For IT contracting in the UK, what does the new Labour government mean?

The expected large Labour majority and even what pollster YouGov last night predicted as a “crushing” defeat for the Conservative party has almost come to pass, ejecting Rishi Sunak from 10 Downing St and parachuting in his place as the UK’s new prime minister Sir Keir Starmer.

The latter’s victory speech (“Change begins now”) and the former’s conciliation speech (“A sobering verdict which I take responsibility for”), have already been made, even if a handful of constituencies are still to declare this morning, July 5th 2024. 

But, writes IT recruitment agency VIQU’s managing director Matt Collingwood, what does the first Labour government for 14 years mean for IT contractors? 

Well, I for one am pleased that we now have the stability of knowing we have a new government which need not cooperate with opposition or a coalition to get legislation passed. I hope a new majority Labour government will encourage UK companies to plan for the future and invest further in their technology stacks.  

It’s very much needed. It’s been a challenging 18 months for many independent contractors, arguably none more so than those in the IT sector. With this period being labelled as a ‘global tech recession’, we’ve seen the perfect storm of the Covid legacy, the IR35 repeal reversal, slashed funding, and Big Tech’s mass lay-offs. Each has impacted the freelance technology workforce, ranging from a little to a lot.

To make matters worse, there has been a strong corporate hesitancy of late to commit to big projects and spending. 

Most of our tech staffing agency’s end-user clients pre-2020 were comfortably sharing with our consultants their project plans for the next 18 months, whereas, the running theme for most commercial organisations nowadays is to only plan three-to-six months into the future. At most.

This hesitancy has been, in part, due to our volatile political landscape. Fortunately, that volatility is now over, surely. 

Labour’s ‘Wealth Creation’ sounds good.  But what about small company-owners? 

Labour has won the general election 2024, having claimed to be the party of “wealth creation,” with the aim of enhancing living standards for working people. 

The party believes increased investment will lead to more funding for training, skills, technology, and infrastructure, ultimately boosting productivity—a measure of output per hour worked. And it’s a measure which the UK currently trails behind on, when compared to our many international competitors. 

However, Labour’s concrete policies to encourage enterprise spending are limited in their publicly available detail, focusing mainly on planning and education reforms. Good intentions alone are not enough for business, so it remains to be seen if Labour is going to be the champion of business, let alone ‘small’ business, which includes the standard one-person limited company run by the typical IT contractor.

Public sector spending

At the core of Labour's 2024 election manifesto is a pledge to increase public spending. 

However, before you plan that home extension you’ve been dreaming of while benched or in-contract, it’s important to remember that it may not necessarily equate to more IT contractor job opportunities. 

Labour is promising to deliver an extra 40,000 operations, scans and appointments a week in England - two million a year. The improvement of IT systems and processes may help to deliver this target.

In Spring 2024, the now outgoing chancellor of the exchequer, Jeremy Hunt (who narrowly avoided losing his seat in yesterday’s vote, by just 900 votes) announced plans to increase the NHS’s productivity through IT systems upgrades; scaling existing use of Artificial Intelligence (AI), and equipping all NHS staff with modern computing technology. 

Hunt pledged for all NHS trusts to have Electronic Patient Records by March 2026 and to upgrade over 100 MRI scanners with AI, and to digitise transfers of care. 

So if Labour follows through with these existing plans - and their own, it would be easy to come to the conclusion that there are going to be far more public sector opportunities for IT contractors, especially those with health sector experience.

Yet I’m not convinced the shot in the arm for our health service will materialise. I would love to see more public sector contracts awarded to small and medium-sized businesses. Yet, what we have seen since the IR35 Off-Payroll Working rules were introduced in the public sector on April 6th 2017, is an increase in the use of large Systems Integrators (former PM Rishi Sunak’s father-in-law’s business was a controversial, profitable SI). 

And these corporate systems integrators mostly use permanent employees, or even offshoring. So freelance IT contractors and other temporary professionals could find themselves not invited to the party. 

