Crystal Umbrella

PAYE umbrella contractors concerned about their future prospects may be disheartened by figures just released by the Office for National Statistics, which suggest that the UK has indeed slipped back into recession.

The economy shrank by 0.2% in Q1 2012, largely thanks to a dramatic fall in construction output. As the economy shrivelled by 0.3% in the last quarter of 2011, the latest figures meet the official definition of recession, which is two consecutive quarters of negative growth.

It should be noted, however, that these figures are an estimate and will be revised at least twice in the months ahead. They reveal that the only area to have experienced growth was the service sector, which grew by a risible 0.1%. Production industries shrank by 0.4% (although manufacturing did not decline) but construction went into freefall, nosediving by three full percentage points. Construction only accounts for 7% of the UK’s economy, but its precipitous fall was enough to drag the overall figure into negative growth.

Jobbing contractors working through umbrella companies or limited companies need not reach for the Prozac just yet, however. The Chief Economist at the Institute of Directors, Graeme Leach, conceded that the figures were “not good news”, but added: “These are relatively small falls, so we shouldn’t be too alarmist.”

Mr Leach believes that the “missing link” in the path to growth is confidence. He said: “[But] regardless of the figures, it is the message that comes out to business – to be cautious – exactly when we want them to be a little more aggressive in terms of recruitment and investment.”

PAYE umbrella contractors working within travelling distance of Liverpool may soon find that opportunities for work placements in the area will surge, thanks to a report compiled by former Tesco boss Sir Terry Leahy and Tory party grandee Lord Heseltine.

The document explores the possibilities for job creation, economic growth and investment in Liverpool, and contains a number of significant recommendations that appear to have the approval of the government. Amongst the proposals is the immediate implementation of Network Rail’s £560 million ‘Northern Hub’ plan, which the authors protest is “long overdue.”

Supporting the government’s desire to promote a culture of enterprise, Sir Leahy said that he and Lord Heseltine “firmly believe Liverpool can play a central role to delivering that vision.” He went on: “There has been a great deal of change in Liverpool already, but Lord Heseltine and I wanted to identify how the strengths of the city and its surrounding areas could be built on to ensure success, and help those parts that need extra support.”

The report sets out to combine ideas “that have a real potential for growth.” Already, local councils in Liverpool, local businesses and the Liverpool City Region Local Enterprise Partnership have agreed to co-operate together to stimulate growth as per the report’s recommendations.

If it gets the full seal of approval from government and the recommendations are implemented, contractors working through umbrella companies and many others could benefit substantially. Current estimates are that it would generate at least 30,000 new jobs in the area, and improve links between Liverpool and Yorkshire by providing 700 trains a day (that’s 44 million passengers in a year).

PAYE umbrella contractors specialising in the IT skills market may be encouraged by the views of some of the UK’s leading technology executives, the vast majority of whom believe that economic growth in the UK will be fuelled by technology over the next few years.

Barclays Corporate’s Politics and Economy 2011 survey sought to glean information on the general outlook for growth amongst the UK’s executives. 88% of the 664 executives polled thought that technology would prove to be the key driver of growth, with 78% believing professional services would play a pivotal role and 73% believing that hospitality and tourism services would. 69% opted for financial services.

Unsurprisingly, given the government’s spending austerities, only 31% of respondents believe that significant growth would be driven by public sector infrastructure projects. Even so, 85% expressed confidence that their business needs would be well supported by their local infrastructure over the next decade. 82%, however, believe that the UK economy will become appreciably less dependent on the public sector, against just 17% who thought that public sector reliance would grow.

Although concern is growing in the IT industry about how adequately technology is taught in schools at present, over half (53%) of the technology chiefs polled believe that their businesses would be properly supported by state education in the coming decade.

Given the focus on keeping long term costs to a minimum, many technology leaders may well turn to IT contracting via payroll outsourcing solutions to drive their businesses forward.

Highly skilled freelancers on agency payroll, such as the UK’s PAYE umbrella contractors, will not be adversely affected by the implementation of the Agency Workers Regulations (AWR) on 1^st October, according to findings from the REC’s latest JobsOutlook.

The survey found that many employers – 42% of those polled – are not planning to make any significant change to their use of agency workers and that the demand for flexible working will continue. A much smaller proportion (14%) reported that they will definitely be making changes as a result of AWR, although these include offering higher rates of pay for some staff.

