Employment prospects for the workforce in Britain may be on the mend according to the Recruitment and Employment Confederation. This could be good news for IT contractors who suffered as a result of the lack of demand for services in the recent recession.

A joint report between KPMG and REC has shown that demand for IT contractors rose in January 2010 in contrast to the previous year. The Recruitment and Employment Confederation has stressed that the implementation of counterproductive policies regarding taxation and regulations must be avoided by the government if the economic conditions are to continue improving. Kevin Green, chief executive of the REC stated:

“The recovery is tentative and must not be put at risk by taxes or regulatory changes.”

The United Kingdom moved out of recession in the final quarter of 2009 with growth of 0.1 per cent recorded during this period according to the Office for National Statistics. It is thought that more companies are likely to outsource their IT to contractors in order to cut costs. As this is a major expense for many companies it makes financial sense to outsource the IT aspects of their business to contractors.

This surge in demand for IT specialists may see an increase in demand for umbrella companies in order to maximise take home pay. Any changes in taxation will see more self employed IT workers and contractors requiring assistance as their financial situation becomes increasingly complicated.

With Budget day fast approaching contractors will be waiting to see if there will be any changes to taxation rules, such as IR35 legislation introduced in April 2000 to stop people avoiding the payment of tax and national insurance.

With the beginning of economic recovery, businesses will seek to cut costs in order to spend money elsewhere such as sourcing new business and therefore IT contractors should continue to see an improvement in demand.