Labour vs labour: IR35 is set to deepen the UK skills shortage

For over a year now, IR35 has been a totem in a much-publicised dispute between Labour and the IT industry.

For Labour it's simply a case of closing a loophole used by contractors to avoid tax and National Insurance payments. For the contractors themselves, IR35 - which became law in April - is a draconian piece of legislation unfairly penalising one person service companies. It will also have, they add, a detrimental effect on the UK economy.

Judging by the results of silicon.com's survey released today, it looks like the contractors are right - on the latter point at least.

In the most wide-ranging poll on the topic to date, two themes emerge. Firstly, there is a move to shorter projects. Forty per cent of the 1,200 respondents said they were redefining contracts with clients. For 'redefining' read 'shortening'. Not great news for the health of long-term projects.

The second trend is a less flexible workforce. One fifth of respondents have moved inhouse as a result of IR35. Add the 24 per cent who promise to leave the country in search of fairer working conditions, and a sizeable chunk of the freelance community is disappearing before our very eyes.

Granted, some of the 'last one out of the country please turn out the lights' brigade won't follow their threats through. Nonetheless, the point still stands. Contractors fulfil a very different role to inhouse staff. They complement each other. Fewer contractors is bad news for the industry.

These early signs are worrying. The government may believe it has created a fairer tax environment but in doing so it has greatly reduced flexibility in an industry already suffering a skills crisis.

One thing today's survey makes clear - the IR35 debate isn't over.