• Freelancers now cite state of the UK economy as the biggest detrimental factor on their business performance
• Almost seven in ten freelancers (67%) expect their business costs to increase in the next year
• Freelancers are slightly less confident in their own businesses for the next 12 months

• Freelancers are also now slightly less confident in the UK economy for the next 12 months compared to Q4 2023

   

The state of the economy has now returned to biggest negative factor on the performance of freelancers' business performance. Unfortunately, freelancers' outlook for their own businesses and the wider economy continues to fall and the majority anticipate their business costs to increase in the next 12 months.

Despite this, an increase in their average rates charged over the last three months has pushed up quarterly earnings and business debt has also slightly fallen compared to Q4 2023.

Freelancers’ confidence in their own businesses for the next three months has now increased slightly since last quarter. In fact, confidence has increased from -18.2 in Q4 2023 to -13.2 this quarter, following a decrease in confidence reported between Q3 2023 and Q4 2023 (decreasing from -11.6 in Q3 2023 to -18.2 in Q4 2023).

Freelancers’ confidence in their own businesses has decreased for both SOC1 managerial and SOC2 professional freelancers, decreasing from -10.7 in Q4 2023 to -26.0 in Q1 2024 and decreasing from -18.1 in Q4 2023 to -21.4 this quarter respectively.

However, this has been offset by SOC3 associate professional and technical freelancers reporting a significant increase in confidence compared to last quarter, increasing from -23.1 in Q4 2023 to 2.4 this quarter.

Looking at freelancers’ confidence for the next 12 months now reveals that freelancers are slightly less confident in their own businesses. Confidence has now decreased from -16.0 in Q4 2023 to -18.8 in Q1 2024.

This is driven by decreases in confidence to both SOC1 managerial freelancers and SOC2 professional freelancers, with confidence for these groups decreasing from -10.0 in Q4 2023 to -30.0 in Q1 2024 and from -29.6 in Q4 2023 to -31.6 this quarter respectively.

SOC3 associate professional and technical freelancers, however, reported an increase in their confidence for the next 12 months, with confidence increasing from -7.1 in Q4 2023 to 0.0 this quarter.

We now move on to explore the factors that freelancers identify as having an influence on their business performance. In terms of negative determinations, freelancers continue to cite the same three factors lowering their business performance.

Unlike our findings for the previous quarter, freelancers no longer cite government tax policy relating to freelancing as the top factor negatively affecting freelancers’ business performance. 

Instead, freelancers now cite state of the UK economy (78.2%) above government tax policy relating to freelancing (77.3%).

In third, freelancers cited government regulation relating to hiring freelancers, with 73.3 per cent of all freelancers reporting this as a factor that is lowering their business performance.

Turning to the positive influences on business performance, this quarter reveals that whilst all the negative factors were external, the factors enhancing freelancers’ business performance remain largely internal.

In line with our findings from last quarter, the top factor enhancing freelancers’ business performance remains unchanged this quarter. Brand value and reputation in the market continues to be the top factor positively influencing freelancers’ business performance, with 65.9 per cent citing this in this quarter.

Innovation in terms of the services offered to clients was the second most positively enhancing factor for freelancers’ business performance this quarter, with 59.4 per cent citing this.

Collaboration with other freelancers and businesses is now the third most enhancing factor for freelancers’ business performance, with 54.7 per cent reporting this in Q1 2024.

Freelancers’ quarterly confidence in the UK economy for the next three months has decreased from Q4 2023, decreasing from -20.9 in Q4 2023 to -27.6 this quarter.

This is driven by decreases in confidence reported by all three SOC groups.

SOC1 managerial freelancers reported the biggest decrease in confidence since Q4 2023, decreasing from -18.8 in Q4 2023 to -34.6 this quarter.

SOC3 associate professional and technical freelancers also reported a decline in their confidence, decreasing from -14.3 in Q4 2023 to -19.6 in Q1 2024.

SOC2 professional freelancers reported a smaller decline, decreasing from -29.5 in Q4 2023 to -31.5 this quarter.

Now looking at confidence in the UK economy for the next 12 months, freelancers are now slightly less confident compared to Q3 2023. In fact, confidence has decreased from -30.1 in Q4 2023 to -32.2 this quarter. This follows a decrease in confidence between Q3 2023 and Q4 2023, falling from -28.5 in Q3 2023 to -30.1 in Q3 2023.

This is driven by a significant decrease in confidence amongst SOC1 managerial freelancers, falling from -18.8 in Q4 2023 to -40.4 this quarter.

SOC2 professional freelancers reported a small decrease, decreasing from -35.5 in Q4 2023 to -37.8 this quarter.

SOC3 associate professional and technical freelancers, on the other hand, reported an increase in their confidence for the next 12 months, increasing from -32.1 in Q4 2023 to -21.7 in Q1 2024.

