The Association of Independent Professionals and the Self-Employed (IPSE) has published research into the long-term impact of the pandemic on the £300bn freelance sector. The research shows that more than two out of five freelancers (42%) lost over 40 per cent of their turnover.
It also finds that overall, two out of three freelance businesses (67%) were negatively affected by the pandemic, which translated into a drop in turnover for sixty per cent of all freelancers. Almost one in ten freelancers (9%) saw a devastating drop in turnover of over 90 per cent.
The financial damage of the pandemic varied significantly by gender, age and business structure. Three out of five sole traders (62%) saw a drop in turnover compared to 55 per cent of limited company directors. (However, for those limited company directors who did see a drop in turnover, the damage seems to have been greater: 56% saw a drop in turnover of over 40%, compared to 46% of sole traders.)
Almost two-thirds (62%) of freelancers aged over 35 saw a decrease in turnover, compared to half of under-35-year-olds. Over two out of five male freelancers (43%) also said their turnover decreased a lot compared to 36 per cent of female freelancers.
Government support – and the gaps in that support – seems to have been a factor in the spread of financial damage. Although SEISS offered support to 3.4 million self-employed people, it excluded up to 1.6 million of the 5 million people who were freelance at the start of the pandemic. This has led to 52 per cent of freelancers saying they do not feel supported by the government. This rose to more than two out of three (67%) among limited company directors, who were excluded from SEISS.
Now, the financial damage to the sector has led to one in four freelancers (25%) considering leaving self-employment. One in ten freelancers (8%) said they were actively seeking alternatives to self-employment, while 17 per cent said they would consider leaving self-employment if a permanent opportunity came up. Of these, two out of five (43%) said this was because they felt they could earn more as an employee. Another two out of five (40%) said they wanted the security of employment, while over a third (35%) said they now wanted access to employment benefits like sick pay.
Andy Chamberlain, Director of Policy at IPSE (the Association of Independent Professionals and the Self-Employed), said: “This research shows the true, long-term financial impact of the pandemic on the self-employed sector, which contributed over £300bn a year to the economy before the pandemic.
“Not only did two out of three freelancers see a drop in turnover: two out of five saw a drastic 40 per cent-plus drop. One in ten even saw their turnover slashed by over 90 per cent. These are huge setbacks for a freelance business: setbacks that many will not recover from for years to come.
“The damage of the pandemic was refracted through the government support on offer – or rather, the lack of support for a significant proportion of the sector. This is reflected now in the many freelancers who now simply do not feel the government supports them or their way of working: particularly limited company directors.
“Limited company directors feel persecuted by the government right now not only because they were completely excluded from the SEISS grants, but also because of the changes to IR35 taxation the government forced through earlier this year. As our research found, among limited company directors considering leaving self-employment, this was a key reason for one in three.
“Historically, not only did the freelance sector contribute over £300bn to the economy each year; it also played a crucial part in economic recovery during downturns. Freelancers offer the flexible expertise businesses across the country need to get themselves up and running again. The real question now is with the scale of the damage to freelancing – and the structural damage because of IR35 – will freelancers still be in a position to play that part? After so many were left out in the cold during the pandemic, and with so many threats to freelancing today, do people want to enter into self-employment?
“To make freelancing appealing and to get this vital sector back on its feet again, our message to government is this: repair your relationship with self-employment, clear up the mess after IR35, and build a stimulus package to support and kickstart the worst-hit parts of the sector.”