Contractor demand continues to grow

Thursday 8 August 2013

Contractors in most industries are enjoying a period of high demand, as skills shortages bite across a number of sectors. It appears that this trend is set to continue, as a new report shows that billings and rates both rose last month for the UK’s flexible workforce.

The latest Report on Jobs by Markit for KPMG and the Recruitment and Employment Confederation (REC) found that billings for contractors and other temporary workers shot up at their fastest pace for nearly two and a half years in July from the previous month. But at the same time, permanent placements through recruitment agencies rose quicker than they had in any month since March 2010. This indicates that growing use of contract talent is unlikely to be explained by businesses fearing the commitment of permanent hires - indeed, it looks as though confidence is returning to the UK’s employers.

“Confidence is certainly evident amongst employers; with many conserving cash for a number of years, they are beginning to invest in their people and, as the search for talent is stepped up, the jobs market is looking buoyant again,” says Bernard Brown, partner and head of business services at KPMG.

Beyond the number of workers who were placed by recruiters, the level of demand from employers indicates the improving UK outlook. Overall, the number of vacancies increased at the strongest rate for six years, demonstrating that businesses are seeking the right skills to enable them to make the most of a fragile economic recovery.

However, they are clearly finding them more difficult to source. Recruiters pointed out a fall in the number of available candidates to fill these vacancies, but they noted that the drop in available permanent staff was sharper than among contractors. This suggests that where long-term staff cannot be found to fill vacancies, flexible workers stand primed and ready to take advantage of opportunities for interim assignments.

In turn, this demand is being translated into higher pay. Pay rates for temporary staff and contractors posted an impressive rise, rocketing upwards at the fastest rate since January 2008. Although less dramatic than the pay rise offered to their independent counterparts, salaries paid to permanent workers grew at the quickest pace for over two years.

REC chief executive Kevin Green says that this trend is likely to continue: “We anticipate starting salaries increasing over the coming months as the economy strengthens and  competition to secure talent hots up.”

As in previous months, the report found that many of the industries in which contractors thrive are registering the biggest growth. Among permanent workers, demand rose fastest for workers in the engineering sector. For contractors, medical and healthcare came top of the list including not just short-term nursing staff but locums and self-employed medical professionals. Significantly, construction took second place, marking improvement in a sector which has suffered since the financial crisis.

Mr Brown says that a return to economic growth is likely to give the job market a shot in the arm.

“For some time staff have sat tight refusing to move when job security was low,” he explains. “Now the best staff will be looking for better offers so employers will need to strike a balance between recruiting new blood and retaining their best employees.”

By Victoria McDonnell

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