The private sector is now using nearly as many interims as it did before the recession, according to the Interim Management Association.

The IMA commissions a quarterly survey on interim usage in the public and private sectors and in Q2 it found that private sector bodies were responsible for 61% of interim and umbrella company contractor assignments. The strongest sector for high-end interims was banking and finance which accounted for 40% of all private assignments.

The chair of the IMA, Jason Atkinson, said the private sector buoyancy is welcome and shows that companies are using specialist resources in their bid to drive the economic recovery and enable growth. Businesses are showing an increased willingness to take on interims with bespoke skills for gap management and transitional change projects.

Spending cuts have impacted on resources in the public sector but changes have also been made in the framework agreements for interim providers. Those who did not make the grade have seen a reduction in the number of assignments they receive. On the other hand, IMA members who did pass muster are finding that the public sector side of their business is growing.

The latest JobsOutlook from the REC suggests that most employers will maintain their current level of temporary employees for at least the next three months.

61% of employers said they intend to keep the same level of temps, and 22% actually expect to increase the number of agency staff they use in the coming three months. Over the longer term, 86% of employers said they intend to either maintain to increase the amount of temps they use over the coming 12 months.

Whilst the outlook looks good for temporary workers, things aren’t so positive for those looking for a permanent position. Only 53% of employers intend to take on more permanent staff in the next three months, down from 67% last month.

Roger Tweedy, the director of research at the REC, commented on the results saying that a complex picture was now emerging about hiring intentions. The jobs market has suffered from a dip in business and consumer confidence this month. But despite the forthcoming implementation of AWR, employers are still keen to have a flexible workforce while uncertainty remains in the jobs market.

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Nearly 80% of IT directors believe private sector workers provide better value.

Michael Bennett from ReThink Recruitment said that the government suggests the private sector can absorb the public sector redundancies, but employers feel that IT workers coming from the public sector do not offer as much value for money.

It is obviously not going to be as easy as the government expects for these employees to transition into the private sector. Although umbrella company IT employees who have experience of managing highly complex projects do have transferable skills, the private sector is now seeing a growing demand for hybrid IT staff, he added.

Meanwhile, 45% of UK businesses believe the cuts in public sector spending will have an adverse effect on turnover this year, according to the ICAEW.

This increases to 68% of the firms that supply the public sector direct and many have now been forced to explore ways of counteracting this negative impact.

The chief executive of ICAEW, Michael Izza, pointed out that there is a perception that businesses can ‘pick up the pieces’ and this includes employing ex-public sector workers in addition to supplying the drive to return the economy to growth.

However, we are seeing that private sector businesses are already affected by the cuts. 21% of companies saw their business turnover fall last year and the figure increases to 42% of those that supply the public sector direct.

SMEs are suffering more than the larger organisations with 56% of those affected seeing turnover decrease by more than 5%. Construction companies are left particularly exposed after the coalition scrapped the Building Schools for the Future scheme and 70% now think the government austerity measures will hit their turnover in the next 12 months.

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Freelancers with digital skills could be one group to benefit from the government’s public sector cuts.

PeoplePerHour.com unveiled data last week that showed that the public sector’s response to the cuts has been to use a record number of freelancers. Invoicing for digital projects in the public sector is seven times higher now than it was this time last year.

Europe’s largest online marketplace has also seen an increase of 315% in the amount of digital job postings across all sectors in the last twelve months. Xenios Thrasyvoulou, the founder and CEO of the company, says the public sector has at last woken up to the potential cost savings in outsourcing to freelancers.

Meanwhile, the FSB has launched its Local Government Manifesto which urges local authorities to think about small businesses first and ensure the SMEs in their locale are able to create prosperity and jobs.

The manifesto stresses how important small businesses and umbrella company contractors are to a local area and urges local authorities to make sure roads and broadband coverage are improved and Local Enterprise Partnerships include small firms.

The FSB is concerned that government budget cuts may force local councils to make up for cash-flow shortages by increasing the cost of services. However, before taking any such action, councils should consider the impact the measures would have on local businesses.

