Contractors reveal major factors impacting business performance

04th December 2020
Written by Qdos Contractor

Coronavirus, economic problems and IR35 reform affected contractors most in Q3

The self-employment association, IPSE, has published insight into freelancer and contractor confidence in the third quarter of 2020, with a combination of factors contributing to the second lowest confidence in the history of the study.


Following a year full of unprecedented challenges, the research shows the Coronavirus pandemic, its resulting impact on the economy, and Government tax policy have each created a difficult environment in which to operate.


Pandemic ranks as top negative factor 


Unsurprisingly, of the 15 categories put to contractors, the pandemic topped these workers’ concerns, with 80% of respondents citing Coronavirus as the biggest factor lowering their business performance in Q3. Look a little closer and it’s to be expected, with those surveyed said to have spent 39% of their time not engaged in contract during these months.


Long-term economic implications leave their mark


Alongside Coronavirus is the state of the economy, which 79% of contractors view as a main concern. The UK’s economic performance is closely attached to the ongoing crisis, which led to the first recession in 11 years in August 2020. As a result, contractors have experienced a drop in demand for their services, leading to a 24% fall in earnings for Q3 (£17,405) year-on-year.


But while the economy rebounded from July to September, and officially climbed out of recession, the Chancellor warned in his recent Spending Review speech that “our economic output is not expected to return to pre-crisis levels until the fourth quarter of 2022.” 


Further lockdowns are also said to have impacted contractors’ flailing confidence in the economy.


IR35 reform and Government tax policy a consistent threat

Making up the third factor affecting contractors is Government tax policy relating to freelancing, which 63% of individuals stated as the main contributor to poor business performance in Q3.


Contractors are, of course, referring to IR35 reform which, following a 12-month delay, will be introduced to the private sector on 6th April 2021. Despite many businesses taking a pragmatic and fair approach to the incoming reform, reports of blanket IR35 determinations and contractor bans not only weigh heavily on the mind of contractors, but look to be impacting their business performance too.


IPSE revealed that a growing proportion of contractors view the controversial changes as the biggest negative impact to their business. To some extent this mirrors recent Qdos research, which showed that contractors see IR35 reform as a bigger threat to their business than Coronavirus and Brexit combined.


To learn how to prepare for IR35 reform as a contractor and manage the risks that the legislation will pose beyond April 2021, please click here.


Innovation, reputation and collaboration can improve performance


Contractors were also asked by IPSE about the things that improved business performance in the last quarter. The three most important factors were; brand value and reputation in the marketplace (63%), innovation in the services offered to clients (51%) and the adoption of flexible working practices by hiring organisations (50%).


Looking ahead, and as contractors prepare to navigate IR35 reform, Coronavirus and the UK’s imminent departure from the European Union, this could prove important information. As could the thoughts of PeoplePerHour’s CEO, Xenios Thrasyvoulou, who worked with IPSE on the study:


“We hope that Q1 in 2021 can provide a more positive outlook. The expectation is that freelancers with digital skills will once again fare better than those that are required to be on-site with clients.”



Qdos Contractor provides an award-winning range of business insurance policies, advice and representation to freelancers, contractors and self-employed workers - from IR35 insurance and tax liability cover, to professional indemnity and public liability insurances.


Qdos Contractor
Written by
Qdos Contractor
Award-winning providers of insurance for the self-employed, Qdos are the leading authority on IR35, offering industry-leading employment status services to ensure the flexible working industry thrive. Qdos are the Best Contractor Insurance Provider 2022 and won the Queen’s Award for Enterprise in Innovation 2022 and 2017. 

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