Has the Mass Exodus of Public Sector IT Contractors Started?
In a previous blog post, we discussed the potential implications of planned changes to the tax arrangements regulating self-employed IT contractors working in the public sector.
The proposed changes to IR35, which come into effect in April of this year, could lead to many contractors ‘jumping ship’ to the private sector where the new rules will not apply. This would have a major negative impact on public sector IT projects.
On a more positive note, we argued that the new regulations provide an opportunity to grow and strengthen our existing pool of high quality SME IT companies keen to work as partners on large public sector contracts
It seems that the ‘exodus’ of public sector IT contractors may already have started according to an article published yesterday by The Register. This could leave numerous public sector IT projects hanging in the balance.
Projects affected include:
- A defence-related IT project where half of the 87 contractors have already left.
- A project where two-thirds of the security consultants employed have moved to the private sector.
- 30 PSC contractors to abandon an overrun £16.5m health service IT project with an NHS Trust.
- The potential loss of contractors by various NHS Trusts still in the process of migrating from Windows XP.
- The loss of 30 out of 32 contractors at the Ministry of Defence.
With an estimated 18,000 self-employed contractors working in the public sector, the examples quoted by The Register do not equate to a ‘mass exodus’ but it is certainly an early warning of potential problems ahead.
Any exodus of high quality IT contractors would have a devastating effect on public sector IT projects just at a time when the digital transformation of public services has started to gain momentum.
As argued in our previous post, there is an opportunity here for informed public sector procurement teams to engage with SME IT suppliers, especially those with unique capabilities and specific expertise built on a permanently employed UK-based workforce.
Building a strong base of SME IT suppliers, working in partnership with systems integrators and recruitment agencies, is critical to delivering the public sector digital transformation agenda.