Contractors' concern at general state of market
Contractors' businesses are most at risk from the general economic downturn over and above the threat of specific issues like IR35 or fast track visas, according to a recent UKTECH readers' poll.
IR35 and FTVs, the two most contentious issues for contractors in the UK, rated almost equally with 26 per cent saying IR35 represented the biggest threat to their business and 28 per cent saying it was the fast track visa system.
Only five per cent of contractors believed their companies were most at risk from clients cutting their hourly rates.
Forty one per cent of contractors said 'the general state of the market' was being the biggest single barrier in continuing to run their businesses.
When will it get better?
The recently published Recruitment and Employment Confederation (REC) Annual Report showed that growth in the contract marketplace is expected to be lower in 2003 than in 2001/2, at 4.4 per cent.
REC reported that despite a 5.9 per cent rise in sales for the general UK recruitment industry, the past year had been a particularly tough one, most notably for IT contractors.
Barry Roback, Managing Director of the JSA Group, which specialises in contractor services, recently said: "From our own statistics: contracts are shorter; contracts are lower in value (6.67 per cent down year on year) and there are less of them (our estimate is that the contract market has declined by 40 per cent since 1999).
"The good news is there are still contracts around (JSA maintains close to 70 per cent of the level of new contractors joining JSA compared to 1999/2000). Things have not got any worse compared to Q1 this year; therefore we are at the bottom of the cycle, awaiting the upturn."
Iprofilestats, a statistics site for IT contractors, recently reported that IT skills are still dropping in value, with some of the market's highest earning skills dropping by as much as 38 per cent since April this year. The site claimed that since April, contractors have seen the value of their skills drop by 31 per cent for Project Management, 29 per cent for MS Project 2000, nine per cent for Project Manager Workbench and five per cent for Case Tools, all as a consequence of the current downturn.
Alex Charles, Director of iProfilestats, said: "The flipside is that these will be the first skills to pick up in demand as the market improves. Even when the market does recover, there will be a delayed reaction in rate increase as excess skills are soaked up. Current evidence suggests we may not have hit the bottom yet."
Nick Wells, founder of Jobstats, another market statistics site for contractors, recently commented: "Within this general decline there are some brighter points. Contract rates are down from the peak 18 months ago and are still declining, but permanent salaries are rising or holding steady. This means that the premium for contractors is shrinking. The cash rewards for contracting have been around twice those for permanent positions, they are now about 50 percent more. Going contracting used to be a 'no-brainer', it's not so obvious anymore. At the same time though the proportion of contract jobs has gone back up to a quarter of all jobs having fallen to under a fifth six months ago (at the peak nearly a third of all adverts were for contracts)."
As it stands
UKTECH is running a new series of feature articles entitled: 'From Business to Business,' looking at how some contractors are staying in business on their own account whilst changing professions in a period where the market for their traditional skills has decreased.
Alec Jordan, a highly skilled IT contractor specialising in email servers who has recently had to close his business, agreed with the survey's findings.
He said: "The ongoing economic downturn has been the biggest killer. Rates cuts have hit hard and clients are taking advantage of the fact there is precious little work for contractors at the moment. When there's oversupply, the prices go down: what more evidence does the Government want that we are real businesses trading in a real marketplace! It goes to show how different we are from permanent workers."
Alec is the first contractor interviewed in the series.
If the ongoing economic or regulatory conditions mean you have swapped your contracting business for something entirely different, we want to hear from you. We are looking at entrepreneurial contractors who have moved from one business to another.
Email us at UKTECH