Over a million self employed freelancers have gone into debt since the pandemic began due to late payment. This startling revelation was detailed in a report released by the IPSE (The association of independent professionals and the self employed) along with digital bank starling.
Research was undertaken by the parties to assess the major impact covid-19 has had on the UK’s self employed sector. The research found that 23% of freelancers have had to get a credit card to help with their finances whilst one in seven have had to use their overdrafts. 27% are reported to have used up their savings and 18% are saying they will need to borrow money to pay their tax bills.
The Uk’s freelance population was said to be at around the five million mark prior to the pandemic. This has now reportedly shrunk to 4.56m following a big drop in demand for freelance work.
Research showed that there has also been limited access to government support for freelancers. Only 33% of sole traders have accessed the Self-Employment Income Support Scheme, while just 22% of limited company directors have accessed support through the Coronavirus Job Retention Scheme.
On a positive note, 44% of freelancers haven’t had to use their savings or turn to borrowing or other support since Covid hit.
Freelancers’ financial situations have also been impacted by an increase in late payments during the pandemic. Over a third of the self-employed said that instances of late payment have increased and over a quarter have been paid late by a client during the pandemic. Being self employed and not being paid can be a major trauma for some.
One in six freelancers find themselves with no money to cover work-related expenses or basic living expenses (15%) as a result.
As well as causing financial hardship, the increased prevalence of late payments during the pandemic is taking a toll on mental health. Half (48%) who had been paid late said it left them feeling stressed or anxious and a third (31%) said they lost sleep over it.
This increase in late payments is likely to be felt more by women freelancers, as the report showed that they are more likely than men (67% vs 52%) to have encountered this issue with clients.
Women also reported late payments having a worse effect on them and were more likely to say that it led to them feeling stressed (56% vs 45%) and losing sleep (39% vs 26%). They were also more likely to find that late payments had left them with no money to cover work-related expenses (23% vs 15%) and even basic living costs (22% vs 11%).
Chloé Jepps, Head of Research at IPSE said: “This research shows in detail the drastic and deeply concerning impact the coronavirus pandemic has had on freelancers’ finances. In particular, it shows how its effects are likely to last for years to come, as many freelancers have burned through their savings and turned to credit cards and borrowing to get by. ”