Pay for IT contractors working in financial services has jumped 11 per cent over the past six months, to reach a two year high, according to new research.

SkillsMarket/Association of Technology Staffing Companies (ATSCo) say contractor rates are soaring and there are few signs of City job losses, despite the darkening economic climate.

Ann Swain, ATSCo chief executive said that economic uncertainty might actually boost demand for contractors.

“Banks may look to mitigate employment costs by putting a freeze on permanent hires, which often creates more opportunities for contract workers,” she said.

Thes urvey found 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.

“The post-9/11 downturn saw IT jobs cut across all areas in the City, but we are a long way from being in that position now,” said Swain.

“Strong demand for IT skills in areas such as equities and commodities trading in investment banks is 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.”

According to ATSCo, retail banks are continuing to spend on e-banking and web security while regulatory spending including compliance with Solvency II and IFRS Phase II is driving demand for IT skills in insurance.

Stephen Grant, Managing Director of Cititec, a City IT recruitment specialist added, “Banks are revising their trading strategies right now and 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.”

Other growth areas are likely to be risk management and compliance, particularly in the aftermath of the SocGen debacle.