IT contractor demand growth fell in February amid hiring freezes

Growth in demand for IT contractors fell in February 2019 for the third month in a row, returning the lowest index score for tech skills on a temporary basis since September 2016.

Hiring slowdowns and recruitment freezes due to engagers being on the edge of Brexit – which remains uncertain – is behind the 29-month low on the index of agency body the REC.

Based on the activities of 400 agencies, the index currently scores IT contractor demand at 55.9, down from 56.3 in January and representing the lowest score since the third quarter of 2016.

'Chilling'

“Brexit uncertainty is having a…chilling effect on the jobs market,” says James Stewart of KPMG, which co-authors Report on Jobs with the Recruitment & Employment Confederation (REC).

“With a decision on Brexit now imminent we’re seeing companies freeze or slow the pace of new hires …[putting] vacancy growth…back to the levels we saw around two and a half years ago.”

He also said that something else is having a “cooling” effect on the market -- skills shortages.  And adds the report, IT has among “the most acute” shortages out of nine other key sectors.

Skills shortages

But in the freelance sub-sector of IT, shortages are not growing. This month, for example, seven skills were uniquely scarce among IT contractors. In January, there were closer to 10.

Similarly, January saw a laundry list of IT contractor skills deemed as short in supply -- a massive 21 in total, whereas in February, the list reduced to 16.

The 16 include Architectural Tech, Data Analysis, DevOps, Development, Digital, Gaming, Oracle Fusion, and Technology/IT -- all of which the full-time market is scarce of too.

'Pent up investment'

The IT skills in short supply in the contract market (which are not hard-to-source among permies) include Ruby, Software Development, PHP Development, Python and Java.

Suitably skilled contractors will be hoping that the type of Brexit deal that the UK eventually emerges with is one that end-clients will get behind.

“Once a political decision is made on Brexit, we expect a wave of pent-up investment to be released”, Mr Stewart said. “This should result in another busy time for the jobs market later this year.”  

'Cost reduction'

Yet February’s recruitment freezes may not thaw altogether, as following the Brexit deal sign-off, the KPMG chair expects hirers to implement “a renewed focus on cost-reduction.”

Such a focus may have started already however, as despite banks being the dominant end-hirer of IT contractors last year, Morgan Stanley used February 2019 to tell IT contractors to lower their rates by 10 per cent or face termination.