Freelancers’ earnings fall 30pc to record low as pandemic bites


Figures used by the Bank of England to track Britain’s five million freelancers show that average incomes dropped by more than 30pc in the first half of the year, revealing for the first time the full extent of the devastating impact of the pandemic on the self-employed.

A report from the freelancer trade body IPSE, seen exclusively by Telegraph Money, said the “extreme and extraordinary circumstances of the pandemic” had left the freelance sector “more financially fragile and in need of external support than at any other period on record”.

It said without extra help, coronavirus would sound the death knell for self-employment and cause lasting damage to the £300bn that freelancers generate for the economy each year.

The trade body has now called on the Government to release more targeted financial help for the millions still excluded from the Chancellor’s support schemes, provide advice for small businesses to navigate Brexit and scrap new tax rules that have already put extra pressure on earnings.

Freelancers’ average earnings fell from £22,742 per quarter at the start of the year to £15,709 at the end of June – the lowest level since 2014, when IPSE started to gather data for the Bank.

Earnings fell as the average number of weeks contractors were out of work per quarter rose from three in the first quarter to almost six in the second, the report said. More than two thirds (69pc) of freelancers said they had lost work as a result of the pandemic.

The findings mark a departure from historic trends. In times of economic uncertainty contractors’ earnings often rise as companies shed full-time staff. Before Britain voted to leave the EU in the second quarter of 2016, for example, confidence in the economy dropped to fresh lows, but freelancers’ average quarterly earnings increased from £23,243 to £29,601.

The result is that many are giving up on the “freelance dream”, reversing a decade-long trend. More than 250,000 self-employed workers returned to employed work over the summer months, data from the Office for National Statistics showed.

But groups that depend on more flexible working arrangements, such as mothers and disabled people, may find it harder to return to traditional nine-to-five office jobs.

The number of self-employed women has increased by more than 60pc since the financial crisis and today stands at 611,000. They predominantly work in leisure, travel and care – some of the industries worst hit by the pandemic. A total of 662,000 freelancers are disabled, making up more than 10pc of all self-employed workers.

Andrew Chamberlain of IPSE said freelancers needed extra help. “The Government should introduce a more focused support package that includes individuals such as the newly self-employed and company directors who did not benefit from the first round of help,” he said.

Almost three million freelancers have claimed more than £13bn in state support during the pandemic. Last week Rishi Sunak, the Chancellor, announced a fresh round of grants to cover up to 20pc of freelancers’ earnings over winter.

But he has been accused of excluding and “turning his back on” millions by failing to ease the eligibility criteria for state support. Mr Chamberlain said freelancers also needed more help navigating Brexit, as well as guarantees on market access and ease of movement in key “gig economy” sectors such as manufacturing and financial services.

“IR35” tax rule changes, due to come into force in April but delayed until 2021 because of the pandemic, should be scrapped, he added.

Plans to shift the responsibility of assessing the tax status of contractors from the individual to the employer led many large businesses to cancel contracts with freelancers or to pay them via company payrolls, shrinking their incomes and landing them with higher tax bills.

A spokesman for the Government said it recognised the challenge that faced the self-employed but insisted its existing support measures were among the most generous in the world.



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