Contractor optimism at risk from higher costs

The confidence of contractors and other one-man bands is at its highest level since records began even though “the picture is not completely rosy,” says freelancing body IPSE.

In fact, despite their fiscal and business outlook being brighter than ever before, contractors’ costs are rising, found the Association of Independent Professionals and the Self-Employed.

Their optimism is also at risk from Summer Budget 2015, which hit people who work for themselves with a range of tough measures. And crucially, IPSE’s poll ran before the Budget.

“Despite being billed as a ‘low tax, high wage’ Budget, it created significant consternation in the freelancing community”, the body said, writing in its latest Freelancer Confidence Index.

“[This community] look[s] set to be unfairly penalised with restrictions on travel and subsistence expenses, a new tax on dividends and plans to make IR35 ‘more effective.’”

IPSE is not entirely critical of the Budget – it contained some “welcome measures” such as the cut in corporation tax, but these were “overshadowed” by the unwelcome ones, it said.

The body added that it would have to wait until October, when its index is next updated, to see the full impact of the chancellor’s measures on freelancers’ faith in their prospects.

For now though, their confidence in the UK economy for the next 12 months stands at a +16.1, compared with +12.1 in the previous index, which covered this year’s first quarter.

Their three-month outlook for the economy is also higher than it was in the previous quarter, as is their confidence in how their own business will fare, both in the next quarter and year.

The fly in the ointment is the price tag of executing that business. In particular, almost half of the contractors said they expected their “input costs” to increase over the next 12 months.

This trend is most prevalent among contract professionals who described themselves to IPSE and its pollsters as a ‘manager, director or senior official.’

Six in ten of these top contractors forecast higher costs but, fortunately, the survey also found they are the likeliest contractors to have seen their daily pay rate rise since the first quarter.

Increased travel fares may currently be contributing to rising business costs for all contractors, said IPSE, but its concern for the future is how such pricing pressure will interact with the Budget’s measures.

Chief executive Chris Bryce warned: “We’re very concerned that the tough measures outlined in the Summer Budget will push costs up to the extent that many freelancers will reconsider their line of work.

“The UK needs a robust, confident self-employed community to give our labour market the flexibility it needs to compete in a global marketplace. The people who take the risks associated with self-employment need to be supported in their endeavours.”