Brexit uncertainty impacts demand for agency contractors

The professional staffing association, APSCo, revealed earlier this month that the demand for contractors and permanent staff engaged through recruitment agencies in the UK dropped in November last year – something the organisation puts largely down to continued Brexit uncertainty.

The 6% fall in the requirement for contractors and the 3% decrease in permanent staff vacancies year-on-year is said to have resulted from the chaos that continues to define Brexit, which has impacted overall business confidence and in-turn the hiring intentions of companies.

Ann Swain, APSCo’s Chief Executive, explained the situation;

“Ongoing uncertainty around Britain’s future relationship with the EU, combined with predictions that the UK economy is forecast to fall in GDP rankings, means that employers are becoming more cautious with regards to future hiring.”

Nonetheless, permanent placements were said to have increased by 4% in the year to November. However, the same cannot be said for contractors out on assignment in the same period; this dropped by 8%.

In fact, the number of independent workers engaged through agencies in 2018 fell across the board, with the exception of the financial services industry which saw a 10% year-on-year increase and an impressive 14% rise in November. This could be considered somewhat surprising given it’s widely believed the UK’s financial services sector will suffer most from a no-deal Brexit.

In general, there are mixed views on how Brexit will impact contractors. The overriding feeling is a negative one, but there are some who believe contractors could profit from economic uncertainty, for the fact that independent workers present less of a hiring risk to companies than permanent staff.

On the whole, contractors themselves aren’t particularly optimistic. 11% of more than 1200 independent workers told Qdos in September of last year they believe the UK will exit the EU without an agreement in place that best serves Business. This was only four months ago, but since then much has changed. At the time of writing, the chance of the UK leaving the EU with any kind of deal at all hangs in the balance.

There are factors other than Brexit that are thought to have impacted contractor opportunities last year. Most notably, the effects of public sector IR35 reform in 2017 were felt by independent workers throughout 2018.

Even now, nearly two years since the introduction of initial IR35 changes, a number of public sector organisations are reluctant to engage contractors outside the rules. And along with Brexit drama, it was the announcement of private sector reform – set to be introduced in April 2020 – that APSCO’s Ann Swain believes has also decreased demand for contractors.

“The number of contractors out on assignment is notably lower than a year ago, which we suspect is reflective on incoming changes to IR35 in the private sector – and with further changes to legislation around the use of contingent workers now confirmed, it will be no surprise if this trend continues,” she explained.

Meanwhile, permanent placements in IT increased dramatically, by 39% year-on-year in November. It’s not known whether or not this is due to contractors deciding to enter permanent employment as a result of recently announced IR35 changes, but the number of individuals who were considering employment due to reform makes this a possibility. Similarly, the strong upturn in permanent IT staff appointments was a trend also reflected in KPMG and REC’s UK Report on Jobs from the end of 2018.

In contrast to APSCo’s research, KPMG and REC’s study paints a slightly more positive picture overall – albeit one that Brexit has left its mark on. It reports contractor and permanent billings increased but at softer rates in November.

It is worth noting, however, that while temporary placements grew, it was at the joint-weakest rate for just over two years, while the upturn in permanent staff appointments was the second weakest since October 2017. These are unsettling times, said REC’s Chief Executive, Neil Carberry;

“After a long run of strong performance, it seems that employers are getting more nervous as well. Although permanent and temporary placements continued to increase, the pace of growth has slowed since earlier in the autumn.”

With Brexit discussions coming to a head and March 29th – the day the UK leaves the EU – approaching fast, the jobs market will benefit from certainty one way or another in due course, said REC’s CEO.

“More clarity on the future path of Brexit and immigration will underpin business and consumer confidence, ensuring the UK’s jobs performance remains strong.”