60% of UK freelancers suffered a turnover hit during pandemic

30 August 2021 Consultancy.eu 5 min. read

New research by the UK’s Association of Independent Professionals and the Self-Employed indicates that more than two out of five freelancers have lost over 40% in turnover during the Covid-19 crisis, with a high number of people now considering to leave self-employment as a result.

Up until the Covid-19 crisis, the freelance sector in the UK counted 5 million people – 15% of the country’s overall workforce – after steadily growing up from just over 3 million in 2000, according to the ONS, the UK’s Office for National Statistics. Now, the volatility of freelancing, relatively low returns, and the lack of government support during the pandemic has made many reconsider their employment options.

Taking stock of the UK’s freelance sector, research from the Association of Independent Professionals and the Self-Employed (IPSE) reveals that nearly 70% of freelance businesses were negatively affected by the pandemic, with 60% suffering a decrease in turnover. Of those, nearly half experienced their income decrease significantly – with a decline of just over 40%. Almost 10% even saw their turnover reduced by more than 90%.

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

“These are huge setbacks for a freelance business,” Andy Chamberlain, Director of Policy at IPSE, said. “Setbacks that many will not recover from for years to come.”

While the government introduced the Self-employment Income Support Scheme, or SEISS, in response to Covid-19 in March 2020, a large proportion of the freelance sector found themselves left out of the support scheme. The financial damage of the pandemic varied significantly by gender, age, business structure and eligibility for SEISS.

However, according to IPSE, the scheme only offered support to 3.4 million out of a total of the 5 million who were freelance at the start of the pandemic, which has made 52% of freelancers overall say they do not feel supported by the government.

According to the ONS, the different ways in which self-employed people received their income influenced what individuals could obtain from SEISS. IPSE’s research shows that limited company directors, who were excluded from SEISS were particularly hard hit. In fact, 70% of limited company directors said they did not feel supported by the government.

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

“Limited company directors feel persecuted by the government right now not only because they were completely excluded from the SEISS grants, but also because of the changes to IR35 taxation the government forced through earlier this year. As our research found, among limited company directors considering leaving self-employment, this was a key reason for one in three,” Chamberlain said.

At the same time, as the economy is picking up after Covid-19, there is an increasing demand for independent contractors – not only in the UK but also in many other countries. Based on a survey of 800 business executives around the world, McKinsey & Company found that 70% intent to hire more on-site independent workers and freelancers after Covid‑19.

According to Chamberlain, the freelance sector contributes over £300 billion to the economy each year and has also shown to play a crucial part in economic recovery during downturns in the past. “Freelancers offer the flexible expertise businesses across the country need to get themselves up and running again,” he said.

This might bode well for freelancers who already managed to avoid the worst of the damage caused by the pandemic by adopting new strategies. According to IPSE, roughly 30% of freelancers explored new business concepts, just over 20% took training to expand their skills or learn new ones, and a similar number expanded their client base.

Reasons for considering an alternative to self-employed

Of course, an increasing demand for independent contractors does not change the volatility and risks associated with self-employment. The research carried out by IPSE shows that 25% of freelancers consider leaving self-employment as a result of the pandemic.

The majority (43%) indicated that they considered looking for employment opportunities because they felt they could earn more as an employee. This was closely followed by the 40% who said they wanted the security of employment, while just under 40% considered other options because they wanted access to employment benefits like sick pay.

It is now up to the government to make freelancing more appealing again, according to Chamberlain. “To get this vital sector back on its feet again, our message to government is this: repair your relationship with self-employment, clear up the mess after IR35, and build a stimulus package to support and kickstart the worst-hit parts of the sector,” he said.

IPSE, the Association of Independent Professionals and the Self-Employed, is the only dedicated representative body for the UK’s self-employed community, including freelancers, contractors, consultants and independent professionals.