• Freelancers are slightly more confident in their own businesses for the next 12 months
• Freelancers are also now slightly more confident in the UK economy for the next 12 months compared to Q2 2023
• Average day rates and quarterly earnings have increased since Q2 2023
• The number of freelancers incurring business debt has slightly decreased

• Almost half of freelancers (49%) expect their business costs to increase in the next year

   

Despite continuing inflationary pressures, freelancers are now slightly more confident in the performance of the UK economy and their own businesses for the next 12 months. This is perhaps driven by the fact that average day rates and quarterly earnings have now increased compared to Q2 2023.

However, this report now reveals that more freelancers are now incurring business debt and almost half of all freelancers expect their business costs to continue rising over the next 12 months.

Freelancers’ confidence in their own businesses for the next three months has now increased slightly from -13.1 in Q2 2023 to -11.6 in Q3 2023. This follows a decrease in confidence in Q2 2023, falling from -2.4 in Q1 2023 to -13.1 last quarter.

Freelancers’ confidence in their own businesses has increased for both SOC1 managerial and SOC2 professional freelancers, increasing from -10.7 in Q2 2023 to -3.1 in Q3 2023 and increasing from -25.0 in Q2 2023 to -23.0 this quarter respectively.

On the other hand, SOC3 associate professional and technical freelancers reported a slight decrease in confidence compared to last quarter, falling from -3.5 in Q2 2023 to -6.3 this quarter.

Looking at freelancers’ confidence for the next 12 months now reveals that freelancers are slightly more confident in their own businesses. Confidence has now increased from -13.3 in Q2 2023 to -12.9 in Q3 2023, albeit remaining in negative territory.

This is driven by increases in confidence to both SOC2 professional freelancers and SOC3 associate professional and technical freelancers, with confidence for these groups increasing from -31.8 in Q2 2023 to -30.2 in Q3 2023 and from -3.4 in Q2 2023 to -3.1 this quarter respectively.

SOC1 managerial freelancers, however, reported a small decrease in their confidence for the next 12 months, with confidence falling from -1.8 in Q2 2023 to -2.9 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, Q1 2023 and Q2 2023, freelancers continue to cite the state of the UK economy as the top factor negatively affecting freelancers’ business performance, with 81.8 per cent of freelancers citing this factor – which can be largely attributed to the continuing inflationary pressures experienced across the UK.

Interestingly, both SOC1 managerial freelancers and SOC3 associate professional and technical freelancers cited states of the UK economy as the greatest negative determinant on their freelancer business performance (88.2% and 80.0 respectively).

SOC2 professional freelancers, instead, cited government tax policy relating to freelancing as their top factor to lower their business performance, with 85.2 per cent reporting this was the case this quarter.

Government tax policy relating to freelancing was cited by 77.7 per cent of all freelancers and was the second greatest negative determinant whilst government regulation relating to hiring freelancers – cited by 69.8 per cent – was freelancers’ third most reported factor that hinders 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 66.2 per cent citing this in this quarter.

Adoption of flexible working practices by organisations was the second most enhancing factor for freelancers’ business performance, with 48.0 per cent reporting this in Q3 2023.

Innovation in terms of the services offered to clients is now the third most positively enhancing factor for freelancers’ business performance this quarter, with 46.4 per cent citing this.

In terms of breakdown across SOC groups, both SOC2 professional freelancers and SOC3 associate professional and technical freelancers cited the importance of brand value and reputation in the market as the most enhancing factor for their business performance (61.7% and 78.6% respectively).

SOC1 managerial freelancers, on the other hand, cited growth of the sector in which they work as their top factor.

Freelancers’ quarterly confidence in the UK economy for the next three months has increased from Q2 2023, increasing from -35.0 in Q2 2023 to -26.8 this quarter.

This is driven by a significant increase in confidence reported by SOC3 associate professional and technical freelancers and a slightly smaller increase reported by SOC2 professional freelancers (increasing from -39.8 in Q2 2023 to -9.4 in Q3 2023 and from -41.9 in Q2 2023 to -39.8 this quarter respectively).

On the other hand, SOC1 managerial freelancers, interestingly, reported a decrease in their confidence, decreasing from -17.2 in Q2 2023 to -35.3 this quarter.

Now looking at confidence in the UK economy for the next 12 months, freelancers are also slightly more confident compared to Q1 2023. In fact, confidence has increased from -37.2 in Q2 2023 to -28.5 this quarter.

