The PCG’s economic adviser, Georgios Nikolaidis, predicts that demand for professional contracting talent will continue to rise after a strong performance during June 2014.
Mr Nikolaidis foresees some potential threats to the generally improving economic outlook, however, each of which could rebound negatively on demand for Umbrella Company Employees and other contractors.
Although June saw positive indicators for both output and business investment, suggesting a balanced recovery, the governor of the Bank of England’s (BoE) mixed signals over interest rates last week risked upsetting the markets and undermining his own forward guidance policy, Mr Nikolaidis claims. While there are disagreements within the monetary policy committee, the low inflation rate appears to have persuaded the BoE to defer any hike in interest rates until later this year.
With underlying problems still persisting, such as the UK’s stagnating productivity and the housing market still posing a threat to the recovery despite cooling recently, there are some potential booby traps in place for a smoothly continuing recovery. Mr Nikolaidis also observed that the chancellor’s public finance and exports targets were further derailed in June and “look increasingly unrealistic”.
Contractors and freelancers have so far benefited from a combination of rising vacancies and skills shortages, while business investment has driven renewed demand for temporary staff and pushed up pay rates. Additional investment is also probable as more businesses recover confidence in the economy, which is likely to drive more demand for contractors.
Mr Nikolaidis cautioned: “This overall buoyant mood could dampen, however, as we approach an eventful autumn with the Scottish referendum and the decision on interest rates set to take place.”