The latest Office for National Statistics figures show how unemployment levels fell by 125,000 to 2.3 million during the final quarter of 2013, compared to the previous three months. In this blog, we delve a little deeper and explore just what this means for contractors.
Recent figures from a range of organisations initially show that while the future for contractors in the construction and manufacturing sectors is looking rosy, steps must be made to address skills shortage in areas including finance, engineering and IT.
Construction sector builds strongly
Activity in the UK’s construction sector expanded for a 10th straight month in February, with civil engineering activity overtaking house building as the strongest sector, according to a survey from the Chartered Institute of Chartered Surveyors.
Other details from the survey further confirmed the health of the construction sector, with job creation rising to a level not seen since 2007, while subcontractors charged higher prices as demand for their services remained strong.
This increase in construction work follows news that the manufacturing sector continued to expand at a healthy pace, and suggests that UK economic growth should accelerate in the first quarter of 2014.
Specialist, technical industries suffer shortages
While construction goes from strength to strength, the latest Report on Jobs from the Recruitment and Employment Confederation (REC) highlights that finance, engineering, IT, business development and interim management contractors are all in short supply and difficult to source.
The REC report also stated that recruitment agency billings for contractors did in fact fall during February 2014, alongside sharply decreasing availability and increasing rates of pay.
These indicators would normally signal worsening skills shortages, because agencies simply cannot find enough suitably skilled contractors to fill assignments. But the jobs report shows that demand growth in fact slowed in every core contracting discipline, except for construction and manufacturing.
Coupled with record levels of permanent recruitment, it could be queried as to whether businesses are sufficiently confident in the economy and its recovery that they are choosing to permanently employ workers, rather than hire contractors.
The REC firmly believes that skills shortages are causing the blip, explaining that the number of candidates available to fill vacancies is continuing to fall and that this is becoming a critical issue in recruiting highly skilled roles. This resulted in a subsequent spike in demand for skilled umbrella company employees and other freelancers in January.
Although both permanent and temporary/contracting staff billings increased at a marginally slower rate than the 15-year high registered in December, the pace of growth remained encouragingly strong. Pay rates are also beginning to pick up, keeping pace with the six-year peak seen in the previous month.
The growth in permanent and temporary billings was seen across all UK regions, with temporary/contracting roles being most in demand in the North and, in second place, the Midlands. Demand for new staff grew in both the private and public sectors during January, although growth was strongest in the former.
The REC said that while the squeeze on people’s living standards was still a dominant news story, the latest figures give hope for workers as skills shortages in an expanding number of sectors are driving up pay rates across the country.
The best things in life are freelancers
Freelancers’ association the PCG has given a positive verdict on what the UK’s emerging economic recovery may mean for the UK’s freelance contracting community. The PCG analysed recent GDP figures and a raft of associated data concerning the credit market, the labour market, the investment market, public finances and trade. The aim was to read this mass of information and tease out what impact the current trends – and possible future changes – may mean for umbrella company employees and other freelancers.
There are certainly risks ahead, much hinges, for example, on the Bank of England’s monetary policy decisions in 2014. If interest rates rise too early, demand will be suppressed and the recovery slowed. If interest rates remain subdued for too long, the economy could overheat and lead to inflation.
While poor productivity remains an issue to be tackled as a matter of urgency, the PCG points to reinvigorated credit markets and improved public finance, both of which bode well for freelance independent professionals. For freelancers, the macro-economic outlook should instil confidence and allow them to continue making their unique contribution to the UK economy. Rapid improvements in the labour market and prevailing skills shortages in sectors dominated by independent professionals could mean more contracts and better rates.
Conclusion
What’s certain is that as the economy recovers following the recession, businesses must capitalise on all that the burgeoning construction and manufacturing sectors have to offer while building up talent pools in languishing sectors so that they may flourish and, in turn, contractors too. The challenge is a tough one, but the opportunity to build upon and create a healthy and buoyant jobs market means that there’s definitely more than a hint of optimism in the air in 2014.