Councils should also do more to engage with the local business community and consult them on a regular basis on issues that affect them. Furthermore, councils can support local SMEs by procuring more of their products and services.

The FSB is ready to work constructively with local authorities to improve their economies but it’s a two way street and councils must be prepared to work in tandem with business people and not create barriers to stop them doing their job.

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It will probably come as no surprise to umbrella company contractors to learn that complaints against HMRC have increased dramatically over the last couple of years.

Last year, the Adjudicator’s Office wholly or substantially upheld 466 complaints against the Revenue. This was more than double 2009’s figure of 229, which itself was more than the 108 complaints upheld in 2008.

HMRC has made a series of high profile errors recently. The incorrect tax code fiasco led to the Revenue collecting £238 million excess tax in the year 2009-10, an increase of 148% on the previous year. That problem also led to an under-collection of tax of £132 million from other taxpayers.

UHY Hacker Young’s, Roy Maugham, said the level of customer service provided by the Revenue was now a major concern. It can now take months to get a response to a simple enquiry letter.

This poor level of service is also having a detrimental effect on the cashflow of small businesses. And the Revenue will be put under even more pressure due to the forthcoming public sector spending cuts. 10,000 jobs are due to go at HMRC and with the organisation already struggling, the result of these cuts could be catastrophic.

The Commons’ Treasury select committee had some harsh words to say about the situation the other day. Andrew Tyrie, the Tory MP for Chichester, told the Commons that one businessman had suffered a loss of £7 million challenging HMRC over a five year period for a case that eventually proved groundless. This is just one example of the many complaints that MPs now receive on a regular basis.

The Treasury Select committee has been listening to evidence on the Revenue’s performance and will report its findings shortly.

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Contractors who have been used to public sector working will need to learn private sector language if they become victims of the government spending cuts.

The MD of career transition services at recruitment company Hays, Mark Staniland, pointed out that cutting corners is not encouraged in the private sector. However, success is measured on the end product and candidates should bear that in mind and adjust their interview answers accordingly.

Mr Staniland made his comments after the Reed Job Index for February showed demand hit a new high last month. Job demand hit new highs in over 67% of the industry sectors looked at by the index, showing a sustained return to private sector growth.

David Morgan, a partner at Morgan Law, has said that recruiters can play a key role in helping clients from the public sector develop labour strategies and share knowledge.

Data from the New Local Government Network think tank recently showed that using shared services to deal with back office administration might only save local authorities 3.6%.

Morgan explained that knowledge sharing is key to developing the labour strategies of the future. Local authorities need to establish the optimum level of staffing necessary to achieve efficient processing of labour intensive tasks such as the processing of benefits.

They also need to establish who takes responsibility if something goes wrong. Whilst there are cost saving benefits to the call centre approach, these can quickly be diminished when you do not have direct control.

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2011 could be a busy year for the UK’s small business technology sector as councils struggle to cope with the public sector spending cuts.

A recent report from ComRes shows that local councils in England and Wales think they will have to depend more on technology in order to deliver public services this year because of the cuts.

70% of councillors think that technology will have a greater role to play in delivering various services and 84% said that their local authority is open to improving efficiency by leveraging technology.

IT umbrella company contractors could soon find that local council technology projects are being outsourced to small IT firms and individual freelancers.

Meanwhile, billings for IT contractors in the public sector are once again increasing. Interquest, an IT staffing firm, says that the paralysis that affected freelance IT workers last year seems to have come to an end. The public sector organisations that it deals with finished downsizing their IT contractor workforce by the end of last summer, Gary Ashworth, the company’s executive chairman pointed out.

Many people feel the public sector will be a fly in the ointment this year for the IT sector, Ashworth continued. The public sector cuts were deep and opportunities for contractors shrunk by around 35% but the outlook is looking more promising. As government departments merge, they need to invest in IT to make sure shared services such as procurement and finance, work.

Ashworth expects to see increased public sector demand for contractors with enterprise architecture, programme transformation and customer relationship management skills.

