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Contractor earnings fall by a record 25%

COVID-19 sees contractor earnings drop by 1/4 in Q2

The “devastating” financial impact of COVID-19 on the UK’s freelancer and contractor workforce has been revealed, with independent professionals on average reporting a record 25% drop in earnings in the second quarter of 2020. 

These statistics were revealed in IPSE’s Freelancer Confidence Index, which cited the record 5.5 weeks out of 13 in which contractors spent not working in Q2 as the driver of this record downturn in business. In monetary terms, the fall in income, which wasn’t helped by a reported 3% drop in day-rates, saw independent workers on average earn £15,709 in Q2, down from £20,821 in Q1. 

“Devastating” Q2 for freelancers and contractors

While IPSE has said not all groups of freelancers were impacted equally, with self-employed managers experiencing a 35% drop compared to technical freelancers, whose income was hit by 16%, the data is a big cause for concern, explained Inna Yordanova, the association’s Senior Researcher:

“It’s been clear for some time that the economic impact of Coronavirus has fallen particularly hard on freelancers, but in this quarter’s Confidence Index, we can measure just how much. Freelancers’ average incomes have fallen by a devastating 25% since the first quarter of the year – and for many, by even more than that.”

Lack of COVID-19 support to blame

However, such poor business performance came as “no surprise”  to Xenios Thrasyvoulou, founder and CEO of PeoplePerHour, that collaborated with IPSE on the report. But the apparent plight of freelancers and contractors hasn’t been helped by the startling lack of COVID-19 support for independent workers, IPSE’s Yordanova added:

“Almost two thirds of the highly skilled freelancers covered by our Confidence Index work through limited companies and therefore could not get support through the Government’s Self-Employment Income Support Scheme. With such a financial cliff-edge and limited Government support, it is not surprising freelancers’ confidence in their businesses over the next 12 months is drastically low – or that so many are leaving self-employment.”

Confidence remains worryingly low

Flailing contractor confidence has seen 61% of contractors take the view that their day rates will continue to fall over the next 12 months, by an average of 11%. It should be noted these figures are slightly less pessimistic than Q1, when a 20% fall was predicted. But even so, and despite this marginal improvement, confidence freelancers and contractors have in their own business sits at the second-lowest score since IPSE began the study in 2014. Similarly, economic confidence was said to have made gains but “remained deep in negative territory.”

It therefore comes as no surprise that IPSE – that recently criticised the Government for the record fall in UK self-employment – urged Westminster to improve the COVID-19 support available to independent workers:

“Freelancers are a vital and extremely productive part of the workforce who have historically always been essential to recovery from economic depressions. If they are to play this crucial role, however, the Government must make sure that in the event of a second wave, all freelancers have the support they need. Otherwise, going through another full lockdown and the resultant slump in work and income could be utterly devastating for them.”

By Contractor Weekly

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11 thoughts on “Contractor earnings fall by a record 25%”

  1. The Oracle

    Wait till worldwide communism and 24×7 tracking and monitoring is rolled out after the economy is completely devastated on purpose, then we’ll see what fall in earning really looks like. Compared to what’s planned, so far this has been a picnic in the park.

  2. Geoff

    COVID support is available to the extent that contractors paid themselves a salary through their company, at the cost of NI.
    To not pay NI then complain about the lack of support is disingenuous.

  3. Graham

    Can we stop complaining about not receiving personal support for people working through Ltd.s and predominantly being paid dividends? It is embarrassing and will just hasten the demise into PAYE. We are eligible for the same business support as everyone else. Don’t we continually try and justify we are businesses?
    And looking at day rates, I would suggest the drop is nearer the 20-30% rather than the token drop suggested.

  4. Rasta

    It is disingenuous to complain about the furlough parameters if you operated under your own Ltd Company.

    However the real damage to Contractors began in Q4 2019 & Q1 2020 pre-pandemic with the threat of extending IR35 into the Private Sector. Many of us strenuously warned against it but were ignored.

    The Public Sector officials are still dedicated to introducing IR35 within the Private Sector which continues to constrain contracting.

    Which firm is going to engage a Contractor and agree in perpetuity to underwrite how that Contractor conducts their own tax affairs.

    IR35 legislation as currently devised is the real problem, and CW you can save this article re:Q2 as you will be writing an identical article in Q3, Q4, & Q1 (21), as IR35 revs up again.

  5. IR35 Victim

    25% drop – Luxury

    Try 100% drop – nothing for 5 months

    Tory party really stuck it to the knowledge sector

  6. Masbro

    I think the real reason is the Government and shadow want to make the private sector as inefficient as the government sector, people with real skills will go elsewhere leaving the lesser skilled to replace them, bingo – downgrade in quality,

    just look at all the errors we see day to day using web apps etc the downward creep is upon us

  7. Ye Gods

    HMRC does not operate within democracy

    It is a self perpetuating autocracy that does not, will not respond to users AND is totally hostile

    Clearly, the jobsworths never try to understand anything

    Perhaps they just can not because of their type

    HMRC is a cause of death by means of suicide

  8. Yeo

    HMRC does not operate within democracy

    It is a self perpetuating autocracy that does not, will not respond to users AND is totally hostile

    Clearly, the jobsworths never try to understand anything

    Perhaps they just can not because of their type

    HMRC is a cause of death by means of suicide

  9. Andrew Harrison

    These are sad times. I always felt that the good contractor rates included a risk premium which should be kept for a rainy day. Now the risk has happened. The people really shafted are those in “safe” jobs who never were paid that risk premium and now find themselves unemployed.

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