PCG: No room for freelancer complacency

Tuesday 4 March 2014

Now is not the time for freelancers and contractors to become complacent, according to one industry expert.

The PCG has warned that despite a positive year for self-employed professionals, there are still signs that caution is the best option.

Indeed, data has begun to point to slowing economic growth and while the skills shortage will still put umbrella and limited company contractors in a strong position, demand may peter slightly.

In the PCG's monthly analysis, economist and author of the document, Georgios Nikolaidis, said: "The UK’s economic recovery remains on track but some disappointing data in February should serve as a reminder against complacency.

"Forecasters have once more rushed to upgrade growth projections, however signs that the economic recovery is slowing down should keep policy-makers on their feet."

Mr Nikolaidis isn't the first to notice a change in conditions and the Chartered Institute of Personnel and Development last month predicted a slowdown in employment growth. This came off the back of a slump in net employment to +16 from +24 in November.

However, broadly, things remain positive for freelancers and industry fundamentals are supporting growth. Business investment is on the up as uncertainty eases, domestic demand improves and confidence increases.

"Rebounding business investment should translate to more projects for contractors as companies call in freelancers to provide their high expertise and manage project risk," Mr Nikolaidis explained.

He added that freelancers will have an important role to play when it comes to output growth over the coming months. There is currently a considerable output gap, which means there is room for the UK economy to expand. Figures indicate that there is enough capacity in the UK to sustain output growth over the coming years and contractors will be key to ensuring this capacity is available.

Self-employed professionals will also be needed by businesses to improve productivity, according to the PCG.

Indeed, highly skilled individuals are integral for enhancing operational efficiency and driving innovation, which ultimately leads to productivity growth.

Unsurprisingly, more and more people are choosing to become self-employed and Office for National Statistics data has shown a 41 per cent rise in the number of Britons deciding to go it alone since the last quarter. Year-on-year, a 3.6 per cent increase in self-employment was noted.

Mr Nikolaidis explained this outstrips the growth in employees by nearly three to one.  

"Some argue that the rise in self-employment is tied to the increase in involuntary part-time work and is thus part of the problematic nexus of low productivity and low wages," he said.

"In our view, the persistence of self-employment in the recovery points to a structural change in the UK labour market rather than a cyclical reaction to the financial meltdown."

However, interest rates represent a cloud on the horizon for freelancers and Mr Nikolaidis claims the Bank of England has to pick the right moment to bring in a hike a risk the consequences.

Yet the PCG doesn't expect this to happen until Spring 2015 at the earliest, giving businesses the time they need to get back on their feet.

By Victoria McDonnell

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