But most contractors expect their rates to increase in the next 12 months
Freelancers and the self-employed are suffering from low levels of business confidence, according to a report published by IPSE (the Association of Independent Professionals and the Self-Employed).
The Freelancer Confidence Index (FCI) is a quarterly report, produced in partnership with PeoplePerHour, tracking contractor confidence on a range of metrics. The latest edition of the report focuses on the third quarter of 2022 (July – September).
It indicates that contractor confidence at its lowest ebb since the height of the coronavirus pandemic in 2020.
However, IR35 in most part is not to blame. The low confidence levels are primarily driven by the state of the UK economy, cited by 75.9% of respondents as the most detrimental factor impacting the sector.
Interest rates have also risen, as a knock-on effect of the economic conditions, with 55.6% of contractors concerned about the impacts this will have on their business.
Additionally, some contractors have cited Brexit (51.3%) as a cause for concern, with its impacts continuing to be felt by some “associate professional and technical freelancers”, according to the report.
Decreased earnings figures as cost of living crisis bites
Contractors also experienced decreases in average day rates over the third quarter, from £528 to £503 per day – the lowest average day rate reported in the FCI since the first quarter of 2021.
Subsequently, there has been a similar drop in the average quarterly earnings, which are down to £25,887, from £27,486 in the previous three-month period.
Despite these findings, there is optimism for the year ahead. 52% of contractors expect their day rates to increase in the next 12 months, with a little over a third (34%) anticipating further decreases.
This confidence is tempered, however, by the 83% of freelancers and contractors who expect their business costs to increase by 13.3% on average in the next year.
“Unsurprising” findings, says IPSE
Commenting on the report, Fred Hicks – the Senior Policy and Communications Adviser at IPSE – called the findings “yet another worrying indicator that the health of our freelance sector is at risk”. Hicks continued:
“Having endured a maelstrom of tax rises and worsening economic conditions, it is unsurprising to see that freelancer confidence continues to fall.”
“With costs set to rise but day rates lagging, the Q3 results are a reminder of the impossible choice freelancers must make between absorbing unaffordable cost increases, or risking client retention by increasing their rates.”
“From programmers and designers to engineers and consultants, freelancers provide their services in all corners of the economy – a decline in the sector would be felt just as widely.”
Hicks also called on the government to use the Spring Budget to “deliver bold measures” to support contractors and the flexible workforce, including “meaningful improvements to IR35 legislation and firm action to clamp down on late paying clients”.