The public sector could face a serious IT skills shortage if contractors working on e-government projects are lured back to the private sector by rising rates of pay.
New research from payroll specialist Giant Group shows that the public sector is now the UK's second-largest employer of IT contractors.
Giant Group's Contractor Confidence Index for the first quarter of 2004 found that more than a fifth (20.5 per cent) of contractors now work in the public sector, compared to just 12.4 per cent six months ago.
The largest employer of contractors is the support services sector, which accounts for 22 per cent of the market, while financial services slips down to third position with 20 per cent.
Matthew Brown, managing director of Giant Group, said: "The public sector traditionally employs a fairly low proportion of contract workers, but next year's e-government deadline has driven unprecedented demand for IT skills."
But contractors were also confident about a more general pick-up in the market - particularly in the financial services sector, where respondents anticipate the highest growth in opportunities over the next 12 months.
"Contract positions in the public sector don't pay so well. As people are pulled back into the private sector, the public sector will find it much harder to attract the best workers. The only way they'll be able to do so is by increasing rates," said Brown.
"The question is whether public sector organisations have factored this likely rate increase into their budgets. If they want the skills then they're going to have to compete. And if they don't compete, they won't get the staff."
Two-thirds of contractors expect their earnings to increase this year, compared to just 45 per cent last year. Only eight per cent expect to earn less, in sharp contrast to 28 per cent a year ago.
Overall, said Brown, the results were very positive for IT contractors.
"Times are better to be a temporary worker. The chances of them being out of work between contracts has reduced significantly and there are signs of growth across the board. I'm normally pretty conservative, but I'd say we're definitely on the edge of recovery," he said.
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