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Research by SkillsMarket/Association of Technology Staffing Companies (ATSCo) shows that hourly rates for IT contractors working in financial services increased from £45 to £50 per hour, its highest level in two years.

ATSCo says that the figures contradict forecasts by some analysts that the credit crunch would lead to an immediate, wider downturn in technology spending in the financial services sector.

Strong demand for IT skills 

Ann Swain, chief executive of ATSCo, explained that the post-9/11 downturn saw IT jobs cut across all areas in the City, but that we are a long way from being in that position now.

She said that strong demand for IT skills in areas such as equities and commodities trading in investment banks was helping to pick up some of the slack on the credit side.

“IT departments are not as over-staffed as they were in 2001-02 in terms of IT skills, so there is far less fat to trim this time around,” Swain added.

Retail banks are continuing to spend on e-banking and web security at a healthy rate, according to ATSCo, and regulatory spending in the form of compliance with Solvency II and IFRS Phase II is already feeding through to demand for IT skills in the insurance sector.

Freeze on permanent hires 

ATSCo pointed out that demand for IT contractors in the banking sector may actually receive a further boost if the economic outlook remains uncertain.

Swain said that banks may look to mitigate employment costs by putting a freeze on permanent hires, which often creates more opportunities for contract workers.

According to Cititec, a staffing company specialising in supplying IT skills to the City, there has been a decline in demand for IT staff in investment banks in areas like credit derivatives.

European and Asian banks, which are less exposed than US banks to sub-prime liabilities, are still looking to looking to increase IT skills in other business areas.

Beefing up trading systems 

Stephen Grant, managing director of Cititec, said that banks are revising their trading strategies right now.

He added that this is leading to an increased demand for IT business analysts whose job it is to align IT systems with changing business needs.

A lot of IT investment is now being channelled into beefing up trading systems on equities and commodities desks, where more efficient IT infrastructure is needed to process higher transaction volumes.

“Risk management and compliance are still growing areas of demand for IT skills in the City. If anything the credit crisis and the Société Générale scandal will accelerate this process, rather than put the brakes on spending,” Grant added.

Data released by analyst Celent forecasts that IT spending in the financial services sector will grow at 3.6 per cent in 2008, compared to 4.1 per cent in 2007.

Swain pointed out that investment in IT is often one of the best ways for banks to increase efficiency during a slowdown and make cost savings elsewhere.

She is convinced that the City ought to resist savaging IT budgets despite difficult trading conditions.

Related links

• Association of Technology Staffing Companies