IR35 regulations," Garwood wrote on social media, in the period covering the REC data.

"[These inside IR35 roles are] offering daily rates ranging from [just] £400 to £600, [but then also are] requiring on-site presence, for tasks that could be efficiently handled remotely."

How many days a week are software developers required to attend a UK workplace?

According to Indeed.com, the typical hybrid software development job in August 2025 requires 2.3 days a week in the office.

The jobs site said that represents a 0.6 percentage point increase over the past two years.

Despite sounding like only a tiny uptick, it is 'perhaps surprising' that a "remote-friendly" role like software development saw the second-largest leap in 'in-office' days (out of the 18 other roles it tracks), Indeed said.

Do employers wield more leverage in a subdued tech worker market?

But the jobs site says IT infrastructure, operations and support roles also now require 2.3 days in the workplace a week, slightly ahead of IT systems jobs.

In a blog, Indeed.com senior economist Jack Kennedy reflected: "Almost half of UK software development jobs mention remote and/or hybrid work, the highest of all occupations tracked by [us].

"The increase in required office days could reflect employers wielding more leverage in a subdued market for tech talent, and/or wanting to promote greater in-person collaboration."

How is the volume of tech job opportunities holding up?

Echoing the "subdued" conditions, an IT contractor, Liam Rowlands, said in August that his last contract search stood out due to the "low volume of opportunities."

But August historically brings a "seasonal slowdown" in the professional jobs market, pointed out Andy Ingham, a senior vice president at Bullhorn.

Ingham was responding to the APSCo data showing the four per cent rise in contractor placements and the 31% rise in live temporary contracts.

Is the summer typically a quiet time for IT contractors?

However, the two findings were released by the Association of Professional Staffing Companies (APSCo) alongside a third — an 11% dip in August contract opportunities compared to July.

"[That's] typical for this time of year," Ingham said of the month-on-month, double-digit decline.

"While we saw a temporary dip in permanent jobs and CV sends, it's encouraging to note that our conversion rates remained strong.

"The contract market, in particular, showed resilience, with placements up 4% year-over-year."

What do hirers want to see from the chancellor at Autumn Budget 2025?

The REC doesn't sound as confident, even if the "sunnier outlook" among UK hirers was the confederation's assertion at the start of summer 2025.

"What is needed now is a shot of confidence," said Mr Carberry, citing the REC's August 2025 data showing both the lowest pay growth and highest worker availability since 2020.

Continuing his appeal to Rachel Reeves, Carberry said: "Backing businesses to create growth and jobs — not raiding them for cash — needs to be the theme of the autumn."

How is APSCo responding to Employment Rights Bill (ERB) amendment removals?

Sam Hurely, of APSCo, says pockets of "subdued" recruitment are "unsurprising" given that both Autumn Budget 2025 and the Employment Rights Bill loom.

She called rejections of proposed changes to core sections of the Employment Rights Bill "disappointing."

"A large number of the recommendations from staffing experts and business leaders have [unfortunately] been ignored.

"Yes, reform is needed given the pace of evolution in the world of work and employment models. However, more so than ever, a tailored approach is required."

What does the ERB need to achieve for workers like contractors?

APSCo's UK managing director added that different workers required "nuanced safeguards" and "some need far more freedom and flexibility."

"The current format of the bill risks creating barriers for employers both financially and in terms of access to critical talent," Hurley warns.

"Protection in employment should go both ways — for the individual and those hiring them. At the moment, businesses and recruiters are set to be hindered by the plans, which will only inadvertently impact the labour market as available jobs continue to dwindle further."

Are there positive signs for contractor prospects?

Sounding more positive, the association described its August 2025 data showing the annual rise in contract recruitment as "a positive signal."

"It shows that demand for high-level skills persists, despite employers remaining cautious about long-term employment commitments."

Hurley continued: "As more organisations explore efficiencies through AI and digital transformation, we expect to see continued reliance on project-based contracts to meet short-term needs."

Which IT/technology skills are in short supply?

What is the REC asking of Rachel Reeves ahead of Autumn Budget on Nov 26th?

Ahead of next quarter's fiscal statement by the chancellor, the REC's Neil Carberry said:

"Long-term investment in skills, workforce stability, a more practical approach to the Employment Rights Bill and meaningful partnerships with employers will yield far more enduring returns than short-term fixes.

"All eyes are now on the Autumn Budget, in hope now that the chancellor won't do any further damage to the labour market with costs on hiring."

In his less guarded comments to his online followers, Mr Carberry expanded: "That means no more nasty Budget surprises that quell employment. That means sensible steps to make sure the Employment Rights Bill is a sustainable step — not a car crash that gets rewritten."