You could forgive independent workers for suffering a crisis in business confidence. 2017 so far has arguably been defined by Brexit uncertainty, changes to IR35 in the public sector and mounting speculation that reform to this confusing tax legislation with reach to the private sector too.
Just published IPSE research suggests that despite a gradual increase in freelancer and contractor confidence in Q3 compared to Q2, independent workers’ optimism surrounding the economy and their own business remains relatively low.
Government policy and Brexit impacting confidence.
Freelancers are strong in their belief that their business prospects are being hampered by the Government’s policy decisions impacting the self-employed, which include Brexit and regulation changes to hiring freelancers.
75% believe Government policy is having a negative effect on their business prospects, while 67% think their business performance is being impacted by recent and potential changes to IR35. Unsurprisingly, 57% see Brexit as a contributing factor.
Reputation and collaboration driving business performance.
Freelancers have identified the importance of establishing a brand and building their personal reputation, with 63% confident it will enhance their business performance. 49% of freelancers believe collaboration with other independent professionals who share complimentary skills is important, while 48% are confident that providing innovative services and solutions to clients will improve their business.
Business costs to rise?
Just 2% of freelancers expect business costs to fall, compared to the 82% who expect them to increase by anything up to 11%. 16% expect no change in costs associated to running their company.
Day-rates drop, but sit higher than 2016.
In Q2 of 2017, freelancer day-rates had increased by 5% since the beginning of the year. These gains have been lost in Q3, with a 7% decline. That said, freelancers’ and contractors’ average daily earnings still sit at £489 – a figure up £86 compared to Q3 in 2016.
Freelancer capacity falls, but remains high.
Despite being slightly down on Q2, freelancers’ capacity sits at 80%, a figure up in comparison to this time last year. This means eight out of ten contractors are working 10.4 weeks out of a possible 13 in one quarter. IPSE suggest that the availability of contracts has perhaps fallen in more highly skilled and better paid positions, and increased in the lower paid freelancer roles.
As a result, earnings drop.
Low business confidence has no doubt influenced a fall in freelancer earnings, as their day-rates decrease and capacity drops off. However, it's worth bearing in mind that compared to Q3 2016, earnings are in fact up by 30%.
Economic confidence improves but remains negative.
Unsurprisingly, freelancers’ economic confidence sits critically low. Since the result of the EU referendum, independent workers have shown little optimism surrounding the economy. Despite economic confidence increasing marginally from -34.0 to -20.4, a large majority of freelancers are bracing themselves for the UK economy to worsen in the next three months.
Freelancers and contractors are clearly concerned about the current forces at work which are now impacting their business. As we head into the final 6 weeks of what has been a turbulent year, perhaps it's time for the Government to truly consider the implications of policy changes aimed towards the UK's independent workforce.
How confident are you with regards to your business prospects?