• Freelancers’ confidence for the next 12 months now reveals that freelancers are less confident in their own businesses
• Freelancers are also now less confident in the UK economy for the next 12 months
• Average day rates and quarterly earnings have fallen since Q1 2023
• The number of freelancers incurring business debt has increased in the past quarter

It remains a tricky economic landscape for freelancers to navigate, with rising inflation impacting business costs and freelancers' overall confidence in the wider economy and their own businesses.

Despite inflationary pressures, the average day rates charged by freelancers have fallen since Q1 2023 which has in turn reduced freelancers' average quarterly earnings.

Whilst freelancers are less confident than previous quarters, they are however more likely to report higher job satisfaction and lower job-related stress.

Freelancers’ confidence in their own businesses for the next three months has now fallen to -13.1 in Q2 2023 from -2.4 in Q1 2023. This follows two successive increases in confidence since Q3 2022 (from -17.7 in Q3 2022 to -8.6 in Q4 2022 and then to -2.4 in Q1 2023).

 Looking at freelancers’ confidence in more detail reveals that there were falls in confidence across both SOC (Standard Occupational Category) 1 and SOC 2 groups, with SOC3 associate professional and technical freelancers reporting the biggest decrease. This group now report their confidence in their own business for the next three months at -3.5 compared to 15.6 in Q1 2023.

SOC2 professional freelancers have also seen a decrease in confidence, falling from -13.6 in Q1 2023 to -25.0 this quarter.

On the other hand, SOC1 managerial freelancers have seen a small increase in confidence - albeit remaining in negative territory – increasing slightly from -14.6 in Q1 2023 to -10.7 in Q2 2023.

Freelancers’ confidence in their own businesses for the next three months has now fallen to -13.1 in Q2 2023 from -2.4 in Q1 2023. This follows two successive increases in confidence since Q3 2022 (from -17.7 in Q3 2022 to -8.6 in Q4 2022 and then to -2.4 in Q1 2023).

Looking at freelancers’ confidence for the next 12 months now reveals that freelancers are less confident in their own businesses. Confidence has now fallen from -10.1 in Q1 2023 to -13.3 in Q2 2023.

This is driven by significant decreases to both SOC2 professional freelancers and SOC3 associate professional and technical freelancers reporting decreases compared to Q1 2023 (falling from -23.2 in Q1 2023 to -31.8 this quarter and from 10.0 in Q1 2023 to -3.4 in Q2 2023).

SOC1 managerial freelancers, on the other hand, reported a small increase in their confidence for the next 12 months, increasing from -22.9 in Q1 2023 to -1.8 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.

As was the case with our findings from Q4 2022 and Q1 2023, freelancers continue to cite the state of the UK economy as the top factor negatively affecting freelancers’ business performance, with 78.9 per cent of freelancers citing this factor – which can be largely attributed to the continuing inflationary pressures experienced across the UK.

Interestingly, it was just SOC3 associate professional and technical freelancers that cited state of the UK economy as the greatest negative determinant on their freelancer business performance (85.0%), with both SOC1 managerial and SOC2 professional freelancers instead citing government tax policy relating to freelancing (73.1% and 83.7% respectively).

As a result, government tax policy relating to freelancing continues to be the second most selected factor for freelancers, with 73.1 per cent citing this factor in Q2 2023.

Government regulation relating to hiring freelancers also continues to be considered the third greatest factor negatively affecting freelance businesses (69.6%), largely driven by SOC1 managerial freelancers and SOC2 professional freelancers citing this as their second greatest negative determinant (69.2% and 81.9% respectively).

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 two factors enhancing freelancers’ business performance remain unchanged this quarter.

Brand value and reputation in the market continues to be the top factor positively influencing freelancers’ business performance, with 65.2 per cent citing this in this quarter.

Innovation in terms of the services offered to clients remains as the second most positively enhancing factor for freelancers’ business performance this quarter, with 55.7 per cent of freelancers citing this factor this quarter.

However, collaboration with other freelancers/businesses to secure more work was now cited as the third most enhancing factor, with 51.1 per cent of freelancers citing this factor this quarter.

In terms of breakdown across SOC groups, all three SOC groups cited the importance of brand value and reputation in the in the market as the most enhancing factor for their business performance (61.5%, 64.3% and 68.3% respectively).

Freelancers’ quarterly confidence in the UK economy for the next three months has decreased from Q1 2023, falling from -24.5 in Q1 2023 to -35.0 this quarter.

This is driven by a significant decrease in confidence reported by SOC3 associate professional and technical freelancers and a slightly smaller decrease reported by SOC2 professional freelancers (falling from -7.4 in Q1 2023 to -39.8 in Q2 2023 and decreasing from -34.1 in Q1 2023 to -41.9 this quarter respectively).

On the other hand, SOC1 managerial freelancers, interestingly, reported a significant increase in their confidence, increasing from -37.5 in Q1 2023 to -17.2 this quarter.

