Home Business News ‘Remarkable recovery’ in freelance earnings and confidence to pre-pandemic levels

‘Remarkable recovery’ in freelance earnings and confidence to pre-pandemic levels

by LLB Finance Reporter
4th May 21 9:31 am

New research by the Association of Independent Professionals and the Self-Employed (IPSE) and PeoplePerHour shows freelancers’ earnings and confidence in the economy saw a “remarkable recovery” to pre-pandemic levels in the first quarter of 2021.

In Q1 2021, freelancers’ average quarterly earnings stood at £20,778 – a 20% increase from £17,283 at the end of 2020. The rise is due to an increase in both their day rates and the amount of work they did at the start of this year. Freelancers’ average spare capacity (the number of weeks they go each quarter without work) dropped from 4.3 weeks to 3.7 weeks. Although this is still not quite back to pre-pandemic levels (3.3 weeks in Q1 2020), on average, freelancers compensated by raising their day rates (£445 on average – the highest since Q3 2019).

Freelancers’ confidence in the UK economy also dramatically rose both for the short- and long-term. Short-term (3-month) confidence increased from -27.8 to -4.3, which is the highest it has reached since Q4 2015, before the EU referendum. Long-term (12-month) economic confidence rose from -27.7 to -0.2 – also the highest since Q4 2015.

The key metric that has not significantly recovered is freelancers’ confidence in the performance of their own businesses. Freelancers’ three-month confidence in their businesses dropped from -11.9 to -13.9, while their 12-month confidence remained stable at -15.6. This is the first time since 2014 that freelancers have had less confidence in their business than the economy. This seems to be driven by the changes to IR35 taxation and their impact on hiring freelancers with ‘Government regulation related to hiring freelancers’ and ‘Government tax policy’ cited as the two main factors negatively affecting their business – above the pandemic.

Andy Chamberlain, Director of Policy at IPSE said, “The roadmap to opening up the UK has driven a remarkable recovery in freelancers’ earnings and also their confidence in the economy. Economic confidence among freelancers is in fact now at its highest level since before the EU referendum. After a dark year in which they were disproportionately hit by the financial impact of the pandemic, freelancers are again seeing cause to hope.

“Amid the optimism, however, there are also lingering causes for concern. Above all, the recent changes to IR35 are clearly damaging freelancers’ confidence in the future of their businesses – not unreasonably as they see the chaos now running through the contractor hiring market. In fact, this is the first time since IPSE’s Confidence Index began in 2014 that freelancers have had less confidence in their businesses than in the economy.

“Historically, the freelance sector has always been a key driver of economic recovery and it is clearly raring to go. At the same time, however, the IR35 tax change is a blight on freelancers that is undermining them at a crucial and otherwise optimistic time. We urge the government to step in, clear up the chaos left after IR35 and launch a full review and reform of self-employed taxation. It must ensure freelancers have the confidence in their way of working to take up their vital place in our workforce and drive the UK’s economic recovery.”

Xenios Thrasyvoulou, founder and CEO of PeoplePerHour added, “It’s incredibly encouraging to see that freelancers’ confidence in the economy is the highest it’s been for 6 years. This is a testament to the resilience of the freelance economy, and we hope to see this trend progress as the road out of lockdown continues.

“Whilst it has been an incredibly tough year for all workers, more people have turned to freelancing as a way of maintaining or increasing their income. The freelance economy is more important than ever to the UK’s overall economy, so it’s crucial that the government supports this growth.

“The IR35 tax change is a direct hindrance to freelancers, and could have a negative impact on the economic recovery from the pandemic. We urge the government to review this change at the earliest opportunity to sustain a strong recovery.”

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