What To Expect From IT Contracting In 2025

A number of factors have shaped the 2024 IT contracting sector and will continue to affect IT contracting in 2025. From layoffs plaguing the tech world to the UK Election and the Autumn Budget, contractors have had another rough year. The landscape for IT contracting in 2025 does not look significantly better, but there are a few glimmers of hope in the sector that I will explore in this article.

Economic growth

Over the past few years, the economy has seen stagnation, recession and the continual threat of economic downturns.

2025 is not promising great things, but a small growth of 1.5% GDP is predicted for the year, rising to 1.6% in 2026. This is a long way off from the 4.8% economic growth level we saw during the tech boom of 2022. However, with recession threats now firmly in the past, I expect confidence will slowly start to increase, which should have a positive impact on the market.

The rise of the contractor

I predict that demand and utilisation of IT contracting in 2025 will see a good amount of growth. In my conversations with clients, although they are no longer able to project 12-18 months ahead like they could previously, many are keen to start much needed IT projects that have been delayed already. However, they cannot commit to full-time employees. Therefore, I expect budget distribution for contractor resource over permanent heads will increase.

However, don’t go out to buy champagne yet. We are in a hirer’s market currently and many organisations are still reluctant to offer Outside IR35 rates due to their supposed risk, so we will likely see the highest rise in Inside IR35 opportunities. Of course, for niche and highly specialist IT contractors, as always, they are more likely to be in a position to secure a better deal.

In 2023 and 2024 we saw contractors face long periods of searching for contracts instead of working. With our new government now established and some small steps forward with the economy, I hope there will be more opportunities for IT contracting to thrive in 2025.

Changes to legislation coming into force

For many, IT contracting in 2025 will be that much more difficult due to the Employment Law changes announced in the 2024 Autumn Budget.

The increasing Employer National Insurance cost from 13.8% to 15% from April 2025, will hit those working through Umbrella companies hard, costing an average of £17 per week. This combined with high Corporation Tax means that contractors, particularly those Outside IR35, will have higher costs to contend with.

These changes might also have wider implications on the scope of the market and could affect the extent to which organisations can invest in IT hiring. However, with ‘Day One’ rights for permanent employees set to be introduced, we will have to wait to see how the IT contracting market fairs compared with its permanent equivalent.

Recruitment agency changes

Over the past 18 months we have seen a 32% reduction in the recruitment consultant workforce, with over 600 recruitment businesses no longer in business. Some might think this is a good thing, but in reality, recruiters create disruption in the market. They develop and build new opportunities for contractors.

We will see the relationships between umbrella agencies, contractors and recruiters change in 2025, as the government is planning to place more responsibility on recruitment agencies and the end clients. Soon, recruitment agencies will have to perform due diligence and conduct checks on umbrella companies that they recommend to contractors, in order to make sure contractors aren’t unwittingly committing tax fraud via unscrupulous umbrella companies. This means that the onus on finding a reputable umbrella company will be on the recruiter, rather than the contractor themselves.

The contractor / recruitment agency relationship is slowly changing, and it will be interesting to see how the market reacts in 2025.

Specialists will do well

As always, the advice for those in IT contracting in 2025 is to specialise where they can. Don’t go an inch deep and a mile wide. If specialising in one area is not possible or desired, it would be a good idea to try and stay in one sector and gain more experience within a particular industry.

When contract work is booming, often contractors accept whatever role they are given based on which company will offer them the most money and an increase in responsibilities. As 2025 will likely be a tricky market, it would be a good idea for contractors to consider focusing on either going for roles where they can create a niche for themselves or choosing a role in an industry they know and have experience in, even if it doesn’t offer more money. This is more future proof and will help contractors weather the storm and increase their chances of securing new contracts.

Fewer remote working opportunities

Whilst IT contractors have often had the ability to dictate where they can work, the current mood of the market is pushing for more in-office working.

When I have spoken with clients who are stipulating on-site working, some have stated that unpleasant experiences with dodgy remote contractors has shaped their decision making. In some cases, contractors had been working for multiple clients at the same time supposedly during the same working hours. A few have even outsourced their work to professionals in other parts of the world for cheaper pay without telling the organisation. This has been happening since at least 2022, when our MD Matt Collingwood first reported on it in a ContractorUK article, and according to our clients it is still an issue today. These circumstances, amongst others, have made organisations want to offer less remote working opportunities.

Sectors seeing growth

Some of the main sectors in which we are seeing growth and more opportunities for IT contractors in 2025 include:

• Telecommunications – due to the rise of “soft phones” with Microsoft Teams and other communication platforms, over traditional phones.
• Ecommerce – is an area that is doing well, with lots of plans to integrate artificial intelligence into platforms.
• Cyber security – cyber threats and attacks are becoming a lot more sophisticated. With an increasing number of organisations placing more of their networks and data online and in the cloud, protection is becoming a more vital area to improve.
• Green tech – the sustainability sector is booming currently as companies work to improve their carbon footprint, in anticipation of future restrictions to help the UK reach Net Zero by 2030.

After a number of tough years for IT contractors, there are some great areas within the tech space where we will see growth and opportunities in 2025. Whilst we will unlikely see the dizzy heights of 2022 again for the foreseeable future, contractors may feel they are on a better footing in 2025.

VIQU is an award-winning IT recruitment agency that was recently awarded ‘Best Contractor Recruitment Agency’ at the 2024 Contracting Awards. If you are an IT contractor looking for some new opportunities in 2025, please get in touch with our team here.