What is happening to the financial IT contract scene?

Will things ever be the same again?

In this recession some people continue to do well, some people are just bobbing along as usual and some people are really struggling. In the main this final diagnosis applies very much to IT contractors for the big banks.

Things were starting to look bad at the start of the year when it became clear that certain banks were actively stopping the renewal of large numbers of contractors (HSBC was one of the first in January). Some of this may have been a natural result of the fact that certain banks have 2 year limitation clauses on their contractors’ contracts and a lot of hiring was done in 2010, but with the economy continuing to flatline it begins to look more and more like the banks are making actively trying to reduce their manpower expenditure.

Then in May and June en masse cuts began. Deutsche Bank, RBS, Goldman Sachs, Barclays Capital started putting legions of contractors on notice. Most of these guys are still around, kicking their heels waiting for the next contract.

Are things really that bad?

In some ways yes. The question is, have we seen a paradigm shift away from contracting towards permanent members of staff? In the long term, no. I don’t think so. When the banks are making money having a section of the employee base which is highly skilled and highly mobile is very useful to the banks, and that hasn’t changed. In the short term it’s the steadily increasing level of regulation, increased capital requirements and general global economic melancholy that means that a £600 a day Java developer looks much less attractive than an AVP on a £65k base. And to make things worse for your career contractor most team leads report that many contractors take a box ticking approach to their daily duties and clock off on-time, everytime.

I have to say that things are the worst for developers with Winforms and Swing specialisms. My advice is get down to Skills Matter and upskill with something modern (Flex or HTML5 anybody?) as soon as possible.

What is happening to rates?

For the first 6 months of the year contractors who were getting new contracts managed successfully kept their rates high, perhaps only seceding £50 or so on their rate. Some of which I believe is down to the Government’s restriction on Tier 1 visas. For BAs and PMs my colleagues report rates falling more dramatically to 500 or just below. I expect the new round of contract positions we are expecting (hoping for) later in September to continue that trend of pushing rates down.

I had lunch with an old contact of mine yesterday who used to be a contractor but successfully made the transition to perm 3 years ago. He told me he thought that it was inevitable that, painful as it may be, contractors would have to start to accept lower rates, as he told me “I may eat with a spoon but I do eat”…