Now looking at confidence in the UK economy for the next 12 months, freelancers are also less confident compared to Q1 2023. In fact, confidence has fallen from -28.7 in Q1 2023 to -37.2 this quarter.

This is driven by a significant decrease in confidence amongst SOC3 associate professional and technical freelancers, falling from -14.9 in Q1 2023 to -40.9 this quarter.

SOC2 professional freelancers also reported a decrease, falling from -19.0 in Q1 2023 to -43.2 in Q2 2023 whilst SOC1 managerial freelancers actually reported an increase in their confidence, increasing from -35.4 in Q1 2023 to -22.4 this quarter.

This quarter, the average day rate charged by freelancers over the last three months stands at £472, which represents a small decrease on our findings from Q1 2023.

Looking at the SOC groups more closely and comparing the findings to Q1 2023 reveals that both SOC1 managerial and SOC2 professional freelancers have reported decreases in the average day rates charged (decreasing from £621 in Q1 2023 to £469 in Q2 2023 and from £640 in Q1 2023 to £578 in Q2 2023).

On the other hand, SOC3 associate professional and technical freelancers reported an increase to their average day rate, increasing from £336 in Q1 2023 to £375 in Q2 2023.

In terms of quantifying the expected change in day rates, 35 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 15.5 per cent in the next 12 months.

Freelancers’ spare capacity has increased slightly since Q1 2023, increasing from 3.0 weeks without work per quarter in Q1 2023 to 3.2 weeks this quarter.

This small increase in freelancers’ spare capacity is driven by an increase in the spare capacity of both SOC2 professional freelancers and SOC3 associate professional and technical freelancers, increasing from 3.0 weeks in Q1 2023 to 3.2 weeks this quarter and from 2.9 weeks in Q1 2023 to 3.2 weeks in Q2 2023 respectively.

SOC1 managerial freelancers reported the same number of weeks not working this quarter at 3.2 weeks.

This quarter, average quarterly earnings over the last three months stands at £23,251, which represents a decrease on our findings from Q1 2023 (£25,577).

This is largely driven by decreases to SOC1 managerial and SOC2 professional freelancers, with these groups reporting a decrease from £30,803 in Q1 2023 to £24,717 this quarter and from £31, 710 in Q1 2023 to £28,074 in Q2 2023 respectively.

On the other hand, SOC3 associate technical and professional freelancers reported a small increase, increasing from £16,622 in Q1 2023 to £17,859 in Q2 2023.

Just over half of freelancers (60%) now expect their input costs to increase over the next 12 months.

A further 28 per cent of freelancers forecast no change in their input costs for the next 12 months whereas just two per cent of freelancers predicted a decrease in their input 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 10.1 per cent.

The percentage of freelancers incurring business debt has increased from Q1 2023, increasing from 22 per cent in Q1 2023 to 34 per cent in Q2 2023.

Freelancers are now more likely to be incurring business debt via credit cards, increasing from 11 per cent in Q1 2023 to 15 per cent in Q2 2023.

Similarly, they are also more likely to be accruing business debt from a commercial bank, with the number of freelancers reporting this increasing from seven per cent in Q1 2023 to 10 per cent this quarter.

This quarter, job-related stress levels have decreased from 5.92 in Q1 2023 to 5.54 in Q2 2023 (on a 10-point scale where zero is not at all stressed and 10 is extremely stressed).

SOC1 managerial freelancers reported a decrease in their job-related stress levels, decreasing from 6.09 in Q1 2023 to 6.00 in Q2 2023 whilst SOC2 professional freelancers reported the same figure as Q1 2023, with their job-related stress remaining at 5.27 this quarter.

SOC3 associate professional and technical freelancers reported a significant decrease in their job-related stress levels, falling 6.40 in Q1 2023 to 5.50 this quarter.

Job satisfaction has increased from 5.98 in Q1 2023 to 6.55 this quarter, driven by increases to both SOC1 and SOC3 groups (on a 10-point scale where zero is not at all satisfied and 10 is extremely satisfied).

SOC3 associate professional and technical freelancers reported the most significant increase in their job satisfaction, increasing from 6.59 in Q1 2023 to 7.87 this quarter.

SOC1 managerial freelancers also reported an increase to their job satisfaction compared to last quarter, increasing from 5.14 in Q1 2023 to 5.74 in Q2 2023.

On the other hand, SOC2 professional freelancers reported a decrease in their job satisfaction, decreasing from 6.59 in Q1 2023 to 6.03 this quarter.

In conclusion, freelancers are still extremely concerned about the wider economy and their own businesses for the next 12 months, as the cost of living crisis shows no signs of abating.

Despite these inflationary pressures, the average day rates charged by freelancers have fallen since Q1 2023 which has in turn reduced freelancers' average quarterly earnings.

Whilst freelancers are less confident than previous quarters, they are however more likely to report higher job satisfaction and lower job-related stress.