The cost-flexibility of IT contractors has meant that financial services firms have been eagerly recruiting interims over the last year or so. Now, however, this love affair appears to be dwindling and with permanent recruitment booming, is now the time to make the switch?

The number of roles offered to financial services IT contractors in the first quarter of 2010 fell by 19% on Q4 of last year, and by 50% on the comparable period in 2009, according to figures from pre-employment screening firm Powerchex.

“There has been a massive shift in the balance between contract and permanent roles so far this year,” confirms Paul Elworthy, associate director in the IT in banking and financial services division of Hudson. “There’s been an influx of permanent development roles, and project management continues to be buoyant. I wouldn’t say the contractor market is bad, but it’s certainly slower than 2009.”

Increasingly, contractors working in investment banking technology are eying permanent roles, suggests Johnny Walker, associate head of interim markets at financial recruiters Jared James.

“There’s a new found confidence that the market is expanding and permanent headcount is beefing up to accommodate this,” he says.

Part of the problem for contractors is that while demand for specialist skill-sets – such as those around third-party systems like Murex, Calypso and Summit – remains high, banks are unwilling to shell out for more generic technical skill-sets.

“For seasoned contractors in investment banking, insurance or retail banking, their services at still at a premium, and many are juggling multiple job offers,” says Julianne Brooks, director, head of contract recruitment at The JM Group. “By hiring a contractor, firms are essentially parachuting in specialist expertise to their permanent team. Increasingly, they don’t want to pay a contractor rate for comparatively inexperienced candidates.”

Predictably, though, recruiters don’t advise contractors to urgently make the jump across to a permanent position. Decisions should be based on individual circumstances, they say, and permanent posts should appeal to contractors seeking job security and potential career progression.

Switching to a permanent position simply because the market is currently offering more job opportunities would not be a wise idea.

“Ironically, with more people moving to permanent jobs, it means good IT contractors are even more difficult to find, which puts them in a very good negotiating position,” adds Brooks.