By Lorence Nye, IPSE Economic Advisor IPSE’s Freelancer Confidence Index is drawn from a quarterly survey of freelancers which assesses the recent performance of their businesses, as well as their outlook for the performance of their businesses and the economy in the three and 12 months following. The main index figures are calculated using an […]
By Lorence Nye, IPSE Economic Advisor
IPSE’s Freelancer Confidence Index is drawn from a quarterly survey of freelancers which assesses the recent performance of their businesses, as well as their outlook for the performance of their businesses and the economy in the three and 12 months following. The main index figures are calculated using an average of the 12 month forecast from freelancers. As 0 is neutral, any number higher than this indicates a positive outlook from freelancers while negative numbers show that freelancers believe conditions will worsen. In this article we look at those surveyed who started their business less than two years ago.
Business confidence remains strong, while confidence in the economy weakens
Although these relatively new freelancers reported a slight decline in confidence towards their business performance in Q1 2016, they remained decidedly optimistic about their businesses’ prospects over the next 12 months. This sentiment of confidence has followed a similar path to that seen among more experienced freelancers, but interestingly, those that have been freelancing for two years or less have consistently reported higher business confidence than their more experienced counterparts.
The confidence of new-to-market freelancers and more experienced freelancers is driven by the same three factors. Freelancers are mainly confident due to factors they control themselves; they believe that ‘building their brand and reputation’ and ‘innovating their services’ will have the most positive impacts on their performance in the next 12 months. The third reason cited as a positive driver of business performance is the belief that there will be ‘growth in the sector they work in.’
Meanwhile new freelancers’ confidence in the economy has continued its downward trend from Q3 and Q4 2015, the point at which confidence in the economy fell below zero. The broader population of freelancers reported much lower levels of confidence in the economy. In Q4 2015 freelancers were generally positive about the UK economy, but the Freelancer Confidence Index now shows that they broadly believe the economy will be worse off in the next 12 months.
Figure 1: 12 month confidence outlook for the economy and freelancer business performance
Rates and costs provide a mixed picture
New freelancers have seen day rates decline steadily from Q2 2015. The past quarter saw this trend continue, but a significant majority of these freelancers (67%) believe that their rates will increase within the next 12 months.
Half (51%) of new freelancers reported stability in the costs of doing business over the last year, typical of the low inflation in the wider UK economy. Fifty seven per cent (77%) of new freelancers believe their costs will rise by Q1 2017, on average by 18.7%.
The more established freelancers have lowered their day rates in the first quarter of this year, but believe that this will be reversed over the year to come. They also expect more cost pressure on their businesses than had been experienced in 2015.
Overall, newly established freelancers report fairly strong confidence in their businesses but do not believe the wider UK economy will fare as well. While they see their costs increasing, they also see themselves demanding higher rates within the next 12 months, possibly because they also see their businesses becoming more innovative with more established brands.
To download a copy of the latest report visit IPSE’s website