Drop in IT contractors blamed on IR35 reform fears

The prospect of IR35 reform in the private sector is beginning to cut into demand for IT contractors, an agency group is warning.

Although less acute than it was, a slump in the number of IT contractors “on-assignment” was largely due to “anticipated amendments to IR35”, said APSCo, pointing to August.

In April, the group said that despite a vow to consult to roll out public sector IR35 reforms universally, IT contractor demand was “continuing,” as any rollout was “some way off.”

'Less attractive'

Since then however, the full rollout of the off-payroll framework has been described as ‘inevitable’, potentially with a launch date as soon as April 2019.  

“The number of IT contractors out on assignment in August 2018 was 30% lower than August 2017”, said the Association of Professional Staffing Companies (APSCo).

“This can largely be attributed to recent changes -- and further anticipated amendments -- to IR35 legislation, making non-permanent employment a less attractive choice”.

'Talent and employers alike'

The association said that under the envisioned IR35 changes, such contract and freelance opportunities would become less attractive for both “talent and employers alike”.

Yet APSCo said contract opportunities in IT still increased in August 2018 by three per cent, compared to dips of seven and eight per cent earlier in the year.

Reflecting on a rise in full-time IT staff hiring in August, APSCo said that “against the current backdrop” of IR35 reform and Brexit, clients were “locking in vital skills” not easily found among contractors.  

'Serious issues'

Asked last month about the impact on the contract market, First Point Group, an IT contractor jobs agency in London, told ContractorUK that it would be negative if the two went hand-in-hand.

“I would agree that Brexit plus any legislation of this type being brought in at the same time would cause serious issues to the supply to the contract market,” says the agency’s managing director David Taylor.

“I think you would see a lot of contractors looking to move into full time employment and in general contract roles being a lot harder to fill – [ironically] just at a time when [IT contractor] demand is very high and, if anything; growing, as companies look to contractor as opposed to fixed-headcount [resource] during the Brexit uncertainty.”

A survey of 2,500 companies published on Friday by the British Chambers of Commerce showed that 18 per cent say they would reduce recruitment in the event of a ‘no deal’ Brexit.