Banks are reportedly putting permanent hiring in the deep freeze following the sub-prime crisis. Will contractors be able to cash in?

Past experience suggests yes. When banks freeze permanent hiring, it's usually an occasion for contractors to break open the champagne: work still needs to be done and day rates go through the roof. But recruiters warn against assuming this will necessarily be the case.

"I can't see contractor rates going up. Investment banks are looking to control their cost base. Contractor rates are pretty high now, having risen sharply for the last three or four years and I think they're now on a plateau," says Paul Elworthy, associate director for IT banking and financial services at Hudson recruitment consultants.

David Baker, commercial business manager at recruiters Greythorn, says that a freeze on permanent headcounts could prove expensive: "A decent contractor doing, say, J2EE with an investment bank can command maybe £500 to £600 a day. On permanent staff they'd be expecting to earn £60k to £70k a year. You only have to do the maths to see that freezing permanent recruitment's going to cost the banks more in the long run, particularly if they want to tempt people away from being contractors."

With day rates high already, the potential for further upside may be limited. Over at specialist Oracle and SAP recruiters Maximus IT, Jay Ladva, IT division manager, predicts: "If there is a squeeze on hiring permanent staff, you will see contractors' rates rise, but not as much as they have in the past."