Contractor confidence takes its biggest knock in two years

Contractors admit their confidence in their freelance business has taken its biggest knock for two years, in both the short and long-term.

So in spite of shrugging off threats like Brexit and IR35 reform in the third quarter of 2018, the fourth quarter saw contractors’ resolve slip to its lowest level since April-June of 2017.

In fact, for the coming 12 months, and despite such adverse factors affecting their outfit not changing, their confidence reading sunk from --3.5 to --9.1, says contractor body IPSE.

'Confidence drop'

Similarly, for the coming three months, and due to contractor taxation, Brexit and contractor regulations all exerting a bigger drag on them, their confidence reading sunk from 5.1 to --1.8.

“Confidence over the first quarter of 2019…dropped to the second-lowest level on record,” said the Association of Independent Professionals and the Self-Employed (IPSE).

“Professional freelancers are the most downbeat among the freelance occupational groups and they directly blame the government, with fiscal policy and regulatory policy being identified as having a detrimental effect on their business.”

'Twenty-one per cent rate lift'

Contractors in the other groups -- who are managers, directors and senior officials, or associate professionals, are much more downbeat too, but as a group they remain positive.

So such niche contractors are upbeat about quarter one of 2019, unlike the rest of the year and beyond, where two of the three occupational groups are firmly negative in their expectations.

This pessimistic outlook indicates that a big pay bump in 2018’s third quarter for contractors -- rates shot up by an average of 21 per cent -- will fall short in alleviating incoming pressures.

Average quarterly earnings rose too in the period, to a level not seen since 2017’s Q3 (£24,776), and for the rest of 2019, a majority (54%) expect their pay rates to climb further.

But it seems clients paying more is par for the course. Almost 80% of contractors say that their own costs will leap in 2019, and all strands of freelancer foresee economic malaise.

'The only positive'

In particular, and based on the responses of 600 consultants, the economic confidence score of the independent workers has now slumped to its lowest reading since the index began.

For the three-month outlook, it stands at highly gloomy --37.6 (down from --21.1 in Q3 2018), and for the 12-month outlook, it stands at an even more dismal --48.1 (down from --35.4).

“The only positive that one might take from what are worrying forecasts for the UK economy is that the survey was conducted over a period which was mostly dominated by media stories of the UK heading towards a ‘no deal’ Brexit,” IPSE said.

“If this interpretation is true, either a Brexit deal with the EU that is more conducive to business, or a policy move to reconsider Brexit altogether could contribute to a more positive freelancer view on the prospects of the UK economy for 2019.”

'Disastrous'

Suneeta Johal, IPSE’s head of research said: “For freelancers, all this is also exacerbated by the knowledge the government is going to push the disastrous changes to IR35 tax legislation through to the private sector.”

She added: “The government must scrap the hugely damaging IR35 changes and should also give freelancers and all businesses the security and stability they need on Brexit: by taking ‘no-deal’ off the table, guaranteeing the easy passage of manufacturing goods and by agreeing a coherent and sensible plan for the future of financial services.”