This is driven by a significant increase in confidence amongst SOC3 associate professional and technical freelancers, increasing from -40.9 in Q2 2023 to -21.9 in Q3 2023.

SOC2 professional freelancers also reported a small increase, increasing from -43.2 in Q2 2023 to -41.0 whilst SOC1 managerial freelancers also reported an increase in their confidence, increasing from -22.4 in Q2 2023 to -20.6.

This quarter, the average day rate charged by freelancers over the last three months stands at £554, which represents an increase on our findings from Q2 2023 (£472).

Looking at the SOC groups more closely and comparing the findings to Q2 2023 reveals that all three SOC groups have increased their day rates. SOC1 managerial freelancers reported the biggest increase, with their average day rates increasing from £469 in Q2 2023 to £600 this quarter.

SOC3 associate professional and technical freelancers reported the next biggest increase, increasing from £375 in Q2 2023 to £465 in Q3 2023.

SOC2 professional freelancers also reported an increase in their average day rates, increasing from £578 in Q2 2023 to £618 this quarter.

In terms of quantifying the expected change in day rates, 36 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 21.5 per cent in the next 12 months.

Freelancers’ spare capacity has decreased since Q2 2023, decreasing from 3.2 weeks without work per quarter in Q2 2023 to 2.4 weeks this quarter, meaning freelancers are now working more.

This decrease in freelancers’ spare capacity is driven by an decrease in the spare capacity of both SOC2 professional freelancers and SOC3 associate professional and technical freelancers, decreasing from 3.2 weeks in Q2 2023 to 2.6 weeks this quarter and from 3.2 weeks in Q2 2023 to 1.5 weeks in Q3 2023 respectively.

SOC1 managerial freelancers reported a small increase in their number of weeks without work this quarter, increasing from 3.2 weeks in Q2 2023 to 3.6 weeks this quarter.

This quarter, average quarterly earnings over the last three months stands at £28,815, which represents an increase on our findings from Q2 2023 (£23,251).

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

SOC3 associate professional and technical freelancers reported the biggest increase in their average quarterly earnings, increasing from £17,859 in Q2 2023 to £26,430 this quarter.

SOC2 professional freelancers reported the next biggest increase, increasing from £28,074 in Q2 2023 to £32,693 in Q3 2023.

Finally, SOC1 managerial freelancers also reported a small increase in their quarterly earnings, increasing from £24,717 in Q2 2023 to £26,875 this quarter.

Just under half of freelancers (49%) now expect their input costs to increase over the next 12 months.

A further 43 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 8.6 per cent.

The percentage of freelancers incurring business debt has decreased slightly from Q2 2023, decreasing from 34 per cent in Q2 2023 to 30 per cent in Q3 2023.

Freelancers are just as likely to be incurring business debt via credit cards as they were in Q2 2023, with this figure remaining at 15 per cent.

However, they are now less likely to be accruing business debt from a commercial bank, with the number of freelancers reporting this decreasing from 10 per cent in Q2 2023 to eight per cent this quarter.

This quarter, job-related stress levels have increased from 5.54 in Q2 2023 to 5.74 in Q3 2023 (on a 10-point scale where zero is not at all stressed and 10 is extremely stressed).

This is largely driven by increases to both SOC2 professional and SOC3 associate professional and technical freelancers, increasing from 5.27 in Q2 2023 to 5.36 in Q3 2023 and also increasing from 5.50 in Q2 2023 to 6.33 this quarter respectively.

SOC1 managerial freelancers, on the other hand, reported a decrease in their job-related stress levels, decreasing from 6.00 in Q2 2023 to 5.35 in Q3 2023.

Job satisfaction has decreased from 6.55 in Q2 2023 to 6.10 this quarter, driven by decreases to both SOC2 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 decrease in their job satisfaction, decreasing significantly from 7.87 in Q2 2023 to 5.82 this quarter.

SOC2 professional freelancers also reported a decrease in their job satisfaction, decreasing from 6.03 in Q2 2023 to 5.90 in Q3 2023.

On the other hand, SOC1 managerial freelancers reported a small increase to their job satisfaction compared to last quarter, increasing from 5.74 in Q2 2023 to 5.82 this quarter.

In conclusion, freelancers are now slightly more confident about the performance of the wider economy and their own businesses for the next 12 months, despite the cost of living crisis showing no signs of abating.

These inflationary pressures have now caused freelancers to increase their day rates which has in turn resulted in higher average quarterly earnings being reported by the sector. But this small increase is unlikely to offset the increase in business costs that freelancers are continuing to predict for the next 12 months.