This quarter, the average day rate charged by freelancers over the last three months stands at £547, which represents an increase on our findings from Q4 2023 (£522) but still below our findings for Q3 2023, where average day rates stood at £554.

Looking at the SOC groups more closely and comparing the findings to Q4 2023 reveals that both SOC1 managerial and SOC3 associate professional and technical freelancers have increased their day rates. 

SOC1 managerial freelancers reported the biggest increase, with their average day rates increasing from £592 in Q4 2023 to £644 this quarter.

SOC3 associate professional and technical freelancers also reported an increase, with their average day rates increasing from £390 in Q4 2023 to £431 in Q1 2024.

SOC2 professional freelancers, however, reported a decrease in their average day rates, decreasing from £617 in Q4 2023 to £607 this quarter.

In terms of quantifying the expected change in day rates, 24 per cent of freelancers now expect an increase in their average day rates for the next 12 months.

When asked to quantify the expected change to their day rates, freelancers expect their day rates to increase by 10.3 per cent in the next 12 months.

Freelancers’ spare capacity has decreased since Q4 2023, decreasing from 2.9 weeks without work per quarter in Q4 2023 to 2.2 weeks this quarter, meaning freelancers are now working more.

This decrease in freelancers’ spare capacity is driven by a decrease in the spare capacity of all three SOC groups.

SOC1 managerial freelancers report the biggest decrease in spare capacity, decreasing from 4.3 weeks without work in Q4 2023 to 2.4 weeks in Q1 2023.

SOC2 professional freelancers reported a decrease, decreasing from 3.1 weeks without work in Q4 2023 to 2.5 weeks this quarter whilst SOC3 associate professional and technical freelancers also saw a decrease on last quarter, decreasing from 1.9 weeks without work to 1.8 weeks this quarter.

This quarter, average quarterly earnings over the last three months stands at £29,853, which represents an increase on our findings from Q4 2023 (£25,564).

This is driven by all three SOC groups reporting an increase in their average quarterly earnings compared to last quarter.

SOC1 managerial freelancers reported the biggest increase in their average quarterly earnings, increasing from £25,734 in Q4 2023 to £32,478 this quarter.

SOC3 associate professional and technical freelancers reported the second biggest increase in their average quarterly earnings, increasing from £20,955 in Q4 2023 to £26,955 this quarter.

Finally, SOC2 professional freelancers also reported an increase, increasing from £30,417 in Q4 2023 to £31,866 in Q1 2024.

Almost seven in ten freelancers (67%) now expect their input costs to increase over the next 12 months.

A further 25 per cent of freelancers forecast no change in their input costs for the next 12 months. Interestingly, just 3 per cent of freelancers could foresee a decrease in their business costs for the next 12 months.

In terms of quantifying the expected change in input costs for the next 12 months, freelancers now predict that their input costs will increase by 6.4 per cent.

The percentage of freelancers incurring business debt has remained the same since last quarter, with 29 per cent of freelancers reporting this in Q1 2024 and also in Q4 2023.

Freelancers are now slightly more likely to be incurring business debt via credit cards as they were in Q4 2023, with this figure increasing from 12 per cent in Q4 2023 to 14 per cent this quarter.

This quarter, job-related stress levels have decreased from 6.19 in Q4 2023 to 5.85 this quarter (on a 10-point scale where zero is not at all stressed and 10 is extremely stressed). This is driven by increases to both SOC1 managerial freelancers and SOC3 associate professional and technical freelancers.

SOC1 managerial freelancers reported a decrease in their job-related stress, decreasing from 5.85 in Q4 2023 to 5.52 in Q1 2024 whilst SOC3 associate professional and technical freelancers also decreased their job-related stress from 7.23 in Q3 2023 to 6.24 this quarter.

On the other hand, SOC2 professional freelancers reported a slight increase, increasing from 5.30 in Q4 2023 to 5.66 this quarter.

Job satisfaction has increased slightly since last quarter, increasing from 6.10 in Q4 2023 to 6.16 this quarter (on a 10-point scale where zero is not at all satisfied and 10 is extremely satisfied).

SOC3 associate professional and technical freelancers reported an increase in their job satisfaction, increasing from 6.31 in Q4 2023 to 6.48 this quarter.

SOC1 managerial freelancers also reported an increase, increasing from 5.69 in Q4 2023 to 6.17 in Q1 2024.

On the other hand, SOC2 professional freelancers reported a decrease in their job satisfaction, decreasing from 6.17 in Q4 2023 to 5.80 this quarter.

Freelancers are understandably concerned about the impact of rising costs on the performance of their business and also the wider UK economy and this perhaps explains why they now cite state of the UK economy as the biggest negative factor on their business performance.

 With almost seven in ten freelancers now expecting their costs to increase in the next 12 months, the sector is preparing for costs to only increase and remain sceptical about the performance and growth of the economy in the next year.

Despite these pressures, average day rates and quarterly earnings have increased since last quarter.