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David Cameron has vowed that the government will focus on job creation in 2011.

The Prime Minister made the pledge in a recently delivered podcast, saying that the creation of jobs is uppermost in his mind as we move into 2011.

Cameron has already conceded that due to the budget deficit, the public sector will not be able to create new jobs and therefore the onus falls on the SME community, entrepreneurs and other freelancers to generate employment opportunities.

The PM said the government was going to look at ways to lift some of the barriers that prevent people from setting up on their own.

He said he wants to investigate all the reasons why it is so hard to set up, and grow, a business in the UK and the government will get tough to address them. Cameron wants to see a new economic dynamism in the UK and to achieve this the government will put extra pressure on banks to lend money to SMEs. More investment is also needed in the sectors of the future in order to create tens of thousands of new jobs in the green sustainable sector.

Despite Mr Cameron’s words, the PCG still believes that umbrella company contractors are in for a testing time this year. Redundancies, public sector spending cuts and economic uncertainty will all have a role to play in shaping 2011.

John Brazier, the MD of the organisation, says that the freelance community in the UK is in a good position to tackle the challenges ahead. A recent survey from the PCG showed that 60% of UK business leaders would struggle to operate without the help of contractors and more than 50% said the freelance community was essential if the economy is to grow.

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Although the government spending cuts may not have a direct impact on everybody, it’s worth bearing in mind the underlying message that the coalition is trying to get through.

The UK can no longer afford to carry on spending and getting into yet more debt, and this applies just as much to individuals as it does to government departments.

Making the most out of any cash left over at the end of the month should become a priority for freelancers. There are lots of savings products currently on the market but the trick is finding the one with the best returns, whilst at the same time ensuring you can get hold of the funds in case of an emergency.

Fixed-rate ISAs can pay better interest rates than those available on other savings accounts. For example, the Post Office offers a two year fixed-rate ISA at 3.1% while the Halifax is currently offering a rate of 2.8% on a variable rate ISA with unlimited withdrawals.

In fact ISAs generally offer the best interest rates, but it’s worth bearing in mind that although the returns are exempt from capital gains and income tax, you are currently only allowed to invest £5,100 per year in an ISA. Another fact to bear in mind with ISAs is that some providers only guarantee their current rate for 12 months, after which it will be reduced and consumers may well find it worthwhile moving their money elsewhere.

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The REC is worried that the public expenditure cuts announced in the CSR will lead to kneejerk cuts in staffing budgets.

Those in charge of recruiting may be tempted to take the easy option and axe the budgets for IT contracts and other roles currently fulfilled by umbrella company contractors. This could be a serious error of judgement with detrimental longer term financial implications, the Confederation says.

Jim Berrisford, the Regional director of the REC in Northern Ireland, said that temporary workers are often the first casualties when it comes to cost cutting but taking this option is invariably misguided. Contractors are more likely to be an effective solution to a problem rather than an economic drain on resources.

Berrisford acknowledges that the public sector needs to undergo fundamental reform in the way it delivers services and preening down the workforce is obviously going to play a major part in achieving this. But a workforce made up of highly skilled flexible contractors can play a major role in delivering cost effective, efficient services.

Dr John Philpott, the CIPD’s chief economic adviser, says that about 1.6 million new jobs will need to be created in the private sector by 2015-16 to offset public sector redundancies and January’s VAT rise. The CIPD has estimated that 725,000 public sector jobs will be lost over the next 6 years and another 650,000 jobs in the private sector will go as a result of public sector spending cuts. A further 250,000 private sector roles will be lost as a direct result of the rise in VAT, as demand for goods and services reduces.

The CIPD believes that the private sector is capable of creating 300,000 new jobs each year by 2015-16 if the economy can grow at a faster rate than 2.5% but this looks unlikely to happen before 2013.

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How is the Revenue going to survive the spending cuts? Some advisers have suggested that it might roll out more amnesties in the hope of increasing cost efficiency.

