Demand for contractors grows in an uncertain economic climate

It’s fair to say that the prolonged Brexit saga, along with last October’s announcement that IR35 reform will be enforced in the private sector in 2020, has created an uncertain climate for hiring in recent months.

However, new jobs data released by KPMG and REC has indicated that while these factors seemingly continue to weigh heavy on the mind of businesses, the number of contractor vacancies and independent professionals hired in April actually grew.

As a result of this increase in demand for freelancers and contractors, KPMG’s and REC’s monthly Report on Jobs revealed that rates of pay also increased at the strongest rate since January.

Uncertainty drives demand for contractors

It’s positive news at last for contractors, who have understandably grown concerned about incoming changes to the IR35 legislation – a reform which, critics argue, could at worst see businesses switch to hiring permanent staff as they look for ways to avoid the changes.

But according to the 400 recruitment and employment consultancies surveyed, this isn’t the case. And contractors also worried about the economic impact of Brexit on temporary hiring, shouldn’t be, explained REC’s Chief Executive, Neil Carberry:

“Today’s report shows the continued strength, agility and flexibility of the UK labour market. In uncertain times, employers are turning to temporary work to support their business and offer people opportunity while the long-term economic picture is unclear.”

Public sector demand rises

The data also signalled that in the public sector – where IR35 changes have already been introduced – demand for freelancers and contractors increased, albeit marginally. Amid reports of the public sector’s mishandling of the IR35 rules, the very fact that these organisations still view contractors as an important resource should be welcomed. What matters, however, is that these bodies are in a position to administer IR35 accurately.

Fastest growth experienced in the North

The North of England reported the fastest growth in contractor billings, closely followed by the South. The Midlands, however, noted the first drop in temporary placements in just over seven years.

Healthcare contractors most sought after

While IT & Computing topped the rankings for permanent staff demand, healthcare workers – such as locum doctors and nurses – experienced the quickest increase in contractor vacancies. This was also the case in March. Blue collar workers, whether construction professionals or tradespeople, came in second, closely followed by temporary hospitality workers.

Generally speaking, contractors are staying put

The insight suggests that contractors and employees are staying in their current roles for longer, perhaps as a result of the uncertainty created by Brexit. Combined with the UK’s high employment levels, this has led to a decline in immediately available talent.

This was an issue that KPMG’s Vice Chair, James Stewart, focused on: “On the supply side, a high rate of employment and the apprehension of potential candidates means there just aren’t a lot of suitably skilled people out there to hire anyway. This is an increasing problem for firms in technology, health, and engineering who are experiencing a skills gap.”

Freelancer rates rise

Needless to say, a stagnant jobs market is a cause for concern. But a scarcity of talent can contribute to rate increases. As touched upon, the rising demand for freelancers and contractors – many of whom are reluctant to start new projects – has, according to REC and KPMG, contributed to “steep increases in pay.”

On the whole and given Brexit is yet to reach its long-awaited conclusion, REC’s Neil Carberry said the UK should be proud of how the jobs market has adapted to such challenging circumstances. Looking ahead, Mr Carberry also outlined the importance of taking “bold bold steps to fix the underlying problems suggested by these figures.”