Brexit battering UK contractor confidence

The silver lining that contractors were clinging to – that Brexit would be sorted by now – not emerging is behind a gloomy picture for contractor confidence, set to last until October.

Outlining this downbeat forecast stemming from the January to March 2019 period, IPSE said 'Brexit' overtook ‘Regulation’ as the most damaging factor to contractors’ businesses.

Previously, the contractor group said “the only positive” during the October-December period was that the then-pessimistic mood among contractors could clear if Brexit was resolved.

“However, at the time of writing, we still haven’t left,” the Association of Independent Professionals and the Self-Employed said, writing in its Q1 Contractor Confidence Index.

'Drags out the uncertainty'

Obtained by ContractorUK yesterday, the full report behind the index adds: “Th[is] quarter was set to finish with us leaving the EU on March 29th.

“However… now [there is] an extension in place that takes us up to the third quarter of the year. In one sense, that gives businesses more room to prepare for changes to the economic landscape. In another sense, however, it also drags out the uncertainty of Brexit.”

Taken with other negatives in Q1, like less available work and 74% foreseeing extra costs, contractors “are in a significantly worse position than in the last quarter of 2018,” IPSE says.

'In the black,' nearly

Indeed, they suffered a 17% decline in income comprised of both a fall in their day rates (15%) and the volume of business undertaken.

Contractor managers, directors and senior officials were the hardest hit -- average daily rates plumetted from £675 in Q4 to £489 in Q1.

But overall, the short and long term confidence of all the polled contractors is, technically at least -- and on average, improving. And their economic outlook is following suit.

Their deeply negative --48.1 outlook for the economy for the next 12 months reduced in January-March to --38.5; their solidly downbeat --9.1 outlook for their business for the next 12 months business moderated to --6.1; and their ‘in the red’ three-month business outlook of --1.8 moved closer to being ‘in the black,’ standing at --0.7.

'More clarity'

But a more meaningful recovery in the eyes of contractors looks some way off.

“It is unlikely that business confidence will return to pre-referendum levels until there is more clarity on the UK’s Brexit and broader economic position,” IPSE said, alluding to the UK’s October withdrawal date from the EU.

The association added: “In the past freelancers have been able to overpower these negative influences [Brexit, and Government regulations] by employing business strategies associated with reputation/brand building and innovation which have led to business growth.

'Thrive'

“Unfortunately, the current economic challenges are so sufficiently great that freelancers have been unable to beat trends to generate positive performance for their businesses.”

As to the business strategies contractors favour, ‘My brand/value reputation in the market’ is in the lead (as it was in Q4 2018), followed by ‘Innovation in the services I offer.’

IPSE reflected: “Freelancers have demonstrated in the past their ability to thrive through their own business initiatives and therefore, if parliament can create a more conducive business environment, there is no reason to believe they wouldn’t be able to do that once again.”