The number of registered company insolvencies in May 2023 was 2,552, 40% higher than in the same month in the previous year (1,825 in May 2022). This was higher than levels seen while the Government support measures were in place in response to the coronavirus (COVID-19) pandemic and also higher than pre-pandemic numbers, according to the latest figures.
Arguably, the cost of living and rising interest rates could have a big part to play as to why companies, small business owners and solo self-employed limited companies are drowning in debt and having to call it quits. Hiring cutbacks in certain industries such as technology, where many freelancers and IT consultants work, is also a contributing factor to self-employment woes.
- There were 2,505 Debt Relief Orders (DROs) in May 2023, which was 23% higher than May 2022. Monthly DRO numbers may be volatile at present due to the introduction of new DRO hubs.
- Individuals registered 617 bankruptcies, which was 5% higher than in May 2022, and around half of pre-2020 levels.
- There were 189 compulsory liquidations in May 2023, 34% higher than in May 2022. It must be noted that the number of compulsory liquidations has increased from historical lows seen during the coronavirus pandemic, partly as a result of an increase in winding-up petitions presented by HMRC.
Individuals can’t even save for a rainy day
Nine million people across the UK have no savings and another five million have less than £100, according to new research from the Money and Pensions Service (MaPS). These low levels of financial wealth are and have been for a number of years, an object of policy concern.
Compared with those in a couple with children, those who are single with children (i.e. lone parents, the vast majority of whom are women) are 14 percentage points more likely to have less than £2,000 saved, according to the Institute of Fiscal Studies.
“Single men and women without children are 5–6 percentage points more likely to have less than £2,000 saved. Couples without children, in contrast, are 6 percentage points less likely to have less than £2,000 saved compared with couples with children,” says the Institute’s report.
If you put the report findings in context to freelancers with the following situations, it paints a clearer picture of which freelancers or self-employed small business owners could be struggling more than others as 2023 carries on with inflated prices and rising interest rates.
How does house tenure factor in?
Compared with homeowners, private renters are not significantly more likely to have less than £2,000 saved, all else equal. Social renters are, however, 9 percentage points more likely to have less than this threshold.
“Those adults who are living with their parents (or others who are living with other adults other than a partner) are 10 percentage points less likely than homeowners to have low financial wealth, controlling for other factors, perhaps reflecting their greater ability to put money aside given low or no housing costs – or indeed the fact that they might be saving in order to build a deposit to enable them to move into private rented accommodation or to purchase a home,” said the report.
How could a mortgage crisis add to the insolvency rate?
Economists and rate-setters are preparing us for higher interest rates to be announced later this month on 22 June when the Bank of England will reveal the next base rate decision.
What does this mean for freelancers? Especially, those refinancing their mortgage this year? Coming up with thousands of pounds in extra salary/earnings, in some cases as much as £7300 for those paying London house prices.
That means many freelancers are going to have to work more or smarter or both to keep the lights on.
Most employees and freelancers work five days a week on average with a similar number of contracted hours, however, freelancers are more likely to work overtime than employees and be out of pocket during the cost of living crisis, as previously reported by The Freelance Informer.
Now may be a time to raise your rates to help cover your mortgage, credit card and loan payments. You can also provide special deals for new and existing clients where you will provide a certain amount of services for them for a set price over a set amount of time, as in a week or fortnight. That way you know how much you will be bringing in. Promoting this through your professional networks on LinkedIn, Facebook or Instagram is a good place to start.