The freelance market in the United Kingdom stands at a crossroads in 2024, shaped by the dual forces of legislative evolution and global economic headwinds.
The IR35 legislation has redrawn the lines around tax, employment status, and client relationships while freelancers navigated an economy tinged with inflation and financial uncertainty.
Today, more than ever, organisations and government bodies need to embrace and support part of the workforce that can bring so much value to business operations and boost the UK’s economy.
The infamous challenges of IR35
The introduction of the IR35 reform in the UK has set the freelance community ablaze with its implications on work status and tax liabilities.
As a measure designed to prevent disguised employment and ensure that contractors pay the appropriate tax, it brings forth a wave of challenges for many who value their autonomy.
Since its implementation in the UK’s public sector in 2017, organisations have spent significant amounts to adapt to the regulations, which has coincided with a significant drop in the UK’s freelancer population at a time when global trends showed workers moving towards greater autonomy with an active choice to work independently.
This has given rise to new players like umbrella companies, which profit from freelancers’ income, while some companies implemented blanket rules, treating all freelancers as falling within IR35, thus increasing their contingent hiring costs by up to 30%.
Therefore, a governmental reassessment of IR35 could relieve the pressure on this vital segment of the workforce and encourage the return of these skilled independent professionals to the UK market, fostering a more business-friendly environment with the necessary freedom and flexibility.
This would combat the shortage of freelancers and, more importantly, skills while mitigating the impact of the rising cost of living.
The changing freelance dynamics
Unsurprisingly, the UK has experienced a tightening of freelance opportunities, with over half of its independent professionals feeling the pinch – a case less pronounced in countries like France and Germany.
As a result, over 65% of UK freelancers have expressed cautious optimism about their future, lower than the global average.
Nevertheless, only 12% of the UK freelance market’s workforce seeks full-time employment, suggesting that most people still prefer the flexibility and independence that freelancing offers.
While nearly half of the full-time freelancers have adjusted their fees in response to inflation, the rest held back to remain attractive to budget-conscious clients.
In addition, full-time freelancers, especially those experienced in navigating such economic fluctuations, maintain a higher degree of confidence, focusing on specialisations less susceptible to budget cuts, such as Business Consulting and Tech & Data.
However, when compared to the rest of Europe, where freelancers are much more confident in their future career options, it is evident that more is needed in order to support and nurture valuable independent talent here in the UK.
So, how can the UK freelancing landscape turn the development wheels faster?
Freelancer support and advocacy
Countries with successful freelance economies often have strong support structures in place. Germany, for example, offers tax assistance and professional development opportunities, nurturing the freelance community’s competitiveness and wellbeing.
Similarly, the Netherlands recently introduced new measures to reduce the differences in tax and social security contributions between employees and freelancers, offer mandatory disability insurance for the self-employed and clarify the assessment of employment relationships.
Simplified tax processes and appropriate legal protections could thus encourage the freelance environment to grow faster within the UK, striking a balance with the rigidities introduced by the IR35.
Community and collaboration
The US and Australian markets excel in facilitating co-working spaces and digital collaborations.
These not only enable networking but also create ecosystems where collaboration spurs innovation and business growth.
The UK might invest in such models, helping freelancers overcome isolation and fostering a sense of community and mutual support.
Similarly, UK organisations could offer more welcoming projects for freelancers, treating them as part of the internal teams and introducing them to their culture through team building and social activities.
Opportunities and the learning curve
While challenges loom, the landscape is also ripe with opportunities. Freelancers specialising in emerging and in-demand fields such as digital transformation and AI can command higher rates.
Remote work trends widen the potential client base, allowing UK freelancers to tap into international markets.
The UK’s freelancers have a perfect advantage over the rest of Europe, dedicating an average of five hours weekly to skill development – something their European counterparts spend less time on.
This commitment to continuous learning is central to their adaptability and competitive edge, creating a perfect talent pool for many local and international organisations.
Moreover, hiring freelancers now goes beyond just hiring someone to do a job or a project. Instead, they bring value by helping upskill teams rather than simply filling a capacity need.
Companies are bringing someone into an organisation with invaluable knowledge and learning that can be integrated and remain in the organisation long after the freelancer has left.
Principled partnerships and new directions
For many in the freelance workforce, principles matter. Aligning with clients who share their values is crucial, and 75% are willing to decline projects that go against their personal beliefs and values – a bold stance that underscores freelancers’ increasing demand for meaningful and ethical work.
Furthermore, there is a push to cultivate stronger client relationships, with freelancers emphasising transparent communication and clear briefings to ensure repeat business and career longevity.
Stepping forward in 2024
Despite the IR35 and economic challenges, the community’s grit and entrepreneurial spirit remain strong. Drawing from their years of experience, seasoned professionals continue to pivot and adapt to the market’s demands.
Simultaneously, a wave of new freelancers demonstrates that the allure of independence and self-direction is undiminished.
The lessons from Europe and other parts of the world highlight pathways for the UK to enhance its freelance landscape: from fortifying support structures and collaborative environments to regulating with a softer touch that encourages freelancing without legal or financial penalties.
Ultimately, the narrative of the UK’s freelance and independent consulting space in 2024 is one of resilience.
As the UK’s independent talent forges a path through this changing territory, integrating global best practices could be the catalyst that transforms the freelance market into a more vibrant, sustainable, and prosperous community, elevating the UK’s economy to new heights.
Charlotte Gregson, Country Head at Malt.