Around a quarter of the employers planning to make changes say that they will consider reducing their use of temporary staff, but the REC data also shows that, overall, the number of employers planning to maintain or increase their use of agency payroll workers has grown from 80% last month to 83% this month.

The REC’s Director of Policy and Professional Services, Tom Hadley, said “The data on general hiring intentions is encouraging. Although some employers may see reducing agency use as an obvious short term option, the need for flexible staffing arrangements will outweigh concerns over the AWR in most sectors.”

He went on to say that, despite some alarmist stories in the media, the latest JobsOutlook data suggests that AWR “will be workable in most sectors.” The REC, he added, will make a final “concerted push” to help those employers who remain uncertain about the impact of AWR on their businesses to understand the EU directive’s effects more clearly.

Contractors working for umbrella companies or limited companies are likely to endorse comments made by the Minister for the Cabinet, Francis Maude, who has just issued a warning to big business suppliers of Government services – make prompt payments to the smaller firms and contractors they use, or risk being named and shamed.

Mr Maude was forthright in his condemnation of late payments, which adversely affect small enterprises and individual contractors far more severely than bigger businesses.  He said, “Prompt payment is crucial to smaller companies.  The Government has an excellent record on paying our bills quickly and we expect our suppliers to do the same and pay sub-contractors well within the 30-day limit.  When work has been done, especially by an SME, it is just inexcusable not to pay up quickly for that service”.

Ominously for the indolent culprits, he added that the Government would be “keeping a close eye” on the performance of its big suppliers vis-à-vis payments to sub-contractors and “we won’t shy away from naming and shaming those that we find have failed to pay promptly.”

Moreover, the “close eye” Mr Maude spoke of is not just rhetoric – he announced that the performance of prime contractors will be monitored by all Government departments as part of routine contract management processes.  Contractors and SMEs with a grievance can alert the Government to any backsliding over payments due via the “Mystery Shopper” service, the details of which will then be published on its website.  Finally, the Government’s prime suppliers will be pressured into paying more quickly that the 30-day standard by the Crown Representatives Team, which co-ordinates the management of major suppliers across all departments.

Late payers beware.

North of the border, umbrella companies (especially those supplying contractors in the IT skills market) are likely to be heartened by the Bank of Scotland’s latest Report on Jobs.

Last month, IT professionals saw a significant increase in demand for their services in Scotland, with the IT industry seeking more temporary workers than either the executive and professional or accounting and financial sectors.

The figures represent an encouraging trend in the number of permanent posts being advertised, too; according to the Bank’s Chief Economist, Donald MacRae, last month was the seventh consecutive month in Scotland where permanent appointments rose.  More vacancies were also reported by recruitment consultants during the month, reflecting a marked increase in demand for permanent staff.  Mr MacRae also noted that demand for temporary workers rose to its strongest rate for four months, especially in the hotel and catering sectors.

The data coincides with observations made by a leading employment agency.  ReThink Recruitment has seen a nationwide surge in demand for IT specialists in line with the growing development of e-commerce.  Anyone with e-commerce expertise in their repertoire of IT contracting skills may have noticed that demand for e-commerce specialists has doubled in the last 12 months, according to ReThink’s data.

It is a development, moreover, that has seen something of a bidding war break out between firms seeking their input.  Some companies are offering as much as 25 per cent more than their competitors in other sectors in order to bag the specialists they need to improve the functioning of their e-commerce systems.  According to ReThink’s Director, Ian Blair, demand for IT staff in the retail sector has undergone an “astonishing turnaround”.

PAYE umbrella contractors used to spending varying proportions of their daily life working from home might be interested in a new study from the TUC, which suggests that the number of people working from home in the UK has fallen slightly.

At the start of 2010, 3.7 million worked chiefly from home.  The number actually rose by a further ten thousand during the year but, in statistical context, it nonetheless reflects a small but perceptible drop, from 12.9 per cent of the workforce to 12.8 per cent.

Even though companies that allow their personnel to work from home usually find that it is a cost-efficient approach, saving money on office costs and allowing staff to manage their workloads more personally and effectively, the TUC believes that fewer workers are requesting home working arrangements due to anxieties over current economic conditions.  Rising unemployment and greater job insecurity seem to be deterring people from seeking the home working option.

Work Wise UK’s chief executive, Phil Flaxton, sought to encourage more people to request flexible working arrangements, however, insisting that it was sensible to allow staff to work from home occasionally – it prevents the stress of commuting and allows workers to get on with their tasks without the everyday distractions of the office.  Many contractors working through umbrella companies will undoubtedly be aware of these benefits already.

