Contractor income down 25% in locked down Q2
UK contractors’ average income dropped by 25% in the second quarter of 2020 according to the Freelancer Confidence Index, run by contractor interest group IPSE and PeoplePerHour.
The three-month period, which includes the height of the UK’s national coronavirus lockdown, saw a record fall in the average number of weeks worked by contractors in a quarter. In the 13 weeks between March and June, the average freelancer went five-and-a-half weeks without work.
Contractors also saw their average day rates fall, with quarterly earnings down 25% from £20,821 in Q1 to £15,709 in Q2.
Contractors working in management, director-level and other senior official roles saw the biggest drop in quarterly income – down 35%. This compares to a 16% earnings dip for contractors in more technical roles.
The survey also revealed that contractors are pessimistic about the future. Only three in five (61%) said they expect day rates to increase in the next 12 months and by an average of 11%.
Contractor confidence slumped to its lowest ever levels last quarter, along with the performance of their businesses.
The signs are that things are improving in the current quarter, but contractors are more concerned about prospects over the next year than the next three months. This concern reflects fears about the possibility of a second full lockdown as well as changes to IR35 legislation, which is due to take effect in April next year.
Inna Yordanova, Senior Researcher at IPSE, said: “It’s been clear for some time that the economic impact of coronavirus has fallen particularly hard on freelancers, but in this quarter’s Confidence Index, we can measure just how much.
“Freelancers’ average incomes have fallen by a devastating 25 per cent since the first quarter of the year – and for many, by even more than that.
“Almost two thirds of the highly skilled freelancers covered by our Confidence Index work through limited companies and therefore could not get support through the government’s Self-Employment Income Support Scheme. With such a financial cliff-edge and limited government support, it is not surprising freelancers’ confidence in their businesses over the next 12 months is drastically low – or that so many are leaving self-employment. Recent ONS data shows a drop of 178,000 freelancers since last quarter.”
Miles Grady, Director at Umbrella.co.uk said: “Contractors are incredibly important to the smooth running of an economy, especially during downturns. To play this role properly, they need adequate support. If the government isn’t going to support contractors and continue pursuing damaging policies like the changes to IR35, contractors will need to look to access support elsewhere.”
For more information about the changes to IR35 and how contractors can respond, speak to a member of the Umbrella.co.uk team today. Call: 0800 121 6513.