IPSE Economic Policy Adviser Lorence Nye gives his analysis.

IPSE conducts a quarterly survey of freelancers in order to get a valuable snapshot of this important sector’s sentiment. Nearly 700 independent professionals took part in our latest survey and gave us their views on issues such as earnings, costs, availability and demand; and, of course, their confidence in their business and in the wider economy.

Optimism wanes for businesses and freelancers as economic growth dips 

The past three months have seen mixed fortunes and wavering optimism for freelancers and those in the wider economy. UK gross domestic product (GDP) growth has slowed but unemployment is lower and workers are becoming better off in real terms. Independent professionals have, however, experienced falling earnings despite being engaged more regularly and with little cost inflation. The Government’s interventions announced in the Summer Budget have given cause for freelancers to adopt a negative outlook towards the health of their business in the short and medium term, as the proposed measures are likely to make it more difficult and costly for freelancers to operate as limited companies. Freelancers also have less confidence in the wider economy as a slowdown in the global economy is expected to dampen the UK’s recent surge.


Freelancers experienced a fall in confidence regarding the prospects for their own business in the Q3 survey. The main driver of this was public policy. Specifically, measures announced in the Summer Budget, which could significantly increase the regulatory and tax burden of single-person businesses, have caused alarm.

IPSE research, conducted after the Budget, showed that as many as a fifth of freelancers may be forced out of business by changes to travel and subsistence tax relief. That finding is backed up by this survey as two-thirds of respondents (66.2%) stated that the Government’s attitude towards freelancing is likely to have a negative impact on their business over the next twelve months.


The confidence measure regarding the wider economy also showed pessimism prevailing, with the headline figure falling into slightly negative territory for the first time since the surveys were started. Data released after the survey was conducted gave credence to these fears, as UK GDP in Q3 showed slightly slower growth at 0.5%, down from 0.7% in Q2. The impact of emerging markets’ slowdown, which has weighed upon the global economy, was most acutely felt over the summer months and was brought into sharp relief by the crash in the Chinese stock markets, which started in June.

Economists and business people are also concerned about the potential impact of a British exit from the European Union. Many are in agreement that this would be negative for inward investment and the UK’s exports and businesses may already be delaying investment until after the referendum. In addition, planned austerity measures from the Government will weigh on growth as funds are withdrawn from some of the country’s largest employers.


Freelancers experienced greater demand for their services over the past three months than was the case in Q2. Capacity utilisation (the average number of weeks worked out of the number of weeks available to work) recovered to 83% from 80% in Q2 after an extremely strong performance of freelancer businesses in Q1. November’s jobs numbers also reflected this recovery. The total number of self-employed people in the UK increased by 30,000 in the year to September after most of the year showed a falling total by year-on-year comparisons. Employment in the broader economy remains strong with the headline unemployment figure just 0.1% from pre-crisis levels (5.3%).

Freelancer day rates have, however dipped somewhat from Q2 levels, while employee incomes have continued to grow at around 3% annually. The fall in freelancer day rates drove a dip in overall average incomes from £26,938 in Q2, to £24,574 in Q3, despite, on average, freelancers being engaged more often.


Inflation in the UK economy has remained at or near 0% for much of 2015 and has been negative in the last two readings. Although the level of deflation is very small ( just −0.1%), its significance should not be underestimated as this year was the first time Britain experienced negative inflation rates in over half a century. The majority of freelancers (58%) have shared this experience and reported that business costs have either stayed the same or fallen in the last three months.

Freelancers’ outlook for costs, however, are perhaps concerning. Some 65% expect business costs to increase over the next twelve months, while only 42% believe day rates will increase. This disparity between the expectation of increased costs and the lower expectation of increased day rates is likely to be a strong driver of a dip in freelancers’ business confidence levels.