PAYE umbrella contractors with skills in manufacturing and engineering could well find themselves urgently in demand during 2012, as recently released data from the ONS suggests that the government’s hopes of moving the UK economy beyond its reliance on financial services suffered a setback: ‘human capital’ has declined for the first time in nine years.

Human capital is a measure of the value of the workforce’s skills and knowledge – and it tends to suffer during recessionary times. ONS figures show that it grew steadily by £425 billion per year on average between 2001 and 2007. Growth continued between 2007 and 2007, but at a slower rate (£120 billion per year). Figures for 2010 reveal that it plunged by £130 billion in 2010, the first decline in almost a decade.

A number of experts have expressed concern about the development. Jonathan Portes, Director of the National Institute for Economic and Social research, said “By allowing unemployment to remain unnecessarily high for an unnecessarily long period, the Government will damage not just short-run output and employment, but human capital, and hence growth and employment over the long run.”

Meanwhile, Shehan Mohamed, an economist at the Centre for Economics and Business Research, warned “If human capital is lower, that means lower productivity.”

People of working age who hold degree level qualifications account for 36% of the human capital stock, the figures reveal, while those with no formal qualifications account for just 5%.

With the government desperate to rebalance the economy, umbrella companies supplying contractors with high-end skills in manufacturing and engineering could be in for an exceptionally busy year in 2012.

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