Freelancers braced for the future

Freelancers braced for the future

IPSE's Economic Adviser Lorence Nye gives his overview of the latest Freelancer Confidence Index (FCI) results

Against a backdrop of political and economic uncertainty the latest Freelancer Confidence Index (FCI) provides a snapshot of opinion in the run up to the EU referendum vote, and the time immediately following it (14-28 June). During this quarter, this momentous decision provided a clear barrier to positive responses from freelancers. In the lead up, there were many warnings about the potential damage to the economy that Brexit might cause. The news was dominated with announcements by the then Chancellor, George Osborne and the Governor of the Bank of England, who both stated that leaving the EU posed significant threats to the UK’s economy. There was also a general air of mistrust as countless promises were being made by both the Leave and Remain sides.

The resulting impact on freelancer confidence in both their own businesses and in the wider economy was dramatic. Both are now at their lowest levels since the survey began. Because more than 80% of the survey responses were collected prior to the announcement on 24th June, it suggests that the fall in confidence is mainly attributable to fears around Brexit, rather than the vote to leave the EU itself. Freelancers are more vulnerable to sharp falls in demand and economic downturns, because the nature of their work is transient. However, it is difficult to ascertain a complete picture of the impact of Brexit at this time. We will know much more about how the reality of Brexit has affected freelancers’ confidence levels in the results of the quarter three survey, the results of which are due in September.

An additional threat to freelancers’ businesses in the last quarter has been the Government’s proposal to tighten IR35 rules for personal service companies (PSCs). One-person limited companies will potentially face additional regulation and potentially higher tax bills if they work in the public sector and there is a concern that the Government will look to extend the tighter rules to the private sector, a move that would be extremely damaging to this flexible sector of the labour market.

The results for quarter two reveal that freelancers expect government attitudes towards freelancing, and regulation relating to hiring of freelancers, as the top two factors that will negatively affect their business in the coming year. Freelancers’ falling confidence has, however, been in contrast to their business performance during the quarter. The data for quarter two 2016 show that, on average, freelancers recorded just 1.7 weeks of time spent out of work and earned higher daily rates of pay, which together has resulted in markedly increased quarterly earnings. All of these recorded figures are at their highest since IPSE began this quarterly survey. These results seem to suggest that the uncertainty about the future has had a more noticeable impact on confidence than their business’s current performance.

Looking ahead, although freelancer confidence is at its lowest point ever in terms of how freelancers see their business performance and the economy’s performance, the attitudes of policy makers will be key to turning this around in the future.

While the negative performance of markets in the immediate aftermath of Brexit will be likely to further dampen confidence, the more accommodative approach that has been adopted by some policymakers since the referendum is the best course of action. The flexibility freelancers can provide is likely to be particularly valuable to the UK’s businesses during the uncertain times ahead.