IR35 repeal? Unlikely under Labour

Reform UK was the only party which pledged in the UK’s six-week election campaign to abolish IR35. Made in their manifesto, ‘Our Contract with You,’ this pledge to abolish IR35 was made by the party before the May 22nd announcement of general election 2024 being on July 4th. Despite not being clarified or explained by Reform UK - even when repeatedly invited to by ContractorUK, the pledge remained in place throughout this 43-day campaign.

Labour’s manifesto ignored IR35 completely and generally lacked any interesting detail when it came to the self-employed, despite the party’s pre-election campaign plan for ‘single worker’ status. 

Instead ‘Our Plan to Change Britain’ referred heavily to other already announced plans, such as their “Plan to Make Work Pay: Delivering a New Deal for Working People.”

The Labour party’s small business experts recently told ContractorUK that a Labour OPW review is unlikely, as is going further - an outright repeal of IR35 reform. 

For contractors (and fellow IT contractor recruitment agencies) with rose-tinted glasses, I’m afraid I must bring them back down to earth. It’s important to remember that it was originally Labour that brought IR35 into law all those years ago (2000), and that alone tells me it’s here to stay for a long time yet.

Zero-hour contracts

One thing which does give cause for concern is Labour's flip-flopping on zero-hour contracts. I don’t dispute that some workers, for example, retail and warehouse staff, will benefit from salary and benefits protection. 

However, many IT contractors and freelancers who find themselves working on-payroll actively want the hallmarks of zero-hour contracts. 

Labour has consistently vowed to prohibit zero-hours contracts, which allow employers to forego guaranteeing a minimum number of working hours.  

However, under its updated proposals, while employers would need to provide contracts reflecting the usual hours worked, employees would still have the option to remain on zero-hours contracts if they choose. 

Under a different, more leftist Labour party umbrella companies had their card marked, but fortunately, there’s been no talk since Sir Kier Starmer took over of this important model in the labour market being banned, even if umbrella company regulation is overdue. 

Going green(er)

One aspect of Labour’s manifesto which does fill me with hope is its £24billion pledge towards ‘green’ initiatives, including the creation of a Great British Energy Company. 

Labour’s aim is to create 650,000 jobs in the green/energy sector by 2030. We saw the Biden-Harris administration do this successfully four years ago in the US, and it scaled very well, creating thousands of jobs. In April 2024, the Democrats announced they had permitted more than 25 gigawatts through clean energy projects – surpassing a major milestone ahead of 2025. That’s enough clean energy to power more than 12 million homes across the US! 

I’ve previously written about the future of green tech and how I believe that it’s a sector which IT contractors who have an interest in our environment should absolutely explore. There’s a long, long road ahead before we see what the green technology sector will achieve and how it will impact the UK’s tech contractor workforce. 

Yet we’ve already started to see big corporates looking for team members to drive sustainability within their organisations, and it doesn’t seem to be restricted to permanent employees.  So I am excited to see where the green sector could go under our new Labour government, and I implore freelancers and contract technologists to be open to seeing what the sector could do for them. 

Final thoughts now Labour leader Sir Keir Starmer has all but taken office 

To conclude, I think it’s clear to most IT contractors and businesses that things in government have needed a shake up for a while now. 

There are aspects of Labour’s manifesto that are unclear, which could understandably unnerve one-person contractor companies now Labour - the architects of the Intermediaries legislation - has won the keys to Number 10. Contractors reading this probably won’t be too thrilled to read my thoughts on where IR35 will go under the new Labour government and yet, I think there is a general confidence in the air surrounding Labour’s win, which I hope brings with it a stability, resulting in increased spending and more temporary work opportunities for computer contractors who, quite frankly, have had a bum deal for too long.

Labour has some ambitious plans, which I am hopeful will be a good thing for the long term success of UK businesses; the IT contractor community and tech recruitment agencies. A new era for UK politics has just begun, let’s see what it brings.