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Freelancers are down but not out as 2020 looms

10 December 2019

A new survey of freelancers has found that confidence is low but freelancers have "gone into overdrive" in recent months to prepare for Brexit and IR35.

Freelancers' confidence in the economy is the lowest on record because of their concerns about the economy, Brexit and IR35, according to the latest Confidence Index from the Association of Independent Professionals and the Self-Employed (IPSE).

Confidence in the economy has fallen to historic lows both for the coming three months and the coming 12 months. Freelancers' confidence in their own businesses has also dipped to a record low.

This quarter, freelancers say the biggest factors holding back their businesses are the overall state of the economy (69%), Brexit (66%) and government tax policy relating to freelancers (63%).

However, the findings also show that freelancers are working more and earning more than last quarter. The average freelancer day rate has gone up from £407 last quarter to £447, while the amount of time they spend not working has dropped from 3.3 weeks to 2.5 weeks. This is the lowest level since early 2017. As a result, average quarterly earnings have risen from £20,480 to £24,139.

Ryan Barnett, IPSE economic policy adviser, said: "Freelancers blame three things for their worryingly low confidence: overall economic instability, Brexit and government tax policy - most likely the changes to IR35 due next April.

"This quarter, the sector seems to be gearing up for tough times ahead by working and earning more. Capacity utilisation is up to the highest level since early 2017 … This earnings increase appears to be a self-driven, temporary boost for the sector - a limited positive against a backdrop of historic low confidence and deep worries about the future."

The findings should ring loud alarm bells, Barnett said, because "freelancers ... act as a canary down the coalmine for the rest of the economy". He warned: "Whatever government is formed after the election, it must act quickly to lift the weight of Brexit uncertainty and stop the catastrophic IR35 changes in their tracks."

Xenios Thrasyvoulou, founder and ceo of PeoplePerHour, said: "It seems like freelancers are working harder than ever to save for the rainy day they expect Brexit to bring … It has been a difficult year for the industry with both Brexit and IR35 hampering business. We can only hope with the general election coming up, that policies for freelancers are not pushed even further down the agenda, more has to be done to bring clarity for the important freelance economy to thrive."

Striking a more optimistic note, Andrew Burke, chair of the Centre for Research on Self-Employment (CRSE), said: "Freelancers' business performance was exceptional this quarter, despite a very challenging economic environment. They now expect a tough year ahead with lower business performance and tighter profit margins, for which they blame weaknesses in the UK economy, Brexit uncertainty and unfavourable government policies relating to freelancing. However, based on past trends, if they can continue to find successful innovation and reputation-enhancing strategies, the next 12 months might not be as bad as they expect."

Written by Rachel Miller.

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