Empowering the Freelance Economy

More interest rate hikes on the cards says expert

Freelancers must prepare their business for higher interest rates/ Photo by RDNE Stock project via Pexels
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Freelancers should prepare for more bad news to hit the economy later this year. The good news is, there are actions freelancers can take now to get ahead

The latest employment and wage figures from the ONS could spark the Bank of England to raise interest rates again in an effort to bring down consumer spending and inflation, according to Sarah Coles, head of personal finance, Hargreaves Lansdown.

Many contractors and freelancers that may have increased their rates in the past year to either match rising inflation or to counteract up to a 30% pay cut for having to take inside IR35 roles are unlikely to feel any better off. That’s because the cost of most items is rising, notably mortgage rates for those coming off low fixed-rate deals.

“With more bad news on interest rates in the pipeline, there’s a risk this could be the first of many worrying pieces of data emerging about jobs over the coming months,” says Coles.

The impact of rising interest rates on freelancers, retirees and carers

Those freelancers renewing mortgage deals this summer and in late 2023 could be looking at paying up to £500 or more than they were just a few months ago if interest rates stay the same or go up. The other worry is that vacancies and newer employment figures for April have fallen, the number of full-time employees has dropped, and unemployment and redundancies have risen.

The higher cost of living means retirees and carers are also returning to work – with men and part-time workers driving the rise in employment, according to Coles. The trend however is not isolated to the UK as retirees in other countries are also having to go back to work. The UK falls in the top 10 economies that do not favour retirement. Arguably, this means the tax authority is generating more taxes per person for longer than ever before.

Countries with economies that least favour retirement

Anti-goldilocks jobs figures not a good sign for the economy

Sarah Coles, Hargreaves Lansdown Senior Personal Finance Analyst and Podcast Host for Switch Your Money On

“These are anti-goldilocks jobs figures, with wage rises running too hot for the Bank of England’s liking, and the market cooling off far too fast to offer any certainty over jobs,” says Coles.

“It’s likely to mean both that interest rate rises are on the cards, and that more interest rate rises could well exacerbate growing weakness in the jobs market. Meanwhile, retirees and carers trudged back into work, as rising prices made it harder to make ends meet,” says Coles.

Wages are closing in on inflation, but we’re still poorer with each passing month.

Sarah Coles, Hargreaves Lansdown

The personal finance expert explains that wage rises will ring alarm bells for the Bank of England. 

“It all comes down to wage increases, not everyone is getting these, yet everyone suffers from the higher cost of living and rising interest rates on credit cards, mortgages, and insurance premiums.,” she says.

Pay growth for the private sector was 7.7%, which is the largest growth seen outside the pandemic period. Meanwhile, pay growth for the public sector hit a 20-year high of 5.8%.

Coles believes that The Bank will be concerned that pay rises will raise demand and feed inflation.

“It means more interest rate rises are likely to be on the cards,” she suggests.

She adds, “Somehow, pay is simultaneously too high for the Bank of England’s liking, and yet too low to keep up with inflation. After CPIH inflation, real total pay (including bonuses) fell 1.2% and real regular pay (excluding bonuses) fell 0.8%. Wages are closing in on inflation, but we’re still poorer with each passing month.”

Fewer vacancies: what does this mean for freelancers?

Vacancies are down, which is a continuous trend marking a complete year of falling vacancies. This is a sign that hiring companies are not confident about the economy and will be unwilling to invest in staff. This could spell some short-term good news for freelancers who sometimes see opportunities arise when companies are not able to make new hires, but instead pay for short-term talent to complete or expedite projects, less the overhead costs linked to full-time employees.

What freelancers can do to prepare for a bad economy

  1. Diversify your product and service offering
  2. Save Money by going through your bank statements and cutting down on monthly costs that are not essential to your business or health
  3. Stay Flexible and Patient: Present yourself as a partner with your clients, showing how you understand their needs and provide special deals or rates to back this up
  4. Keep Marketing: not all sectors are suffering as others and you should reach new areas that could use your skills, expertise and experience. Make this known in your social media posts, profiles and website
  5. Invest in Client Relationships: it’s easier to get build on existing relationships than cold ones.
  6. Leverage what’s working: Double down on the offerings that are making you the most money; replicate those with new or existing clients

Source: Vicarel Studios

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