The research by giant reveals that the proportion of IT contractors expecting the best job opportunities in the financial services sector has fallen only slightly over the last 12 months, from 26% of all contractors to 24%. Contractors are still most confident of job creation in the financial services sector compared to all other sectors of the economy.

According to giant, financial organisations have managed their IT skills much more efficiently since the last downturn, leaving less fat to trim this time around, so the expectation of mass lay-offs is more subdued.

Matthew Brown, Managing Director, of giant group, comments: "The financial services sector in the UK is one of the most important users of IT skills, but there is no sign of panic among contractors. Sentiment is on the wane, but few are expecting a repeat of the mass bloodletting we saw in the 2001/02 downturn."

"Organisations have been much more restrained in their hiring post-dot com boom, and offshored a lot of their skills base since then, so the UK contractor resources they currently have are leaner and less susceptible to cost-cutting."

"There is often robust demand for contractors during challenging economic conditions as organisations put off hiring permanent IT staff."

He adds: "What we are seeing is a fairly measured response to the downturn. Some IT projects which will not yield a short-term return on investment are being given lower priority, but the market hasn't fallen off a cliff by any means."

Optimism in the telecoms sector, which has been boosted by 3G wireless devices, such as the iPhone and the Blackberry, is at its highest level in three years. 15.8% of IT contractors expect the most new jobs to be created in telecoms in the next 12 months, compared to 9.7% this time last year.

The research by giant, however, shows the worsening economic climate beginning to have an impact on demand for IT contractors.

Matthew Brown says: "The general trend in joblessness has been upwards, but the proportion of contractors out of work long term (3 months or more) has remained relatively static at around 4% over the last year. To put this in perspective, 13% of contractors were jobless for three months or more in 2003, so the market is still in reasonable shape."

There has been a similar softening of confidence in expected pay rises over the next 12 months, but again the decline is shallow. 70.3% of IT contractors are forecasting earnings growth over the next 12 months, down slightly from 71.9% in the 2nd quarter of 2007.

Other indicators from the research by giant also reveal more caution entering the market as IT contractors move towards favouring long term contracts over higher hourly rates. 56.9% of contractors would now prefer a longer term contract, compared to 50.5% last year.