Freelancers’ confidence in their businesses and the wider economy has been driven to record lows by the Coronavirus crisis, according to research by IPSE (the Association of Independent Professionals and the Self-Employed) and PeoplePerHour, Europe’s largest freelance marketplace.
Freelancers’ 3-month confidence in their businesses had already fallen to a six-year low last quarter because of concerns about the changes to IR35 tax regulations. This quarter their confidence in their businesses for the next three months fell even further from -14.7 last quarter to -62.6. This is by far the lowest level it has reached. Their confidence in their businesses for the next 12 months has also fallen to the lowest level on record: from -23.2 to -57.3. These are both not only historic lows, but also the biggest one-off drops in confidence by some distance.
Confidence in the wider economy has dropped drastically too, having begun to recover last quarter from record lows driven by Brexit. Confidence in the economy over the next year fell from -39.3 last quarter to -77.8. Meanwhile, confidence in the economy over the next three months fell even lower, from -36.8 last quarter to -86.6. It therefore seems freelancers believe the Coronavirus crisis will have the worst effect on the economy in Q2 2020. This is an extremely sharp fall in confidence – perhaps reflecting the sharp fall in demand in the wider economy.
Added to the drop in confidence, freelancers have seen a fall in pay and the amount of work they are doing. Their spare capacity (the amount of weeks they are not working) rose from 2.6 last quarter to 3.3 weeks. Although freelancers’ average day rates remained relatively stable at £430 (down just £3 on last quarter), the fall in the amount of work drove their quarterly earnings down by 8.4 per cent. Freelancers are also extremely pessimistic about the coming year, with two thirds predicting a fall in their rates – with the average predicted drop at 20.1 per cent.
Freelancers’ pessimism is clearly driven by their concerns about the impact of the Coronavirus crisis on the economy. All groups surveyed (Standard Occupational Classifications 1, 2 and 3) said the top factor driving down their business performance is – by a substantial margin – “The state of the UK economy”.
Inna Yordanova, Senior Researcher at IPSE (the Association of Independent Professionals and the Self-Employed), said: “After budding signs of a recovery in the confidence of the freelance sector last quarter, the Coronavirus crisis has driven it to unimagined lows.
“It is especially remarkable that although freelancers can often be expected to be relatively bullish about the performance of their businesses in the face of a weak economy, in this case they are extremely pessimistic both about the wider economy and their own business performance.
“At the moment, freelancers are experiencing a perfect storm of a drop in demand for their services, a creaking and straining economy and a lack of financial support from the government. Although the government has created the Self-Employment Income Support Scheme, which is generous for a proportion of the self-employed, many of the freelancers surveyed for the Confidence Index are limited companies who have so far had very little support.
“This quarter’s Confidence Index shows a sector that has been shaken to the core by the Coronavirus crisis and is drastically pessimistic about the future. This should be an alarm bell for the government that this vital sector urgently needs more support.”
Xenios Thrasyvoulou, founder and CEO of PeoplePerHour commented: “It is worrying to see just how low freelancer confidence has tumbled. A usually resilient segment of the workforce, it is clear they have doubts about their financial future and the strength of their sector.
“Not enough has been done to help maintain the income of many freelancers who are either more newly self-employed and do not meet the threshold for government help, or who are limited companies. Freelancers urgently need support and reassurance from the government to keep this vital industry afloat.”
Professor Andrew Burke, Dean of Trinity Business School, Trinity College Dublin, and one of the Index authors, said: “The Covid-19 health emergency has also had a serious negative impact on the economy and caused a steep fall in freelancers’ business confidence. There is room, however, for some optimism that freelancers’ fortunes may improve a little after the Coronavirus crisis.
“During the lockdown, many organisations have had to adopt remote working practices. When the post Covid-19 economy restarts, many organisations that were previously sceptical about remote working may be more open to flexible work and freelancing. As many of these firms will also be struggling with their cash flow to begin with, the variable cost ‘pay as you go’ freelance workforce model will be particularly appealing.”