Contractors and freelancers underpin the UK’s current and potential economic growth in a global knowledge economy. They drive innovation and efficiency in large organisations and small to medium sized enterprises (SME). But the contracting and freelance sector needs to develop its own identify and become acknowledged as the economic force it represents.
These are the key findings of a new PCG-commissioned report, The Role of Freelancers in the 21st Century British Economy, by Professor Andrew Burke of the Cranfield School of Management.
“This study was prompted by a growing belief that our economy has changed to such an extent that we have to look again at the role of freelancers,” explains Burke. “No longer should we look at them as a shadow workforce filling in gaps when and where they are needed. More and more, we see freelancers driving innovation and efficiency in corporations and small enterprises as they grow and deal with the complexities of change.”
The report’s release was timed to coincide with this year’s PCG-inspired National Freelancers Day. On the research’s findings, PCG’s managing director John Brazier said: “The report is fascinating and casts a new light on this growing community. It is clear that freelancing is a vital link in the value chain that holds the UK’s industry and economy together.”
A core theme of the report is analysing the use of contractors and freelancers in 23 corporations and SMEs, presenting the findings as a set of case studies from which many of Burke’s conclusions are drawn.
Defining contractors as ‘unique economic agents’
A central finding of the report is that contractors must “be recognised in their own right as a unique economic agent”. And Burke notes that: “If Britain…wants to optimise its performance, then nurturing the supply and competitiveness of its freelance talent base is key.”
Carving out a distinct economic niche is therefore essential so that policymakers can identify and implement fiscal, enterprise and labour market policies that will promote contracting and freelancing, he argues.
This study was prompted by a growing belief that our economy has changed to such an extent that we have to look again at the role of freelancers
Professor Andrew Burke, Cranfield School of Management
Burke acknowledges that one of the barriers to broader acceptance is defining what contractors and freelancers are and do. To him:
“Freelancers are workers who supply their services on a contingent project or limited duration basis for remuneration which is output focused. Freelancers take on all or most of the cost and risk of their own labour downtime and below expectations productivity within projects. They take on all the cost and risk of economic inactivity between projects.”
Burke goes on to suggest that “an improvement would be to create a specific...freelance self-employment category, which is identified by the definition above”, although he adds that “In practice the dividing line between employee and freelancer will often be blurred and require the scrutiny and discretion of the authorities.”
Contractors creating innovation for corporate venturing and entrepreneurs
Contractors and freelancers allow large organisations, entrepreneurs and high-growth SMEs to innovate. As Burke puts it, they immediately bring a “fresh and independent external perspective” to corporate clients – a perspective that would otherwise be missing from the creative process.
Entrepreneurs and small firms can use contractors to reduce barriers to entry. By using freelance talent, entrepreneurs can access levels of expertise, skills, capabilities and experience that they would never be able to access under an employment model because of the cost barrier.
Contractors are also used to partially ‘de-risk’ the innovation process, through firms outsourcing product and service development, proof of concept and market testing. Burke found that large corporations “prefer freelancers to contractor firms using employees because they believe that freelancers are higher quality and more motivated.”
Creating and sustaining employment
Contrary to the common belief that temporary workers are in some way responsible for taking jobs away from ‘real’ employees, Burke’s research proves exactly the opposite. “Freelancers are used to serve different functions to employees,” he says.
“By using freelancers for these distinct roles businesses are able to create sustainable ‘value-added’, which underpins employment,” continues Burke. “Simply put, in the modern economy much employment would not be created and some would be unsustainable without the availability of freelancers.”
Burke cites several examples provided in the case studies. For instance, NSG Group “point out that if a sufficient supply of high quality freelancers were not available in the UK, [it] would consider moving its innovation activities overseas.
“Freelancers help business to manage risk, innovate and to undertake changes necessary to grow. They do this in partnership with employees and executives,” says Burke. He concludes: “Public policy needs to reflect this and have a fresh perspective of the 21st century role of freelancers as complementary to, rather than substitutes for, employees, and [they are] often the creators of full-time employment.”