IR35 reform blamed for growth in IT contractor demand depressing, again

Growth in the UK’s appetite for IT skills on a temporary basis reduced again in July, not as sharply as it did in May but still to a historically low level, an agency body shows.

Rather than the same factors depressing growth from June’s slight recovery however, such as Brexit making hirers cautious and candidates “sit tight”, a new issue is adding to the uncertain outlook, said the Recruitment & Employment Confederation.

“Avoiding hasty changes to contractor tax rules should be top of the list,” says the REC’s chief executive Neil Carberry, issuing recommendations to government on how it could help.

'Rushed IR35'

Reflecting after the publication of the body’s July Report on Jobs, which scores IT contractor demand at 52.8 -- a score synonymous with the doldrums of 2012, Mr Carberry got specific.

“[We] need politicians to help…by avoiding rushed IR35 reform”.

He appealed: “The new government should be focused on delivering the negotiated exit from the EU businesses need, but also on avoiding damaging changes that will undermine the strength of our jobs market.”

'Just a bit slower'

The strength of the market for IT contractors, in terms of those of them who end-users need most, looked subdued in July as just five were “in short supply” compared to levels of demand.

In fact, seeming to surpass Mr Carberry’s characterisation of the market being “just a bit slower,” only IT contractors skilled in C#, Development, Digital, IT and Technology are sought-after.

“Businesses continue to take a cautious approach to hiring as Brexit and economic uncertainty linger,” says James Stewart, vice chair of KMPG, which co-authors Report on Jobs.

“Overall, demand remains lacklustre as firms delay recruitment decisions [and] uncertainty is also impacting the supply of labour, as people are choosing to sit tight until the outlook is clearer.”

'Push up rates'

Such candidate inertia seems most pronounced in the permanent IT market, given that 14 tech skills were scarce in July on a full-time basis, all of which are scarce for contracts except C#.

The fourteen are; Cisco Networking; CAD, Software Engineering, Data, Development, Digital, IT, Tech, Media, Programmers, Software, Technical Sales, Cyber and Gaming.  

Positively for those candidates with sought-after skills who are willing to move jobs, the inactivity of the majority is making starting rates attractive. Not that clients will be too pleased.

At KPMG, Mr Stewart said: “With the UK unemployment rate already at a four-decade low, candidate shortages in the labour market continued to push up rates of starting pay.

“This will likely cause concern for businesses looking to control their costs and recruit the right people for the long term. Ultimately, businesses will be eager to see a Brexit breakthrough in Westminster to help re-establish market confidence on hiring and investment.”