Government policy pushes freelance sector into decline, IPSE report finds

• 5 Dec 2018

Freelancers expect government policy to drive their businesses and the economy into decline over the next year, a report from IPSE and PPH (People Per Hour) has found.

This quarter, amid widespread speculation about Budget announcements that would harm the self-employed, freelancers’ confidence in their annual business performance dropped nine points, sliding into negative territory. Their confidence in the wider economy – which was already in deep negative territory – fell another two points to near-record lows.

Freelancers laid the blame on government fiscal policy, citing it above Brexit as the factor doing most harm to their business performance. This is most likely based on the widespread rumours when the survey was taken that the Budget would extend the changes to IR35 self-employed tax law into the private sector.

Freelancers’ low confidence was also exacerbated by a drop in both their day rates and their quarterly earnings. They saw their average day rates fall by £2 this quarter, after a drop of £36 in Q2. The demand for freelancers’ work also declined by 0.2 weeks since the beginning of the year, meaning their overall quarterly earnings fell even further. In Q3 2018, freelancers saw their average quarterly earnings fall by almost £400 compared to the previous three months. 

The news isn’t all bad for freelancers, however. Among freelancers in professional occupations, there was actually an increase in quarterly earnings. Average day rates among associate professional and technical freelancers increased too. Most freelancers (67%) also believe they will recover some of the recent losses in day rates over the coming year, with an average expected increase of eight per cent.

Freelancers are also less pessimistic about the performance of their businesses and the economy in the short term. Although their confidence in their business performance over the next three months fell this quarter, it is still in positive territory. And although their confidence in the wider economy for the next three months is in negative territory, it is still much higher than their confidence for the next 12 months.

Suneeta Johal, IPSE’s Head of Research, Education and Training, commented: “There is no doubt freelancers have suffered from a cocktail of woes this quarter. And many place the blame squarely at the feet of government policy. From the figures, it looks almost certain freelancers’ confidence took a hit because they believed the government would be pushing the disastrous changes to IR35 into the private sector. And they were proved right.   

“Now, as we prepare for a new post-Brexit Britain, the government should be boosting the economy and ensuring it is firing on all cylinders. Instead, its Budget measures are driving one of our most productive sectors into decline. Unless the government wants confidence – and performance – across the freelance sector to drop further, it must scrap the plan to extend the changes to IR35 into the private sector and secure a Brexit deal that works for the self-employed.”

Professor Andrew Burke, Chair of CRSE and Dean of Trinity Business School, Trinity College Dublin, commented: “The freelance sector has moved into recession (two consecutive quarters of negative wage growth) and they blame government policies that make it more difficult to engage them, as well as the uncertainty of Brexit.

“It’s not all doom and gloom, however, as freelancers from professional (SOC2), as well as associate professional and technical occupations (SOC3) have actually seen their incomes increase. People in the more competitive technical sector have also diversified into new markets and even managed to raise their day rates.

“In sum, freelancers are anticipating a tough year, but do still expect to outperform the UK’s sluggish economic growth.”

Xenios Thrasyvoulou, founder and CEO of PeoplePerHour, commented: “It is positive to see the earnings for some sectors of freelancing increasing over the quarter. Freelancers also project an average of eight per cent increase in day rates into the year ahead.  

“However, the government has a lot to answer for when it comes to freelancer confidence and the uncertainty they are feeling going into 2019. More clarity and support for the self-employed is a must to increase confidence and productivity for this important sector of the UK economy.”

You can download a full copy of the report here.