Job numbers are increasing for IT contractors, but contracts are shrinking and pay is still firmly depressed

After a gloomy six months during which jobs were slashed and daily rates were cut by up to 20%, the situation is starting to look up for IT contractors working in investment banking.

According to recruiters Nicol Curtin, cited in Financial News this week, demand has nearly doubled in the past three months. Astbury Marsden's figures confirm a similar trend – there were 230 open contractor positions in Q4 last year, compared to 450 during the first quarter of 2012, it tells us.

One of the reasons is a comparative lack of demand for permanent recruitment, combined with a reduction in headcount across the technology teams within most banks. If a permanent employee leaves, a contractor is usually drafted into replace them, suggests Ben Cowan, director at Astbury Marsden.

"Undoubtedly, there's been an upturn in demand for IT contractors in investment banking, particularly for FX and OTC derivatives projects in the front office as well as risk and regulatory initiatives," adds Alessandro Ferro, principal consultant IT into banking, at recruiters the JM Group. "However, the job numbers are still a lot lower than we'd expect at this point in the year."

The other thing to note is that while the vacancies are there, banks are still dragging their feet when it comes to actually committing to a new hire. Very often, the length of the contract is also decidedly shorter.

"It's increasingly rare that a bank will offer anything more than a three-month contract," says Cowan. "Six months is unlikely and a 12-month contract is seldom offered."

It is still possible to earn some large sums as an IT contractor; we've previously pointed to the rare roles for programme managers who can bring in £1,200 a day. The £1,000 mark is more common, however – programme managers, and project managers working on finance and OTC derivatives tech initiatives can all expect this daily rate, suggests recruiters Hudson.

Lower down the tree, after blanket rate cuts late last year, investment banks are becoming more "flexible" around pay, says Cowan.

"Overall, rates are still down 10-20% on this point last year, but banks are willing to negotiate slightly when a new contractor joins the organisation," he says. "For example, for a role that pays £500 a day, they sometimes stretch to £520-525 a day – particularly for certain development positions – but 12 months ago, that role would have paid £550 a day, so the bank is still making a saving."