UK’s freelancers took major hit during pandemic

24 August 2021 5 min. read
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A new study into the UK’s freelance economy has found that two-thirds of the sector’s workers were negatively impacted by the pandemic. The research from the Association of Independent Professionals and the Self-Employed found that close to one-fifth of freelancers would now consider a return to salaried life as a result.

Prior to the global pandemic, the UK’s gig economy was never far from the headlines. By 2018, the country’s number of self-employed people had boomed to 5 million workers – 2 million of whom were freelancers – and that number continued to grow, as individuals found they could dictate their own schedule and the type of work they engaged with, while also enjoying better pay and work-life balance, outside of a firm.

After the best part of two years of Covid-19 anxiety, however, the picture is very different. With a the economy grinding to a halt, a great deal of work for self-employed individuals dried up during lockdown. Meanwhile, the sustained threat to public health exposed a number of fragilities within the freelancing economy in particular.

Impact of covid on freelancers’ businesses + Change in turnover over the last 12 months

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.

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.

In the years when the gig economy was apparently booming, these shortcomings were overlooked. Before the pandemic, freelancers were said to have added £300 billion to the UK economy, while 54% of freelancers told a poll from Kalido that they earned more as freelancers, and improved their quality of life. In the boom times, the idea of needing job security or sick pay did not seem especially relevant – assuming there would not be an unprecedented global pandemic to disrupt things. Since early 2020, however, the benefits workers had forfeited for a moderate increase on their medium income became painfully apparent.

Which, if any, of the following have you done in the last year

A survey of the UK’s freelance community has found that 67% of such businesses were negatively impacted by the Covid-19 pandemic, while 60% said their turnover had decreased as a result. According to the Association of Independent Professionals and the Self-Employed (IPSE), as they struggled to win contracts, 15% of freelancers reduced day rates or fees over the last 12 months – an increase from findings in May 2020, at which point only 9% had cut day rates.

Andy Chamberlain, Director of Policy at IPSE, said, “This research shows the true, long-term financial impact of the pandemic on the self-employed sector, which contributed over £300 billion a year to the economy before the pandemic. Not only did two out of three freelancers see a drop in turnover: two-out-of-five saw a drastic 40% or more drop. One-in-ten even saw their turnover slashed by over 90%. These are huge setbacks for a freelance business: setbacks that many will not recover from for years to come.”

Even as the UK economy pushes for a return to ‘normality,’ then, this highlights the increasing longevity of the pandemic’s impact on freelance businesses. At the same time, 52% of freelancers reported not feeling supported by the government – including 31% who do not feel supported “at all.” The researchers suggested that concerns around government taxation policy – namely IR35 reforms and the impact on negotiating contracts and gaps in government support during the pandemic – have contributed to the feeling that the government does not support the sector.

Reasons for considering an alternative to self-employed

As it becomes clear these pressures will continue to plague freelancers post-lockdown, even amid the apparent ‘recovery,’ a growing number are weighing up their options in the sector. While IPSE was keen to point to the 56% of freelancers who can still imagine being self-employed until their retirement, 17% said they would already consider a return to company life, and 8% said they were already actively seeking such a change. Additionally, 14% said that they could imagine even though self-employment still worked for them, they could now imagine how it could change in the future. All-in-all then, 39% of respondents said they could potentially exit the freelance sector in the coming years.

The most popular reason for this was the idea they could earn more in employment. Even without taking into account the potential for collective bargaining as an employee (and 35% did also say they wanted access to “employment rights”), this is indeed possible. With the reputation of a firm behind them, they would be less likely to have to scale down price to pick up work.

Meanwhile, a further 40% said they longed for a return to the security of employment. As a member of staff, even if there is no work, they would pick up a pay-cheque, or have to be paid a severance which could secure their finances for several months. In the world of freelancing, however, there are no such guarantees.