Comprehensive spending review

Date: 10 November 2010

Introduction

The Chancellor’s recent announcement on his Comprehensive Spending Review (CSR) paints an interesting picture for contractors and freelancers. While contractors will face tough times and will be squeezed like others there are some bright spots.

We review the dangers, reasons for optimism and provide a few thoughts as to what to do about it.

Dangers for contractors

George Osborne outlined spending cuts running into the £80billions over the next four years. He pointed to spending cuts in “IT Contracts” with an estimated target saving of around £800million – largely from ‘de-scoping’ major IT projects.

There is a further £1billion of IT project cuts expected. What’s more there’s forecast to be a 19% cut in departmental cuts and the Government’s spending on project consultancy services is down by £100 million compared with a year ago.

We could go on but I think you get the gist. Specific areas of government and the public sector will face their own specific cuts and if you work in these areas you will probably be aware of what they are. Suffice to say we are in for challenging times with money being tight and budgets being pared down to the bone.

Added to this will be further scrutiny in procurement process and pressure to renegotiate rates and contracts.

Reasons for (cautious) optimism

While there is cause for concern and contractors are going to have to fight and work harder to get work there are a few factors that should encourage contractors.

The government has indicated its desire to make more use of flexible and contract workers and experts who can bring the right skills to bear.

The Professional Contractors Group suggests that the government has used freelancers more, because they offer "flexibility, skills and value for money.” "Having this flexible and skilled workforce available will allow the public sector to call on a range of skills and resources when and where they need them."

This is borne out by the fact that the feared dip in the use of temporary & flexible staff has not been as severe as expected (30% on last year vs. 75% cut in permanent hires in the same period).

In addition, the private sector and contract staff are going to be needed to take up the slack of the projected 490,000 public sector job losses. This does present opportunities.

What’s more the appetite for increased efficiencies through IT, back-office rationalisation and outsourcing will create opportunities. These activities will play a major role in returning the government its hoped-for efficiency savings (£6bn a year), and top the to-do list at many departments, councils and public bodies.
For instance, Foreign and Commonwealth Office expects to rationalise its IT function and pare back its back office, while the Ministry of Justice will implement shared, corporate services across its department.

In addition, the Home Office's Border Agency will invest in new, cost-saving technologies, whereas the councils of Kensington & Chelsea, Hammersmith & Fulham and Westminster will merge their back-offices.

All of this does mean there’s work to be done and a need for the right people to do it. However, contractors will need to position themselves to take advantage.

Advice to contractors

Contractors can’t just expect great roles to ‘fall into their laps’. To be successful we advise you take note of our 5 top tips.

1. Be flexible – It’s vital that you demonstrate the willingness to be flexible and compromise on ideal roles. In our view it’s much better to get a role and look to shape it subsequently than stubbornly ‘sit on the bench’ waiting for the perfect role.

2. Negotiate & look at the bigger picture – Be prepared to negotiate hard, look at the longer term opportunity and be careful to factor in the ‘opportunity cost’ in turning down a slightly lower rate. You can always renegotiate subsequently.

3. Market yourself – It will become increasingly important to market yourself and your brand. You need to sell yourself and clearly highlight the value you can add and the benefits you would bring.

4. Network, network, network! – Building your personal networks is going to become increasingly vital and you can’t just rely on agents or job boards. Cultivate relationships and contacts and use resources like LinkedIn to broaden your network.

5. Understand & empathise – If you do work in the public sector you need to keep up to date with developments as things are changing rapidly. What’s more you should display empathy and demonstrate that you’d fit in well.

Remember, the people interviewing you may have recently lost friends and colleagues who’ve been made redundant. Be careful to show you appreciate this and understand the challenges.

Conclusion

These are difficult times and it is tough out there. However, we’d urge contractors to be upbeat and search out the opportunities that will undoubtedly be out there. By positioning themselves correctly and taking note of the kinds of tips above we’ve no doubt that contractors can flourish and be successful.

At My Accountant Friend we’re committed to supporting contractors & freelancers in any way we can. Please get in touch if there’s anything we can do to help.