Navigate the UK freelance frontier with Malt in 2024

The UK freelance market is at a cross­roads in 2024, shaped by the twin forces of legislative devel­opment and global economic headwinds.

IR35 legis­lation has redrawn the bound­aries around taxes, employment status and client relation­ships as freelancers have had to navigate an economy riddled with inflation and financial uncer­tainty.

Now more than ever, organi­za­tions and government agencies need to embrace and support a part of the workforce that can bring so much value to business opera­tions and grow the UK economy.

The infamous challenges of IR35

The intro­duction of IR35 reform in the UK has thrown the freelance community into turmoil with its impact on work status and tax liabil­ities.

As a measure to prevent bogus employment and ensure that contractors pay the appro­priate tax, it presents a number of challenges for many who value their autonomy.

Since its intro­duction in the UK public sector in 2017, organi­za­tions have spent signif­icant amounts adapting to the regula­tions, coinciding with a signif­icant decline in the number of freelancers in the UK at a time when global trends showed that workers moving towards greater autonomy and active choice to work indepen­dently.

This has led to the emergence of new players such as umbrella companies that benefit from freelancers’ earnings, while some companies have intro­duced blanket rules that treat all freelancers as falling under IR35, increasing their temporary contract hiring costs by up to 30% .

Therefore, a government reassessment of IR35 could ease the pressure on this important 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 freedom and flexi­bility needed.

This would counteract the shortage of freelancers and, above all, skilled workers, while at the same time mitigating the effects of the rising cost of living.

The changing freelance dynamic

Unsur­pris­ingly, there has been a shortage of freelance oppor­tu­nities in the UK, with more than half of freelancers feeling the pinch — a case that is less pronounced in countries such as France and Germany.

As a result, over 65% of UK freelancers have expressed cautious optimism about their future, below the global average.

Yet only 12% of workers in the UK freelance market aspire to full-time work, suggesting that most people still prefer the flexi­bility and indepen­dence that freelancing offers.

While nearly half of full-time freelancers have adjusted their fees in response to inflation, the rest have held back to remain attractive to price-conscious clients.

Additionally, full-time freelancers, especially those who have experience dealing with such economic fluctu­a­tions, have higher levels of confi­dence and focus on special­iza­tions that are less vulnerable to budget cuts, such as business consulting and technology and data.

However, compared to the rest of Europe, where freelancers are much more confident about their future career oppor­tu­nities, it is clear that more is needed here in the UK to support and develop valuable independent talent.

So how can the UK freelance industry accel­erate devel­opment?

Support and advocacy for freelancers

Countries with successful freelance economies often have strong support struc­tures. Germany, for example, offers tax assis­tance and profes­sional devel­opment oppor­tu­nities, promoting the compet­i­tiveness and well-being of the freelance community.

Likewise, the Nether­lands has recently intro­duced new measures to reduce the differ­ences in taxes and social security contri­bu­tions between employees and freelancers, to provide compulsory occupa­tional disability insurance for the self-employed and to clarify the assessment of employment relation­ships.

Simplified tax processes and appro­priate legal protec­tions could therefore help the UK freelance environment grow faster and offset the rigidities intro­duced by IR35.

Community and collaboration

The US and Australian markets stand out for enabling co-working spaces and digital collab­o­ration.

These not only enable connec­tivity, but also create ecosystems where collab­o­ration drives innovation and business growth.

The UK could invest in such models to help freelancers overcome isolation and foster a sense of community and mutual support.

Likewise, UK organi­za­tions could offer more welcoming projects to freelancers, treating them as part of internal teams and intro­ducing them to their culture through team building and social activ­ities.

Opportunities and the learning curve

While challenges emerge, the landscape also presents numerous oppor­tu­nities. Freelancers who specialize in emerging and in-demand areas like digital trans­for­mation and AI can command higher rates.

The remote working trend is expanding the potential client base and enabling UK freelancers to tap into inter­na­tional markets.

UK freelancers have a clear advantage over the rest of Europe as they spend an average of five hours a week on skills devel­opment — something their European counter­parts spend less time on.

This commitment to continuous learning is central to their adapt­ability and compet­itive advantage, creating a perfect talent pool for many local and inter­na­tional organi­za­tions.

Additionally, hiring freelancers has now gone beyond just hiring a person for a job or project. Instead, they add value by helping teams upskill, not just fill a capacity need.

Companies bring someone with invaluable knowledge and expertise into an organi­zation who can be integrated and stay with the organi­zation long after the freelancer leaves.

Principled partnerships and new paths

For many freelancers, principles are important. Aligning with customers who share their values ​​is critical 75% are willing to reject projects that conflict with their personal beliefs and values ​​– a bold stance that under­scores freelancers’ increasing demand for meaningful and ethical work.

Additionally, there are efforts to foster stronger client relation­ships, with freelancers empha­sizing trans­parent commu­ni­cation and clear briefings to ensure repeat business and long-term careers.

Take a step forward in 2024

Despite IR35 and economic challenges, the courage and entre­pre­neurial spirit of the community remains strong. Experi­enced profes­sionals rely on their years of experience and contin­ually adapt to market require­ments.

At the same time, a wave of new freelancers shows that the appeal of indepen­dence and self-deter­mi­nation remains unbroken.

Lessons from Europe and other parts of the world highlight oppor­tu­nities for the UK to improve its freelance landscape: from strength­ening support struc­tures and collab­o­rative environ­ments to softer regulation that encourages freelancers without legal or financial penalties.

Ultimately, the narrative of the UK freelance and independent consul­tancy industry in 2024 is one of resilience.

As the UK’s independent talent makes its way 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 and lifts the UK economy to new heights.

Charlotte Gregson, country manager at Malt.