Growth in IT contractor demand fell in September 2022 for the fourth month in a row

Growth in demand for IT contractors reduced in September 2022 for the fourth month in a row.

The reduction to 54.9 last month, from 57.2 in August, brings the temporary market for technology skills dangerously close to the threshold at which it is no longer growing (50.0).

Measured by the Recruitment & Employment Confederation, the IT contractor market appears to have received no bounce from the government moving to repeal IR35 reform.

'Deepening economic uncertainty'

However, what did affect the IT contractor jobs market in September was “deepening economic uncertainty,” according to KPMG, which co-authors the REC’s Report on Jobs.

Workers by and large chose to “stay put” last month rather than go forward for new opportunities, but there was also “hiring freezes,” revealed KPMG’s Claire Warnes.   

“Even those [end-clients] who anticipate that the recession may be short, are taking steps now to contain costs,” said Ms Warnes, the firm’s head of education, skills and productivity, referring to the hiring freezes.

'Choppy waters'

In an update covering the same four weeks of September, Indeed.com spoke of “mounting economic headwinds” and the UK economy “heading into choppy waters.”

And writing in Report on Jobs, the REC’s Neil Carberry put job-seekers on notice by warning them that, “any economic slowdown this winter will affect the market.”

Reflecting informally afterwards following the report’s publication, he acknowledged that “a slower market later in the autumn is likely.”

'Pace of growth in new opportunities has slowed way down'

Lending credit to the forecast, already the “pace of growth”  in new opportunities has slowed “way down”, said Mr Carberry, the confederation’s chief executive.

Usually following a Budget, the REC and other staffing bosses point out what the latest statement from the chancellor contained, and how it should help or hinder hiring.

The REC issued a statement after Mini-Budget 2022 (in which it described repealing IR35 reform as a “huge help”), but neither the REC nor Indeed cited it in the new market updates.

On the contrary, Mr Carberry said there is “much that government can do” including one policy that chancellor Kwarteng did not unveil on September 23rd -- “reforming the failed Apprenticeship Levy.”

'Organisations have mixed feelings about IR35 reform facing repeal'

Online, a digital transformation expert said IR35 reform’s repeal from April 2023 was never going to trigger “an overnight return to how things were in the good old days.”

“Having spent time with organisations in the aftermath of…[the repeal] announcement, there are mixed feelings [about the off-payroll rules being revoked],” said the expert, Chris Jones.

“The financial and resource time that has been poured into getting [OPW] compliance processes in place [has been significant].

“[Therefore] managing on-payroll contractors is a big priority for organisations to try and mitigate potential flight risk, as the war for talent will no doubt intensify.”

'Hiring likely to remain a priority'

Fitting with a HM Treasury secondee’s assessment of the IR35 situation exclusively for ContractorUK, Jones added that “we can all speculate but truth be told, we just don’t know what’s going to happen yet post-April 2023.”

At the REC, Mr Carberry is optimistic that economic headwinds won’t hurt the professional labour market – at least not in the foreseeable.

“The UK labour market is so tight that hiring is likely to remain a priority for firms, even as they [potentially come] under pressure and restructure their businesses,” he said. “So while the market will likely slow this autumn, I don't see a substantial drop in activity in the near term.”

'Skills in short supply'

According to Report on Jobs, technology recruiters were "in short supply” in September of IT contractors skilled in Cyber Security, Development and IT/Technology.

Meanwhile, REC member agencies placing full-time techies said they struggled to find the same skills on a permanent basis, as well as applicants for CAD, Digital, Software Engineering, and Technical Sales positions.