Government blamed for contractor confidence crisis

Government blamed for contractor confidence crisis

24 November 2015

An index measuring contractor confidence has dropped significantly in the third quarter of 2015, with government attitudes towards contracting the apparent root cause.

The Freelancer Confidence Index which is conducted by The Association of Independent Professionals and the Self Employed (IPSE) has recorded a significant decline in the latter parts of 2015.

The index score measuring contractor’s business prospects has dropped negative for the first time ever.

When asked whether or not they were confident about the performance of their businesses improving over the next 12 months only 28% of contractors responded positively. This is down from 41% in the previous quarter.

Contractor attitudes to the overall health of the economy were also in decline. The index score tumbled more than 20 points between Q2 and Q3 from +16.1 to - 4.3.

Many contractors cited higher business costs as the root cause of the confidence crisis. Almost two thirds (65%) of freelancers expect their costs to increase in the next 12 months.

Chris Bryce, CEO of IPSE said that proposed public policy changes like the tax and subsistence review are a significant concern for cash-strapped contractors.

He said: “It is clear that freelancer confidence levels have taken a knock. IPSE is deeply concerned over current proposals for changes to travel and subsistence tax relief and more forceful implementation of IR35 – which still operates under an outdated format.

“These changes have the potential to affect a significant driver of the UK economy and put tens of thousands of freelancers out of business. We call on the Government to rethink these proposals to restore freelancers’ lost confidence.”

The findings also showed that contractors were taking less time off, with the average contractor working 83% of Q3, up from 80% in the previous quarter.

This is despite the fact that Q3 includes the key school summer holiday months between July and September.

Jon Biddle, Chief Operations Officer at Umbrella.co.uk said: “Contractors are having to work even harder than usual because their futures are shrouded in so much uncertainty.

“What concerns me most is that this index was carried out before rumours of the one-month contractor cap began circulating. If the same survey were delivered again today then I feel sure that confidence levels would have descended even further. 

“If it becomes legislation, the one-month contractor limit would make contracting in its current form all but impossible. The Chancellor should use his upcoming Autumn Statement to squash any uncertainty and reassure the nation’s temporary workforce.”