Press releaseTuesday 13 June 2006

PERCENTAGE OF IT CONTRACTORS WORKING ON PUBLIC SECTOR PROJECTS DECLINES FOR FIRST TIME IN THREE YEARS

Financial services industry increasing its usage of IT contractors

The share of IT contractors working on public sector IT projects has declined for the first time in three years, reveals research by giant group plc, the contractor services provider. 26% of all IT contractors work in the public sector, compared to 27% six months ago. ¹

Meanwhile, the financial services industry, for so long the bellwether of the IT contractor market, has stepped up its use of flexible IT skills. 26% of IT contractors now work in financial services, a rise of 2% in six months.

Matthew Brown, Managing Director, giant group, comments: "With City institutions now so profitable it is no surprise to see the public sector lose out in the war for IT talent."

According to giant, the decline in the percentage of IT contractors in the public sector is also due to the completion of projects associated with the e-government programme – designed to make public services accessible online.

"The e-government programme was scheduled for completion by the end of 2005, and with most government services now available electronically, demand for flexible IT skills has stabilised."

"New public sector IT programmes have recycled some of the skills from e-government projects that have wound down, but whether that will be enough to prevent the Government’s share of the IT contractor market slipping further remains to be seen."

The Ministry of Defence recently started its £10bn project to design and build a single IT infrastructure for the armed forces, for example.

Matthew Brown points out that despite being an easy target for ministers, IT budgets have not been trimmed by recent public sector belt tightening.

He says: "The NHS central IT budget has not suffered as a result of the organisation’s cash crisis at Trust level, but Trusts have their own budgets for IT projects, and it will interesting to see where on the priority list IT sits if further cuts have to be made."

Surge in demand for IT contractors in the City

According to giant, over the past year the financial services industry has become the fastest-growing sector in terms of utilisation of IT contractors.

A boom in profits is driving spending on new IT systems as investment banks and hedge funds strive to gain a competitive edge.

Matthew Brown says: "As the volume of deals increases the need for faster and more reliable IT systems grows. New platforms also need to be developed to process the growing array of financial instruments in areas like derivatives."

Compliance remains a major spending priority for IT departments in the City, giant points out, as does data security.

Regulatory programmes like Basel II ² and the Markets in Financial Instruments Directive ³ require financial institutions to invest millions of pounds in new IT systems by 2007.

¹ The public sector had a 13% share of the IT contractor market in June 2003 when giant first surveyed the market, peaking at 27% at the end of 2005.
² A framework to improve how banks manage their capital requirements
³ EU Directive intended to create a single market in financial services

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