Contractors and freelancers contribute an estimated £100bn to the UK economy, with the contracting sector having grown by 12% since 2008 to reach 1.56m contracting and freelance workers.
These are just some of the insights illustrating the growing importance of the UK’s contracting and freelancing sector, which can be found in PCG’s latest ‘Kingston’ report, Exploring the UK Freelance Workforce 2011.
The flexible workforce continues to grow
A major finding of the report is the evidence that the flexible workforce has grown by 170,000, to reach 1.56m since PCG published its first report, Defining and Estimating the Size of the UK Freelance Workforce, in 2008.
Flexible workers such as contractors and freelancers now account for 5-6% of the UK’s workforce. The findings are significant because the 2008 and 2011 research both use the same methodology to estimate the size of the contracting workforce, enabling genuine growth comparisons to be made.
Whilst the UK contracting sector has not yet grown to the extent seen in the United States of America or Australia, this report provides hard evidence that it is now a significant constituency of workers within the UK workforce deserving of a voice at policymaking and governmental levels.
Recession has driven contracting sector growth
The report draws attention to two causal links between the recession and the increase in freelancing:
- Unemployment has increased by 49% between 2008 and 2011, “strongly suggesting that individuals losing, or failing to obtain, employment have turned their attention to freelance working”
- Uncertainty is causing end-user clients to hire more contractors: a third use freelancers on a weekly basis and 41% planned to use contractors in the coming year.
Clients use contractors and freelancers “to achieve greater labour flexibility and cost savings, and to manage risk better in times of economic uncertainty”. There is further evidence from business confidence and labour market surveys to support this view.
This report provides hard evidence that it is now a significant constituency of workers within the UK workforce deserving of a voice at policymaking and governmental levels
However, there appears to be little evidence directly linking an increase in freelancing with unemployment.
Contribution by contractors to economic output
Businesses without employees accounted for an estimated £202bn in sales during 2010, which equates to 8% of private sector turnover. However, this economic value includes all small businesses without employees, not just freelance businesses.
The report’s authors acknowledge that, “If freelance workers contribute to turnover proportionate to their presence in the wider group of businesses without employees, their collective sales would be £88 billions.”
And because contractor and freelancer owned businesses “might be expected to generate greater revenues than other own-account businesses, owing to the more valuable knowledge and skills exercised”, the report sets the economic output of the sector at £100bn, or 5% of business turnover.
Contracting underpinned by core of long-term freelancers
Also of interest is the level of ‘churn’ identified by the research team: “70% of those working freelance in April-June 2011 were freelancing a year previously” and “87% of those working freelance in 2010 were freelancing a year later.”
Whilst the report concludes that this is a high level of churn relative to other sectors of employment, these figures highlight that there is a solid core of long-term contractors. Figures later in the report bear this out:
- One in seven contractors started their contracting career before 1990
- 40% of contractors first began contracting before 2005
- “Approximately 10% of businesses enter, and a slightly lower proportion exit, the population each year.”
The report notes: “One might conclude, therefore, that a large part of the freelance workforce is a relatively stable population, with large numbers being self-employed for long periods.”
Contractor demographics
Six in ten contractors and freelancers are male, which is a higher proportion than in the employee element of the workforce, where 56% of workers are male. According to the report, the data suggests that: “Males have access to greater resources required to enter, and sustain, both freelance and senior employment positions – finance, knowledge and skills, and social networks – and/or stronger preferences for freelance working.”
A fifth of contractors and freelancers are over 60 and the reasons given by the report include workers who want:
- To increase pensionable income, either because it is too low or to “enhance an already comfortable lifestyle”
- To “achieve a more satisfactory work/retirement balance, combining paid work with care responsibilities and leisure time”.
Conversely, at the other end of the age scale, only one in ten contractors is under 30.
Core contracting and freelancer disciplines
Although contracting and freelancing can be found in most occupations and sectors, some sectors and occupational groups have a much higher proportion of contractors than others. The largest sectors identified by the report include:
- 265,000 media and artistic contractors
- 161,000 “managers and proprietors in other services”
- 110,000 teaching and educational contractors
Interestingly, there are only 70,000 IT and telecommunications professionals identified in the report, which would appear to be well below the 300,000 figure supported by anecdotal evidence.
Segmented by industry, the contracting and freelance sector comprises:
- 21% professional, scientific and technical (including engineers)
- 12% education
- 11% arts, entertainment and recreation (including media contractors)
- 11% information & communications (includes IT contractors)
- 45% all other industries.
In terms of occupations:
- 40% are associate professional and technical occupations (IT, science, technical and marketing and media contractors)
- 37% are professional workers (engineering, oil and gas, energy and finance)
- 23% managerial occupations (interim management, IT and engineering).
Commissioned by PCG and authored by John Kitching and David Smallbone of Kingston University’s Small Business Research Centre, the report will help provide contractors and freelancers, and their representative bodies, with a powerful tool for engaging with policy makers at a national and European level.