Self-employed trends to watch for in 2023

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As 2023 begins, we’ve used IPSE research from the past year to analyse certain self-employed trends in our data to provide an indication of what awaits the sector in 2023.

IR35 reforms continue to alter ways of working with umbrella companies likely to stay

We’ve seen the ways in which the self-employed operate change drastically since the introduction of the IR35 reforms in April 2021 – in particular those who previously operated through a limited company.

As a result of the changes, over a third of contractors (34%) have become quasi-employees after being forced to operate through an umbrella company. Unfortunately, we also know that the overwhelming majority (61%) of those now forced to work though umbrella companies believe there are no advantages to doing so.

Recent announcements from government have done little to ease concerns around the use of umbrella companies. Grant Shapps has announced the shelving of the planned Single Enforcement body intended to enforce holiday and sick pay despite it being a Conservative manifesto commitment from the last election.

We’re also still waiting on the government’s consultation on the umbrella company market despite the fact that February 2023 will mark one year since the consultation closed.

Looking ahead in 2023, our research reveals that the sharp increase in the use of umbrella companies by clients is likely to continue. In fact, 68 per cent of clients currently using umbrella companies reported that they plan to continue using the unregulated umbrella company sector for their engagements over the next 12 months.

Freelancer earnings likely to struggle to keep up with rising inflation

Looking at the average day rate charged by freelancers, a concerning trend has been emerging since Q1 2022, with average day rates falling across the board despite the current inflationary pressures and cost-of-living crisis engulfing the UK.

Unfortunately, this has now translated into a fall in quarterly earnings reported by freelancers, with freelancers now £1,599 worse off since Q2 2022 without accounting for rising inflation.

We know from our survey of freelancers on the cost-of-living that the majority (50.4%) expect inflation to outstrip their average day rate charged for the next 12 months.

Thriving self-employed industries could play a key role in easing labour shortages

On a more positive note, some areas of self-employment continue to thrive despite a lack of support from government.

It’s clear that businesses are being impacted by the ongoing labour shortage within the UK. If the government is keen to get Britain’s economy moving, then embracing thriving self-employed sectors could go far in plugging the UK’s gaps in jobs and skills.

The number of solo self-employed women in the UK has increased by 59 per cent since 2008, whilst 44 per cent of female freelancers have been in self-employment for over nine years – proving self-employment offers a long-term career to many women.

Similarly, there has also been a significant growth in the number of solo self-employed disabled self-employed people since 2013, increasing by 39 per cent since 2013.

Looking ahead, we anticipate that these sectors will continue to grow in 2023 and beyond and in the process, hopefully drive the UK’s economy through this post-pandemic and inflationary-pressured period.

Notably, one of our major research projects this year revealed that (39%) of employees have considered working for themselves - let’s hope that this translates into growth in the overall self-employed headcount over the next 12 months.

Self-employed population could be more buoyant than we thought

Data from the 2021 Census has changed how we view the overall size of the self-employed sector, with the data revealing that the overall number operating as self-employed in the UK is closer to 4.7 million.

Encouragingly, this would mean that self-employment accounts for almost one in ten residents aged 16 years and over (9.6%) – a strong indication that self-employment continues to play a key role in the UK economy.

Could total self-employment in the UK return to pre-pandemic levels of circa 5 million by the end of 2023? The rise of side hustles amongst employees to cope with the cost-of-living crisis suggests so…

For a comprehensive analysis of the 2021 Census results and what it means for self-employment, read our blog from last week here.

At IPSE, we will continue to press the need for a significant shift in government thinking towards the self-employed, highlighting the vital role that the sector provides to the UK economy and businesses whilst urging for action on IR35 and in supporting those who choose to work for themselves.

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Meet the author

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Joshua Toovey

Senior Research and Policy Officer