It’s a bit of a conundrum. Agencies and umbrellas are reporting that employers are hiring contractors with “a renewed sense of purpose”, yet the market in itself has shrunk for the second month in concession. So what’s to do in the temporary job arena?

One of the possible explanations for a fall off in contractor requirements is the coincidental rise in manufacturing in the UK.

Whilst engineering and IT sectors remain strongholds for bespoke short-term staff, long-serving workers on the factory floor have upped output for the second successive month.

Production figures  reflect the demise of demand for contractors

The belief within the recruitment industry is that the slip back in demand for temporary staff is, in itself, only temporary.

Agencies are reporting that flexible staffing is still very much a part of their plan, especially in the north and the Midlands.

Conversely, reports from the Midlands by recruiters and agencies confirms three aspects about permanent staff that’s good for the economy, but does little suggest the growth in contractors’ awards that’s being hinted at.

Three key takeaways from the Recruitment & Employment Confederation report for April, Midlands:

• permanent placements in the Midlands rose at the fastest rate this year so far;
• indeed, April was the ninth consecutive month of permanent placements rising and you have to go back to September 2011 to find an equally sharp rise in fortunes for the region’s full time staff
• availability of permanent staff also rose. Does that mean some contractors have withdrew from the market to go on the books full time? Read on to continue that chain of thought.
• it would be understandable if so. The region recorded a sharp increase in permanent placement salaries, which may well have tempted agency staff to call time on freelancing and return to full PAYE direct

Midlands is only region to see both permanent and temporary staff demand rise

The Midlands scenario is different from the rest of the country, mind. As well as the incredible figures for permanent placements, temporary billing was also up, reflecting the growth in the area as a whole.

Conversely, London and the South of England continued their downwards spiral in contractor demand; the north, like the Midlands, recorded growth here.

This fits the pattern of recent times. However, the reason there’s not as much cheer in the north as in the heart of the UK boils down to the fact that permanent placements did not mirror the increase in contractor demand for the region.

Fears that upward trend for contractor demand could change

Overall, the contractor sector didn’t fair too badly, despite the localised losses. The only sector to show negative growth was the construction sector for contractors. Overall, especially engineering and IT, the results were positive.

Contractor availability grew in April, despite the demand easing.

Could it be that those skilled contractors whose expertise has suddenly come into demand have foregone the self-employed lifestyle to take permanent roles with employers direct?

If so, that suggests the remaining contractors available to work may not have the skills to win the contracts becoming available.

If employers struggle, despite their desire to hire on a temporary basis, they may be forced to take on full time staff and train them to the bespoke job requirements for their production needs.

The latest Report on jobs from the REC/KPMG suggests that AWR might after all be having an affect on temporary recruitment. If that were to be true, it could be a matter of concern for umbrella company contractors.

Permanent placements increased for the third consecutive month in March, but temporary billings recorded a decrease. Although the decline was moderate, it was the fastest in more than two-and-a-half years. A lot of panel members reported that employers were converting temps into permanent members of staff because of the effects of AWR.

Demand for IT contractors dropped from 53.9 in February to 52.5 last month, but the report says the IT/Computing sector does continue to perform well.

March saw an increased demand for staff, with strong growth in permanent vacancies offsetting the slower rise in temporary contracts. However, growth in candidate availability did not rise to match the demand, which should spell good news for job seekers.

Tom Hadley from the REC said the latest figures were encouraging, but there is still a need to address the skills gap. Employers continue to struggle to find candidates with the requisite skills in catering, driving, engineering and IT and the Government needs to address this lack of supply.

Commenting on the decline in temporary worker appointments he said this could be due to continued uncertainty over AWR, but it could also be because employers are regaining their business confidence. The advantages of flexible staffing arrangements are well known and the outlook for temporary workers is still largely positive.

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Recruitment agency Adecco recently said that the number of job vacancies was on the increase last month, news that will no doubt delight IT umbrella company contractors.

In fact, the IT sector recorded a 3% increase in job vacancies in March. Furthermore, in a complete reversal of recent trends, the public sector showed a 2% rise in job vacancies. Many of these opportunities were for temporary contracts.

Adecco’s MD, Steven Kirkpatrick, said AWR did not appear to have adversely affected temporary opportunities. There was a slight decline in the number of temporary roles advertised in January, but as this was only minimal it suggests that UK businesses have not changed the way they recruit.

ScotlandIS, the trade body, also recently reported that the technology sector north of the border is still expanding and there remains a high demand for suitably qualified individuals.

Yet another report, this time from ContractorCalculator, shows that the engineering and management sectors are also on the lookout for umbrella company contractors.

There is a general skills shortage in engineering and businesses that are recovering from the recession are now looking to increase their investment in infrastructure and energy projects. Employers also believe that IT contractors can provide them with a competitive advantage when economic conditions remain tough.

The report also pointed out that a third of interim management contracts towards the end of last year were in the public sector, which backs up the Adecco claim that the public sector is staging something of a comeback.

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