Demand for contract workers falls sharply as fears of a double dip revive

Demand for contract workers falls sharply as fears of a double dip revive

13% fewer contractor vacancies advertised

Demand in the construction and manufacturing & engineering sectors rises

Demand for contractors has fallen by 13% year-on-year across the UK as fears of a double dip recession intensify, according to research conducted by Staffing Industry Analysts and Innovantage on behalf of the Association of Professional Staffing Companies (APSCo).

Research compiled by Innovantage, the UK’s leading provider of real-time labour market intelligence, and Staffing Industry Analysts, the global advisor on contingent work, shows that 57,191 contractor vacancies were advertised on job boards in September 2011, compared to 66,340 in September 2010. The figures are from the APSCo Monthly Trends report, which analyses job vacancies and placements across the UK professional staffing sector.

Two of the hardest hit sectors are banking & insurance and IT, where the number of year-on year contractor vacancies fell by 34% (from 3,181 to 2,088) and 27% (from 19,328 to 14,175) respectively.

The proportion of temporary workers (including contractors) as a percentage of all employees has fallen from its seven year high of 6.4% to 6.1%.

According to APSCo, the fall in the number of advertised contractor vacancies is a clear indication of growing caution among employers about hiring contingent workers in light of continuing economic uncertainty.

Contractor vacancies, APSCo explains, are an excellent barometer for the health of the labour market. This is because contractors are normally the first to be cut during a slowdown or contraction, and the first to be hired when confidence recovers.

Ann Swain, Chief Executive of APSCo, comments: “Contractors are always the first into and the first out of a downturn. Employers tend to cut back on contingent workers before they slice into their permanent workforce, so with joblessness rising again, we would expect contractors to be bearing a disproportionate number of those job losses.”

“This is the first sign of a fall in demand for highly skilled contractors after a robust recovery this year. Hopefully, what we are seeing now is a momentary wobble as employers adopt more conservative recruitment policies in light of the Eurozone crisis.”

“Contractors may be in the vanguard of corporate headcount reductions, but the flipside is that when confidence revives, contractors are usually the first to be hired. Employers needing additional capacity usually look to boost contractor numbers rather than risk the cost of taking on permanent staff while the economy is still fragile.”

“It’s the flexibility that contractors provide that makes them such a valuable part of the UK economy. They have been hugely beneficial to employers during the financial crisis, allowing workforce numbers to be rebalanced with relative ease.”

She adds: “IT projects, particularly if they are not expected to deliver an immediate return on investment, can temporarily be put on ice and thawed out again once the outlook improves. In some cases, projects have been put into the deep freeze, allowing a reduction in contractor numbers.”

John Nurthen of Staffing Industry Analysts comments: “There have been a number of reports of contractors in banks being forced to take rate cuts, and in some cases a mandatory unpaid two-week holiday over the Christmas period, so it’s no surprise that new vacancies have declined quite sharply.”

“Contractors are a flexible resource, a tap that can be turned on and off very quickly. Right now, many banks are turning the tap towards the ‘off’ position, though in some niche areas, such as compliance and risk, there is still significant demand.”

APSCo points out that demand for contractors in some sectors of the economy is still buoyant despite the faltering recovery. Year-on-year vacancies for contractors in the construction sector is up 33%, (from 2,482 to 3,311) while demand for contractors in the engineering & manufacturing sector is up 15% (from 6,438 to 7,408).

John Nurthen of Staffing Industry Analysts says: “The construction sector reportedly grew at its fastest rate in the five months to October, which is stoking demand for contract workers. With the Government giving the green light to a significant number of infrastructure projects, including two new power stations, this should further bolster demand for engineering and construction skills.”