Research from self-employment group, IPSE, and PeoplePerHour has found that freelancers' confidence in their own businesses for the next three months has fallen from -11.4 in Q2 2022 to -17.7 in the latest quarter (Q3 2022).
The index also found that despite the current cost-of-living crisis engulfing the UK amidst rising inflationary pressures, the average day rate charged by freelancers has fallen from £528 in Q2 2022 to £503 over the last three months. In turn, this has now translated into a fall in freelancers’ quarterly earnings, which have fallen from £27,486 in Q2 2022 to £25,887 this quarter.
Factors lowering freelancers’ business performance
When analysing the reasons behind the recent fall in freelancer confidence, the Freelancer Confidence Index revealed that the state of the UK economy was the most detrimental factor impacting self-employed workers. This can be primarily attributed to the current concerns around the UK economy given two consecutive quarters of economic contraction in GDP and inflationary pressures showing no sign of easing.
The other main issues impacting self-employed workers over the past quarter were interest rates and Brexit.
Rising debt and costs
More than two in five freelancers are now incurring business debt which is a small increase on Q2 2022, where 37 per cent of freelancers were incurring business debt. Almost one in five freelancers are now incurring debt via credit cards issued in the name of their self-employed business – slightly up from 15 per cent in Q2 2022.
The index also revealed that the majority of freelancers (85 per cent) now expect their business costs to increase over the next 12 months, with freelancers forecasting an average increase of 15.1 per cent in their business costs over the next year.
Fred Hicks from IPSE said: “Having endured a maelstrom of tax rises and worsening economic conditions, it is unsurprising to see that freelancer confidence continues to fall. But for it to plunge to the levels we saw at the height of the pandemic is yet another worrying indicator that the health of our freelance sector is at risk.
“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. Government must avoid piling further pressure on the already strained freelance sector at the next Budget and instead take the opportunity to deliver bold measures to support this dynamic and talented segment of the economy – from meaningful improvements to IR35 legislation and firm action to clamp down on late paying clients.”
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