• Seven in ten freelancers (70%) 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 Q3 2023
• Average day rates and quarterly earnings have decreased since Q3 2023

• The number of freelancers incurring business debt has slightly decreased

   

With continuing inflationary pressures, it is unsurprising that freelancers are now slightly less confident in the performance of the wider 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 decreased compared to Q3 2023.

Most notably, seven in ten (70%) freelancers now expect their business costs to increase in the next 12 months.

Freelancers’ confidence in their own businesses for the next three months has now decreased since last quarter. In fact, confidence has fallen from -11.6 in Q3 2023 to -18.2 this quarter, following a small increase in confidence reported between Q2 2023 and Q3 2023 (increasing from -13.1 in Q2 2023 to -11.6 in Q3 2023).

Freelancers’ confidence in their own businesses has decreased for both SOC1 managerial and SOC3 associate professional and technical freelancers, decreasing from -3.1 in Q3 2023 to -10.7 in Q4 2023 and decreasing from -6.3 in Q3 2023 to -23.1 this quarter respectively.

On the other hand, SOC2 professional freelancers reported a slight increase in confidence compared to last quarter, increasing from -23.0 in Q3 2023 to -18.1 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 -12.9 in Q3 2023 to -16.0 in Q4 2023.

This is driven by decreases in confidence to both SOC1 managerial freelancers and SOC3 associate professional and technical freelancers, with confidence for these groups decreasing from -2.9 in Q3 2023 to -10.0 in Q4 2023 and from -3.1 in Q3 2023 to -7.1 this quarter respectively.

SOC2 professional freelancers, however, reported a small increase in their confidence for the next 12 months, with confidence only slightly increasing from -30.2 in Q3 2023 to -29.6 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 four quarters, freelancers no longer cite the state of the UK economy as the top factor negatively affecting freelancers’ business performance. 

 Instead, freelancers now cite government tax policy relating to freelancing (80.9%) and government regulation relating to hiring freelancers (70.0%) above the state of the UK economy (62.9%).

This is driven by the fact that all three SOC groups reported that government tax policy relating to freelancing was the greatest negative determinant on their freelancer 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 62.6 per cent citing this in this quarter.

Collaboration with other freelancers and businesses to secure more work was the second most enhancing factor for freelancers’ business performance, with 56.4 per cent reporting this in Q4 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 54.7 per cent citing this.

In terms of breakdown across SOC groups, both SOC1 managerial freelancers and SOC2 professional freelancers cited the importance of brand value and reputation in the market as the most enhancing factor for their business performance (53.8% and 69.7% respectively).

SOC1 managerial freelancers, on the other hand, cited collaboration with other freelancers and businesses to secure more work as their top factor.

Freelancers’ quarterly confidence in the UK economy for the next three months has increased from Q3 2023, increasing from -26.8 in Q3 2023 to -20.9 this quarter. This represents the second successive increase in confidence, after increasing from -35.0 in Q2 2023 to -26.8 in Q3 2023.

This is driven by increases in confidence reported by SOC1 managerial freelancers and SOC2 professional freelancers (increasing from -25.3 in Q3 2023 to -18.8 in Q4 2024 and from -39.8 in Q3 2023 to -29.5 this quarter respectively).

On the other hand, SOC3 associate professional and technical freelancers, interestingly, reported a decrease in their confidence, decreasing from -9.4 in Q3 2023 to -14.3 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 -28.5 in Q3 2023 to -30.1 this quarter.

This is driven by a significant decrease in confidence amongst SOC3 associate professional and technical freelancers, decreasing from -21.9 in Q3 2023 to -32.1 this quarter.

SOC2 professional freelancers, on the other hand, reported a small increase, increasing from -41.0 in Q3 2023 to -35.5 in Q4 2023 whilst SOC1 managerial freelancers also reported an increase in their confidence, increasing from -20.6 in Q3 2023 to -18.8 this quarter.

This quarter, the average day rate charged by freelancers over the last three months stands at £522, which represents a decrease on our findings from Q3 2023 (£554).

Looking at the SOC groups more closely and comparing the findings to Q3 2023 reveals that all three SOC groups have decreased their day rates. SOC3 associate professional and technical freelancers reported the biggest decrease, with their average day rates decreasing from £465 in Q3 2023 to £390 this quarter.

SOC1 managerial freelancers also reported a decrease, with their average day rates decreasing from £600 in Q3 2023 to £592 in Q4 2023.

SOC2 professional freelancers, likewise, reported a decrease in their average day rates, decreasing from £618 in Q3 2023 to £617 this quarter.

In terms of quantifying the expected change in day rates, 30 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 12.1 per cent in the next 12 months.

Freelancers’ spare capacity has increased since Q3 2023, increasing from 2.4 weeks without work per quarter in Q3 2023 to 2.9 weeks this quarter, meaning freelancers are now working less.

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

SOC1 managerial freelancers report the biggest increase in spare capacity, increasing from 3.6 weeks without work in Q3 2023 to 4.3 weeks in Q4 2023.

SOC2 professional freelancers reported an increase, increasing from 2.6 weeks without work in Q3 2023 to 3.1 weeks this quarter whilst SOC3 associate professional and technical freelancers also saw an increase on last quarter, increasing from 1.5 weeks without work to 1.9 weeks this quarter.

This quarter, average quarterly earnings over the last three months stands at £25,564, which represents a decrease on our findings from Q3 2023 (£28,815).

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

SOC3 associate professional and technical freelancers reported the biggest decrease in their average quarterly earnings, decreasing from £26,430 in Q3 2023 to £20,955 this quarter.

SOC2 professional freelancers reported the next biggest decrease, decreasing from £32,693 in Q3 2023 to £30,417 in Q4 2023.

Finally, SOC1 managerial freelancers also reported a small decrease in their quarterly earnings, decreasing from £26,875 in Q3 2023 to £25,734 this quarter.

Seven in ten freelancers (70%) 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. Interestingly, not a single 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 6.9 per cent.

The percentage of freelancers incurring business debt has decreased slightly from Q3 2023, decreasing from 30 per cent in Q3 2023 to 29 per cent in Q4 2023.

Freelancers are slightly less likely to be incurring business debt via credit cards as they were in Q3 2023, with this figure falling from 15 per cent in Q3 2023 to 12 per cent this quarter.

This quarter, job-related stress levels have increased from 5.74 in Q3 2023 to 6.19 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 SOC2 professional freelancers.

SOC1 managerial freelancers reported an increase in their job-related stress, increasing from 5.35 in Q3 2023 to 5.85 in Q4 2023 whilst SOC3 associate professional and technical freelancers also increased their job-related stress from 6.33 in Q3 2023 to 7.23 this quarter.

On the other hand, SOC2 professional freelancers reported a slight decrease from 5.36 in Q3 2023 to 5.30 this quarter.

Job satisfaction has remained at the same level as last quarter at 6.10 (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 significantly from 5.82 in Q3 2023 to 6.31 this quarter.

SOC2 professional freelancers also reported an increase in their job satisfaction, increasing from 5.90 in Q3 2023 to 6.17 this quarter.

On the other hand, SOC1 managerial freelancers reported a small decrease, decreasing from 5.82 in Q3 2023 to 5.69 in Q4 2023.

Freelancers are understandably concerned about the impact of rising costs on the performance of their business and also the wider UK economy. With 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 skeptical about the prospect of economic growth.

Despite these pressures, average day rates and quarterly earnings have fallen since last quarter and it will be important for the sector to pass on rising costs to clients in the coming quarters.