By: Steve Crouch, co-owner/ FD at Crunch Accounting (www.crunch.co.uk)
As a collective, the freelance community is one that can often find itself misunderstood. They’re a subsection of the UK workforce that is often prone to stereotyping by those in more routine employment.
In Finance – as with any industry – freelancers can often prove a valuable asset, bringing in outside opinion and expertise, providing a helping hand with burgeoning or expanding projects, and at a lower cost than traditional employees. Speak to directors and managers and you’ll likely find that freelancers are viewed as an integral part of their workforce.
That said, in many circles misconceptions about their productivity and reliability remains; misconstrued ideas of weekday lie-ins and leisurely timetables perpetuating the idea of an overpaid and underworked lifestyle.
Last month marked the fourth annual National Freelancers Day. Amongst the day’s aims was to challenge and shift perceptions of the freelance community. The popularity of the freelancing cause is gaining momentum, and myriad events now take place across the UK, with National Freelancers Day receiving more and more media coverage each year.
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Progress has been made in altering perceptions of the freelance community but some still remain. However a recent study released by freelancing body The PCG reflects the true nature of the UK’s freelancers.
Casting an eye over the statistics, you’ll find this is a community that’s hard at work and contributing significantly to the economy.
According to the PCG’s research, freelancers currently make up 12.4% of the UK’s overall workforce, contributing around £202 billion to Britain’s tumultuous economy. To put this figure into perspective, the sum of all freelancing activity equates roughly to the values of the UK construction (£64bn) and manufacturing industries (£140bn) combined.
They are staggering figures which, when you consider successive Governments’ shoddy treatment of the freelance community, makes their legislative ineptitude even more remarkable.
The Government aren’t the only ones giving freelancers short shrift either – the financial sector needs to reassess its treatment of freelancers too.
Although different, freelancers are usually bundled up alongside small businesses for the purposes of statistical reporting, and according to those figures 2012 has been a tough year.
According to Ernst & Young’s ITEM Club, the total amount of money lent by banks to small businesses in 2012 will be at the lowest level since 2006.
The basis for this grim assertion is derived from a collection of surveys by the Office for National Statistics, Warwick Business School and the Federation of Small Businesses. These suggested that loan rejection rates averaged around 11% between 2005 and 2008, whereas the rejection rate in mid-2012 averaged around 38%.
Extrapolating these stats, they suggest that the current lending figure will shrink by 4.6%, dropping to £429bn by the end of the year. They’re impressive figures, for all the wrong reasons.
The coalition hasn’t covered itself in glory where small business is concerned either, instead dishing up plenty of political posturing and little in the way of concrete action.
Cameron’s ‘Small Business Bank’ is yet to be fleshed out, and even this may not have any tangible impact. Skepticism abounds regarding its lending capacity and with Osborne and Cable at loggerheads over its creation, it’s appearing more of a case of ‘if’ not ‘when’ it’ll come to fruition.
Ultimately, something clearly has to be done in both financial and Government circles to alleviate the strain on the self-employed.
The failure of 318 of the FTSE 350 companies to sign up to the Prompt Payment Code is a perfect example. The Code aims is to speed up payment from large corporates to their smaller suppliers (i.e. SMEs and freelancers), but has been largely ignored by the nation’s largest businesses.
Freelancers lack the capital and access to credit of larger businesses, and one late payment can very realistically mean curtains for their business. A study by BACS found the average late payment is now around a month overdue, with large corporate and financial institutions the worst culprits.
To their credit, the Coalition appear to be keen on tackling the issue, threatening any business not signed up to the code with a dose of bad PR. Business Minister Michael Fallon threatened to ‘name and shame’ those big businesses unwilling to the embrace the code.
It’s a step in the right direction but ultimately what’s needed is greater cooperation between both the financial sector and Government about how best to address some of the woes facing the self-employed, especially given their obvious importance to the UK economy.
Speaking on the eve of last year’s National Freelancers Day, David Cameron praised freelancers’ ‘valuable contribution to the economy’ promising that the coalition would offer ‘all their support’. A year on, we’re yet to see that promise fulfilled.
Speak to freelancers and they’ll say that complex legislation remains a burden (despite promises to cut red tape) and consistently lament difficulties both raising and accessing capital. Clearly, both financiers and government need to do more.
This growing army of workers can play a significant part in restarting the UK’s economic engine. Their skills and knowledge can prove a valuable asset in an economy yearning, but struggling, to retain growth.
Hopefully, initiatives like last month’s National Freelancers Day will help highlight a sector that has grown considerably over recent years, both in number and economic importance.
A change in the perception of freelancers will be of benefit to the Government and UK businesses alike, whatever their size.