UK has 2 million freelancers and the number will continue to rise

30 August 2018 Authored by Consultancy.uk

The UK’s gig economy has continued to boom well into 2018, with the country now playing home to an estimated 5 million self-employed people. The professional services sector is a major driver of growth in this area in particular, with the number of freelance workers in Britain having reached 2 million since 2001.

The national unemployment rate is currently reported as having fallen unexpectedly to 4.1%, its lowest since 1975, according to the Office for National Statistics. The shift correlates with a huge boom in self-employment and freelance employment, as part of a much heralded decline of the conventional job, following the 2008 financial crisis.

The influence of the global recession on the self-employed scene in the UK can be seen clearly, when considering the data before and after 2008. Prior to the meltdown, the sector saw growth, certainly, but also brief spells of stagnation and even decline, with many companies still willing to offer traditional permanent roles in the later years of a boom period. After the bust, however, things changed quickly. Following three years of slow growth, the number of self-employed individuals in the UK grew rapidly in 2009. This was the first in a number of sharper inclines for the sector, which has seen continuous growth ever since.

According to Consultancy.uk analysis based on the latest figures from the Office for National Statistics and the Association of Independent Professionals and the Self-Employed (IPSE), the industry currently contains a labour pool of around 5 million people (or around 15% of the labour force), having increased from 3.3 million (12% of the labour force) in 2001. This includes a burgeoning freelance segment, consisting of an estimated 41% of all such workers, according to the IPSE, with a collective economic output “comparable to that of the entire motor sales industry.” While many use the terms freelance and self-employed interchangeably, it is more accurate to classify them as similar yet distinct groups.

Number of self-employed and freelancers in the UK

While neither has a permanent employer, a self-employer individual will work for themselves, usually producing goods or providing services direct to a consumer or customer base. This group includes everything from independent bakeries to plumbers or pest control specialists. Freelancers, on the other hand, usually provide pieces of work for other people, who then sell on their labour. If this sounds like regular employment without the security of a permanent contract, that’s because often it is.

This second category has come under fire repeatedly for presenting firms who would previously have hired employees on permanent contracts – making them more difficult to fire, and meaning employers would have to make commitments toward things like pension funds – with a method to circumvent key labour laws. In the post-crash economy, it is easy to see why cost-wary employers are increasingly fostering relationships with the now 2 million strong pool of freelancers, rather than hiring staff then. While individuals might receive a comfortable income from their work, they often are dependent on a single client, while that client has no legal obligation to award sick days, holiday pay, or contribute to the employee’s pension pot – ultimately paying them less in the long run then – while retaining the right to end an agreement with little or no notice.

Why hire freelancers?

In defence of the freelance sector, some economists argue that Britain’s freelance sector enables huge amounts of value to be added to the UK economy. Freelancers contributed £119 billion to the economy in 2016, a rise of £10billion from the previous year, according to a study by the IPSE last year, while the flexibility offered by Britain’s freelancers was calculated as adding value of some £21 billion to the British economy.

To this end, pricing pressures do not directly factor in the reasons many British businesses use freelancers. According to research from Kalido, a professional networking and matching app, and OnePoll, 64% of firms admit to relying on freelancers, with the highest portion of 43% of those saying they leverage contractors to manage periods of peak activity. In a way, this does relate to pay and conditions though, as it enables companies to upsize their headcount when needed, before being able to downsize, and spend less during off-peak periods. Similarly, 37% said they engage freelancers to deploy hard-to-find expertise, or in other words, a way of accessing expertise on a non-permanent basis, only paying towards it when it is directly necessary.

Why do UK businesses use freelancers?

32% use freelancers to accelerate work, and ensure deadlines are met, once more suggesting freelancers can be used as a shot in the arm for a smaller, less costly permanent workforce, when it is behind on a large workload, or a key delivery. Finally, 16% said that freelancers could inject fresh thinking into a project or aspect of business.

Regardless of the perception of the sector, freelancing in the workplace looks like it is here to stay either way. 39% of those polled admitted that they expect their use of freelancers to grow at a faster rate than number of perm hires, over the next five years, due to the level of success they have yielded businesses.

Why become a freelancer?

At other side of the scale, on the supply side, freelancing has become more popular due to this demand. According to Kalido’s study, the number of those interested in becoming a freelancer has prompted 50% of respondents to explore joining the gig economy, alongside their main job. Of these people, 59% said this was because it presented them with an opportunity to learn new skills, something which in a rapidly changing, digitalising economy, could make for a more secure future. This is in line with the third most noted factor, the opportunity to sharpen skills which workers currently possess, but cannot use at work, cited by half of the respondents.

The second most commonly mentioned factor among the survey, was the chance to earn more, and improve quality of life, at 54%. While this might be applicable for those treating freelancing as a top-up to other employment, for those who depend on it for 100% of their income, this may be far from the truth, however. Freelancing arrangements leave workers at a disadvantage when it comes to leveraging their labour rights to demand improved conditions, instead having to compete with other contractors to offer the most ‘competitive’, lowest rate.

How freelancers view their decision to go independent

Recent Institute for Fiscal Studies figures show that, although the number of self-employed traders in the UK has increased since 2007-08, their aggregate turnover dropped by 19% and their average profits fell by 23% in real terms over that time. The eight years following 2008’s Great Recession were thus much worse for self-employed Britons than conventionally employed people, whose real earnings fell by 6%, and this decline is likely because the statistics include a rising number of freelancers.

It is worth noting that the professional services sector bucks this trend. Over half of new freelancers in the sector actually earned more money as an independent, with consultants under the age of 40 leading the pack. A recent study, which involved 251 independent management professionals active in Europe, confirmed that 91% of freelancers were satisfied with working as an independent consultants, while more than half (53%) were highly satisfied. Just 5% indicated they were dissatisfied.

Of those who already are freelancers, 58% are satisfied with the opportunities they can secure. To this end, most freelancers cite flexibility as one of the most valuable parts of their manner of work, at 79%. Fulfillment also plays a significant role in this, with 42% noting that they only do work they believe in, and 30% stating that they appreciate being in control of their own destiny, or that freelance work helps keep work exciting. Only 28% of those polled confirmed the hopes of those considering freelancing, that they earned more than via employment, however.

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