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What did July's UK industry conditions mean for contractors?

Paystream News

Kerry Hull

Tuesday 18th Aug, 2015

The number of opportunities available for limited company contractors across the UK's manufacturing, construction and service sectors increased during July, but what exactly was behind this rise in demand?

Markit and the Chartered Institute of Purchasing and Supply (CIPS) have published their latest monthly Purchasing Managers' Index (PMI) reports for these three industries and we've taken a look at what the condition of each sector throughout July meant for contractors.


Any PMI rating above 50.0 denotes monthly growth, with the manufacturing industry being awarded a score of 51.9 for July, marking a slight increase from June's rating of 51.4.

Recruitment in the sector rose for the 27th consecutive month in July, partly due to attempts to clear work backlogs and cope with new orders, indicating that the field is performing well at present.

Contractors were in particularly high demand in the consumer goods sector, which performed strongly during the month, but there was decline in productivity in the investment goods field and what the report called 'lacklustre' growth among intermediate goods firms.

David Noble, group chief executive officer at CIPS, commented: "Overall, activity has continued to rise for 31 months and though the minor easing in growth may raise questions around the continued strength of the recovery, recent revised GDP figures for the UK economy confirm the sector's solidity along with half of the survey's respondents who were optimistic for the coming months."

In terms of finances, July saw average selling prices increase once again, while input costs continued to fall, with decreases reported in raw materials such as chemicals, textiles, plastics and metals.

It seems that having more money to spend meant firms were in a good position to take on more contractors - a trend that will hopefully continue over the coming months.


Over in the construction industry, Markit and CIPS awarded the sector a PMI score of 57.1 for July, down from June's 58.1 due to a slight slowdown in productivity, while the country's ongoing skills shortage continues to blight firms in the field.

Contractor recruitment in the industry grew last month, but at a much slower pace than in June, while the availability of sub-contractors declined for the 25th month in a row.

Mr Noble stated: "The sector's optimism was still strong, as staffing levels remained high in anticipation of future success, though issues around sourcing skilled individuals remained a thorn in the side of the sector."

However, this situation could benefit limited company contractors with certain skillsets, as they may be able to take advantage of vacancies and offer their expertise to firms for a short period of time, allowing the client access to the skills they require.

Elsewhere in the industry, residential building continued to be the best-performing area, but activity growth in this division was at its slowest since June 2013. Slow growth was also recorded in relation to civil engineering, as well as commercial building, which expanded at its least marked pace since March.


There was also a slight drop in productivity and optimism in the UK's service sector, with Markit and CIPS awarding the industry a PMI rating of 57.4 in July, down from June's score of 58.5.

However, industry analysts were pleased with the sector's performance, which led to the creation of a significant number of opportunities for skilled limited company contractors.

Mr Noble explained: "Employment continued to rise, which enabled backlog and current contracts to make significant headway."

In total, 18 per cent of businesses in the industry reported taking on additional contractors during July, with just nine per cent making cuts to their workforce. Although the overall rate of jobs growth in the sector stood at its slowest since March 2014, it still remained above average.

The nation's service sector has been growing steadily each month for the past two and a half years, with new business orders coming in at a particularly encouraging pace during July, leading firms to raise their selling prices at the strongest rate for five months - something that could lead to more opportunities for contractors being created in the near future.

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