IT contractors saw increased demand during July 2013, with skills shortages looming

IT contractor demand increased again during July 2013, whilst contractor availability fell, leading to skills shortages in key IT disciplines.

Overall agency billings also increased, whilst contractor availability fell and rates grew.

These indicators suggest to me that IT contracting skills shortages are looming, so depending on your skill set, your prospects and pay are likely to improve in the coming months.

July 2013’s Recruitment and Employment Confederation (REC)/KPMG Report on Jobs highlights that recruiters are experiencing difficulties in sourcing contract and freelance developers with skills across a range of systems and software languages, including C#, FM, Java, Linux, mobile apps, .NET, PHP, SQL and VM. Business analysts are also in short supply.

REC’s chief executive Kevin Green agrees with my analysis: “Hourly rates for temp workers increased at the strongest rate since January 2008. This is an early indicator of increased competition for candidates and skills shortages in a growing number of sectors.”

KPMG partner and head of business services Bernard Brown suggests that many canny IT contractors have an opportunity to upskill to benefit from the increasing demand: “High levels of demand for staff were signalled across every sector we analysed and the same can be said across each region of the UK.

“This does, of course mean that a gap exists between the demand for staff and the quality of candidates available, so the onus is on candidates to improve their skills and prove their capability.”

We saw early signs last month that the UK’s financial sector was starting to recover, with the Confederation of British Industry (CBI)/PricewaterhouseCoopers (PwC) Financial Services Survey and financial recruiter Morgan McKinley both posting positive news.

After software development houses, the UK’s financial sector hires more IT contractors than any other industry. As a result, IT contractor fortunes closely mirror those of financial institutions – so good news for bankers and fund managers is good news for IT contractors.

The ongoing and increasing demand for IT contractors shown by the Report on Jobs is in part underpinned by improved confidence in the financial sector. This in turn is leading to greater hiring and the resumption of many IT projects stalled or postponed during periods over the last five years when business confidence was low.

The next Morgan McKinley London Employment Monitor for July 2013 is due out next week and I’m expecting it to show a drop in City hiring as a result of the summer holidays.

However, four solid months of growth in IT contractor demand shown by the Report on Jobs suggests this is likely to be a seasonal blip, and that demand for IT contractors by both the financial sector and other parts of the UK economy rapidly regaining business confidence will continue.

The skills shortages likely to follow should hugely benefit IT contractors, although less so UK plc. Increased rates and earnings may tip you into higher rate tax brackets, so now may be the time for you to seek some professional tax planning advice from a specialist contractor accountant.


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Shams Urrehman
MD Skytax

Hi, I'm Shams Urrehman, Qualified accountant since 2005 and Director at Skytax Ltd since 2009. I have been advising freelancers, management consultancies, IT contractors, SME’s and other businesses about accounts and tax planning.

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