The latest survey of sole traders shows that UK freelancers have seen a "remarkable" recovery in earnings in the first quarter of 2021 after an incredibly difficult year.
New research conducted by the Association of Independent Professionals and the Self-Employed (IPSE) and PeoplePerHour has found that freelancers' earnings and confidence in the economy saw a "remarkable recovery" to pre-pandemic levels in the first quarter of 2021.
In Q1 2021, freelancers' average quarterly earnings stood at £20,778 - 20% up from £17,283 at the end of 2020. At the same time, freelancers' average spare capacity (the number of weeks they go each quarter without work) dropped from 4.3 weeks to 3.7 weeks. Although this is still not quite back to pre-pandemic levels, the findings show that freelancers compensated by raising their day rates.
Freelancers' confidence in the UK economy also dramatically rose. Short-term (three-month) confidence increased from -27.8 to -4.3, which is the highest it has reached since Q4 2015, before the EU referendum. Long-term (12-month) economic confidence rose from -27.7 to -0.2 - also the highest since Q4 2015.
The key metric that has not significantly recovered is freelancers' confidence in the performance of their own businesses. This is the first time since 2014 that freelancers have had less confidence in their business than the economy. Respondents said that "government regulation related to hiring freelancers" and "government tax policy" were the two main factors negatively affecting their business - ahead of the pandemic.
Andy Chamberlain, IPSE director of policy, said: "The roadmap to opening up the UK has driven a remarkable recovery in freelancers' earnings and also their confidence in the economy. Economic confidence among freelancers is in fact now at its highest level since before Brexit. After a dark year in which they were disproportionally hit by the financial impact of the pandemic, freelancers are again seeing cause to hope … Historically, the freelance sector has always been a key driver of economic recovery and it is clearly raring to go.
"Amid the optimism, however, there are also lingering causes for concern. Above all, the recent changes to IR35 are clearly damaging freelancers' confidence in the future of their businesses - not unreasonably as they see the chaos now running through the contractor hiring market."
Meanwhile, the latest quarterly SME Trends Survey from the CBI shows that SME manufacturing output is expected to improve markedly in the coming quarter. Its survey of 260 SME manufacturing firms saw optimism grow at the fastest pace in seven years. The volume of total new orders grew, reflecting a rise in domestic orders, while export orders were flat. In the next quarter, output and domestic orders are expected to bounce back, with predictions for output growth at the strongest in the survey's history (since 1988).
Written by Rachel Miller.