Advisers expect to have a more strained working relationship with HMRC after the 15% cuts imposed last week in the Comprehensive Spending Review. This has led some advisers to predict that the Revenue will implement more amnesties, such as the Tax Health Plan, instead of embarking on costly programmes to weed out errant taxpayers. One adviser claims to have heard from a government source that the amnesties could even stretch to accountants and lawyers.

As of the beginning of this tax year (April 2010), HMRC employed nearly 69,000 people but around 13,000 jobs have to go by 2014/15. This will leave the Revenue hard pushed to deal with the large volume of information, and enquiries, it receives.

One cost cutting method has already been announced. Earlier this week, HMRC said that contact centres would stop Sunday opening as from the end of November.

Meanwhile, contractors who have been salting their money away in Swiss bank accounts may be interested to know that George Osborne is brokering a possible deal with Hans-Rudolf Merz, the Swiss finance minister. Matters on the agenda will include the untaxed money held by British citizens in Swiss banks.

A partner at the Swiss office of law firm Eversheds said he was surprised that the UK was the first nation to sign a basic agreement about untaxed money with Switzerland. He pointed out that the Channel Islands are world renowned for the legal possibilities available to people who want to hide money in trusts. And the construction of such a trust is more confidential than the secrecy that surrounds Swiss bank accounts.

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We are likely to witness a new North/South divide, courtesy of the government’s Comprehensive Spending Review, according to thinktanks and unions.

Umbrella company contractors may need to carefully consider which side they are on.

Although the government believes that the private sector will be able to create jobs for the 490,000 public sector workers who are going to be made redundant, towns such as Blackpool and Liverpool, which have weak private sectors, are going to feel a disproportionate impact.

The senior economist at the Work Foundation, Neil Lee, said that it was important to realise that the public sector is not only an employer. It also supplies local services and provides opportunities for local businesses. The cuts in public spending will have a knock-on effect on private sector employment, and areas with weaker economies will be hit worst.

Ed Cox, a director of the Institute of Public Policy Research North, agreed saying that the speed and severity of the cuts are a major threat to the recovery of the North of England. The area was the hardest hit by the financial crisis and is still struggling to recover. A lot of jobs in the North are reliant on the public sector and these drastic cuts could cause a sudden increase in unemployment and a large rise in the benefits bill.

The Institute thinks George Osborne should have arranged to reduce the budget deficit over a period of 6 years, instead of the planned 4. If there was also scope for adjustment, the North would stand a better chance of a private sector recovery, which could in turn absorb some of the public sector job losses.

The general secretary of the TUC, Brendan Barber, agreed that job losses in the public sector are going to occur in some depressed areas of the UK where there is already poor private sector recruitment.

Let’s hope that things turn out better than people are currently predicting!

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Our economy should escape a double dip recession, but we will see growth slow down, according to the BCC.

The British Chambers of Commerce thinks that we are not at as much risk of a double dip recession as some industry experts are making out.

David Kern, the BCC’s economic advisor said that we can expect to see slow growth in the immediate future and that if things are going to pick up, it will not be until the second half of next year.

The Chamber also believes that the effect on the economy of the public sector spending cuts has been somewhat exaggerated.

However, Professor David Blanchflower does not share Kern’s optimism. The former member of the BoE’s Monetary Policy Committee believes that the government’s austerity cuts could push the country back into recession.

Earlier this week, the Professor said he is concerned that the first quarter of 2011 is going to be terrible. He thinks that drastic cuts are not the answer and George Osborne should have spread the cuts out over a long time.

Meanwhile, the FSB has reported that 10% of firms are expecting to cut jobs over the coming 3 months after the recent weakening of business confidence.

The results of a recent survey carried out the Federation showed that over 33% of firms reported that their revenue declined in quarter 3. Small businesses and freelancers now want the government to provide a strategy for growth to go alongside the spending cuts.

The government is hoping that the private sector can create more jobs to absorb some of the public sector fall out. But the impending VAT rise and the austerity measures are going to be too much for a lot of small businesses to cope with.

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