Both positive and negative sentiments were expressed by the UK’s freelancers in response to a survey undertaken by the Association of Independent Professionals and the Self-Employed (IPSE).
On one hand, the research for the first quarter of 2021 found evidence of a “remarkable recovery” in freelancers’ earnings and confidence in the economy to levels not seen since before the pandemic. At the same time, however, the respondents indicated continued worries over the detrimental effect of IR35 tax changes on their lives.
What were the main findings from the study?
In the first three months of this year, freelancers’ average quarterly earnings were £20,778, which was a rise of a fifth (20%) from the £17,283 recorded at the end of 2020. IPSE said this increase was attributable to such professionals upping their day rates, as well as to the amount of work they did during the first few months of the year.
The research also found that there had been a drop in freelancers’ average spare capacity – in other words, the number of weeks they went each quarter without work – from 4.3 weeks to 3.7 weeks.
While this wasn’t quite a complete recovery to how the situation was before the pandemic – the same measure being 3.3 weeks in 2020’s first quarter – there were signs of freelancers compensating for this by increasing their day rates. Sure enough, the latest £445 average day rate was the highest seen since the first three months of 2019.
The study also shed light on freelancers’ rapidly increasing confidence in the UK economy, with regard to both the short and long term. Short-term – three-month – confidence went up from -27.8 to -4.3, which is the highest seen since the fourth quarter of 2015, prior to the EU referendum. As for long-term (12-month) confidence, this increased from -27.7 to -0.2, which is again the highest recorded since 2015’s final quarter.
One metric that has not seen major recovery, however, is freelancers’ confidence in how their own businesses are performing. Indeed, a fall was seen in freelancers’ three-month confidence in their businesses, from -11.9 to -13.9, although the measure for 12-month confidence was at least stable, at -15.6. It marks the first time since 2014 that freelancers have been more confident in the UK economy than in their own businesses.
IPSE suggested that this situation appeared to be driven by reform to IR35 taxation and the impact of this on the hiring of freelancers. This was evidenced by the fact that the two main factors these independent professionals cited were ‘Government regulation related to hiring freelancers’ and ‘Government tax policy’.
“Freelancers are again seeing cause to hope”
Andy Chamberlain, IPSE policy director, stated: “The roadmap to opening up the UK has driven a remarkable recovery in freelancers’ earnings and also their confidence in the economy. Economic confidence among freelancers is in fact now at its highest level since before Brexit.
“After a dark year in which they were disproportionately hit by the financial impact of the pandemic, freelancers are again seeing cause to hope”.
“Amid the optimism, however, there are also lingering causes for concern. Above all, the recent changes to IR35 are clearly damaging freelancers’ confidence in the future of their businesses – not unreasonably as they see the chaos now running through the contractor hiring market.”
He urged the Government to “step in, clear up the chaos left after IR35 and launch a full review and reform of self-employed taxation. It must ensure freelancers have the confidence in their way of working to take up their vital place in our workforce and drive the UK’s economic recovery.”
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