Freelancers and contractors reported a remarkable 21% increase in day rates in Quarter 4 of 2018 to record earnings of £24,776. According to SJD partner, IPSE, this is a 21.5% rise and the highest level since Q3 of 2017 in the association’s Freelancer Confidence Index.
This is welcome news at a time when Brexit has resulted in considerable uncertainty, which led freelancers’ confidence in the performance of the economy over the next 12 months to plummet to a record low of -48.1 in the same quarter.
Prior to Quarter 4 in 2018, independent professionals experienced two consecutive quarters of negative growth. IPSE has said this makes the staggering pay boost enjoyed by freelancers and contractors all the more impressive.
As you might imagine, the workers who enjoyed a successful end to 2018 do not necessarily believe their business prospects are tied to the performance of the economy either. Instead, they put their recent success down to their business strategies and the strength of their own brands.
While IPSE no doubt agrees with freelancers on the importance of reputation and strategic planning, the trade body did put forward another reason for contractors’ significant increase in earnings, and one that is directly connected to the state of the economy. The report detailed:
“There seems to be a “talent gap” in the labour market as uncertainty and lack of confidence filter through the economy. This means not only are businesses withdrawing from long-term decisions, but so are workers. Therefore, there are many areas where work is available but workers are not, which has pushed up pay.”
A small majority (54%) of the independent professionals surveyed are confident this trend will continue in the next year, with freelancers across the board expecting to be able to raise their prices by on average 3.8%. Although, this confidence is somewhat overshadowed by the generally pessimistic outlook freelancers have with regards to their overall business performance for the next 12 months. IPSE reported that both 3-month and 12-month predictions fall into negative territory, but wasn’t surprised, explaining:
“From freelancers’ responses, it seems they believe Brexit and government taxation are, understandably, doing the most harm to business performance in their sector. Brexit, in particular, has almost continuously dominated the headlines.”
While Brexit clearly has the potential to impact the demand for contractors, interestingly, it is the government’s fiscal policy relating to freelancing that was viewed as the top factor lowering business performance towards the end of 2018. With IR35 reform being extended to the private sector next April, this could be a regular theme going forward.
In addition to this, 78% expect their business input costs to increase in the coming year, with freelancers on average preparing to outlay an extra 12.4% when running their companies.
However, confidence should at least be taken from the fact that the percentage of time contractors have been working on assignments has stayed consistent over the past 12 months. Individuals spent 79% of their time in Q4 engaged in a contract, which is in line with the average time contractors spent working on a project since Q4 in 2017.
In conclusion, amid continued Brexit uncertainty, contractors can take heart from what is a steady demand for their services, which clients are willing to pay a premium for. That said, as the UK gears up to leave the European Union without any deal in place, IPSE has predicted further economic turbulence in what is already an unsettling time for contractors, who are bracing themselves for incoming IR35 changes next April.
You can view IPSE’s Freelancer Confidence Index in full and download it here.