The Director of research at the Telework Association went further, claiming that flexible home working arrangements benefit both employees and employers and should be more actively promoted as good for business.  His comments coincide with those of Work and Pensions Minister, Maria Miller, who recently said that flexible working arrangements should increasingly become the norm, not the exception.

Perhaps those numbers might just start to rise again.

Contractors working through umbrella companies may be interested in recent research charting the effects of the recession on the freelance jobs market.  Recent studies by PeoplePerHour.com, Europe’s largest online jobs marketplace, and leading HR group, the Chartered Institute for Personnel and Development (CIPD) both suggest that as permanent posts disappear, freelance opportunities are rising.

PeoplePerHour.com’s study confirms the earlier findings from the CIPD research – work that had previously been kept in-house, especially in the public sector, is increasingly being outsourced to contractors.  More than 120,000 freelancers regularly scour the 70,000 plus jobs advertised on the PeoplePerHour.com website.  And, PAYE umbrella contractors take note, a fair proportion of those jobs were once available only as salaried posts in the public sector.

During 2010, the body count of salaried jobs axed from the public sector in the wake of government spending cuts reached a staggering 132,000.  But data from PeoplePerHour.com suggests that, for example, digital projects once kept in-house in public sector organisations are now being outsourced as never before: the number of digital job postings appearing on the site leapt by a breathtaking 315 per cent over the last year.

The switch to increased use of freelancers by public sector organisations is a relatively recent trend, at least when compared to the private sector, which turned to contractors swiftly when the recession started to kick in, cannily saving the additional costs associated with hiring permanent employees.

However, a worry about these trends is that saturation point may not be too far off – without truly substantial economic growth, and more public sector cuts on the way, the freelance jobs market could well start feeling a little overcrowded.

The UK’s umbrella companies and limited companies may be amongst the many small enterprises suffering from discriminatory and unfair banking practises, according to former Liberal Democrat Treasury spokesman Lord Oakeshott.

Lord Oakeshott was speaking after data from the Bank of England revealed massive discrepancies between interest rates paid by small companies and big firms. The figures show that a large company borrowing £20 million will generally be required to pay an interest rate of around 1.78 per cent, whereas SMEs are generally required to pay a stinging 3.69 per cent on a far smaller amount (£1 million).

These discrepancies make a mockery of attempts to solve the UK’s lending crisis, Lord Oakeshott believes, and suggest that the banks are choking the prospects for economic recovery rather than enhancing them. He urged the coalition to put immediate pressure on the banks if it truly wants to help small firms lead the recovery – many, he fears, will seize up entirely unless the government acts.

Net lending to UK firms has actually been falling significantly in recent months, according to the British Banking Association, which recently produced figures showing that it fell by £4.6 million in February and by £4.7 million in March. In response to these trends, some expert commentators, such as business strategist John de Groot, have advised small firms to explore other ways of obtaining finance, including approaching friends and family.

Lord Oakeshott’s comments will strike a chord with many SMEs; whether the government has the influence to make any impact on banking practises, however, remains open to question.

Contractors working for umbrella companies may capitalize on what one expert has a called a “transitional jobs market” in the UK, as two new surveys present a mixed picture of the prospects for economic recovery.

The Federation of Small Business’s regular “Voice of Small Business” recently revealed that confidence amongst small business owners has increased. However, it also showed that a majority of them are refraining from taking on new staff and a small proportion of them actually plan to cut staffing levels.

The survey hardly makes happy reading for Government ministers, who are relying on the private sector – and especially SMEs – to drive the economy forward and create more jobs. The FSB believes that more must be done to encourage and strengthen small businesses, including the extension of the National Insurance Contributions holiday to micro-businesses. Many individual contractors working through their own limited companies would also welcome such a move.

Meanwhile, the Recruitment and Employment Confederation’s latest “JobsOutlook” indicates that less than a quarter of employers (23 per cent) plan to take on any additional permanent staff in the coming quarter, although 64 per cent do not envisage having to cut their existing permanent workforce any further. Intriguingly for the jobbing PAYE umbrella contractor, 93 per cent plan to maintain or actually increase their present use of temporary workers, including contractors, in the near term. Moreover, 81 per cent of those polled said they would do so on a long-term basis.

The REC’s Director of Research, Roger Tweedy said that the UK’s jobs market was in transition, with more businesses relying on temps and contractors than previously.