IT contractor demand fell further into the red in September

Demand for IT contractors lost its footing in September 2024, falling to 43.9 -- the lowest reading since July 2020.

It means three consecutive months of IT contractor demand inching back to the black was in vain, seemingly due to Autumn Budget 2024.

“Slowing [in] hiring activity…is to be expected as businesses apply the brakes on recruitment ahead of the budget,” says KPMG’s Jon Holt.

'Clarity'

The professional services firm says “clarity on future taxation, business and economic policy” is all being waited on by hirers.

The REC, which alongside KMPG publishes Report on Jobs containing the IT contractor index, says end-clients are “waiting for a signal.”

“Recruiters report that projects in client businesses are ready to go, but confidence is not yet high enough to push the button.”

'Holding position'

This “holding position” owes to an Industrial Strategy and an Employment Bill, on top of the budget, looming.

“In a couple of weeks, firms should have greater clarity about the path ahead,” continued the confederation’s Neil Carberry, referring to the chancellor’s statement on Oct 30th.

“[And that] should underpin investment if the messages are right.

“There is frustration amongst employers about the delay over the summer. And the placement numbers…reflect an unwillingness to act without clarity.”

'Uncertainty, yet again'

But IT contractors are frustrated too, as they’ve heard all the tales of hesitation that they can take.

From a LinkedIn profile stating he only accepts outside IR35 roles, a freelance software developer posted:

“This all follows on from 'Uncertainty about the General Election.’

“And that followed on from 'Uncertainty about the [Spring] Budget'...

“Which itself followed on from 'Uncertainly about how the new OPW legislation would pan out!”

A second  IT contractor agrees, describing it as “ludicrous” that, by his count, tech recruitment has been on hold for “13 months.”

'Busy September'

Despite turnaround signs spotted by VIQU in March (signs that didn’t materialise) the IT jobs agency says September was actually “busy”.

“[A] seven per cent [annual] decrease in the number of CV applications per advertised role [bodes well],” says VIQU’s Matt Collingwood.

“Pipeline of future projects…is [in contrast] up 25% on January.

“And…we've seen a 190% rise in permanent placements [this] September, compared to other months this year.”

'Impact of IR35 changes'

The IT jobs agency’s managing director, Collingwood cautions that he doesn’t foresee a return to 2022’s buoyancy.

“Uncertainty” relating to politics; mass layoffs in the tech sector, and the “evolving impact of IR35 changes,” make the return unlikely.

Paul Miles, director at specialist IT job board Big Red Recruitment spoke last week of “positive signs” in September.

“September has been our best month of the year...[indicating] October has [the] potential to be [even] better.”

'Markets beginning to pick up pace'

Boden Group, which hires for the facilities management sector, likewise said of the four weeks covered by the REC’s dataset:

“Our markets are finally beginning to pick up pace.

“Recruiters with the right mindset are making the most of it.”

Boden Group CEO James Fitzpatrick said both contract and permanent placements were “growing well into Q4.”

'Clear Industrial Strategy needed at Autumn Budget 2024'

Looking at sectors in isolation isn’t the approach that Mr Carberry, the REC’s CEO, wants to see in just over three weeks, however.

“Firms want a clear industrial strategy [at Autumn Budget], that goes beyond a sector-by-sector approach, focusing on key growth enablers such as the workforce, infrastructure, access to capital, and the tax system,” he says.

“They also need clarity on the changes to employment law that are planned -- as uncertainty in this area is…slowing employer confidence -- right now.”

'Chancellor faces a tightrope on October 30th'

Keith Rosser, a director at recruitment giant Reed, says the government has an unenviable task on Wednesday Oct 30th.

He says: “It’s a really fine tightrope the new [chancellor] needs to walk.

“A budget that stifles economic growth along with an Employment Bill that needs to blend realism with much-needed worker rights reform.

“Otherwise the balance could tip too far and the slight economic growth we’ve seen over the summer could be quickly reversed.”

'Short supply tech skills'

Demand for IT skills on a permanent basis was categorised last month as in “short supply” in 14 different areas.

Eight of those 14 were scarce on a contract basis too; notably Cyber Security, Data Engineers, Developers, Full Stack Developers, Software Architects, Software Engineers, Technology and Technical Roles.

The IT contractor sector was uniquely short of expertise in Front End Development, IT Senior Management and Java.

Tech member agencies of the REC further reported in August a shortage of applicants for full-time roles requiring CAD, Data Science, Digital, IT Operations and Software Engineering.