In IR35

The Association of Independent Professionals and the Self Employed (IPSE) has welcomed last week’s Office of National Statistics (ONS) data showing an unexpectedly sharp fall in inflation but has warned that any benefits to freelancing and contracting professionals could be offset by a slowdown in their sector caused by reformed IR35 rules hitting private businesses.

The latest ONS data shows that Consumer Price Inflation (CPI), the most-watched measure of inflation in the UK, tumbled from 2.7% in August to 2.4% in September. Most economists had forecast a much more modest drop to 2.6%.

Mike Hardie, Head of Inflation at the ONS, explained that food had been the chief downward pull on inflation. The price rises seen in September last year didn’t, as some had feared, recur in September 2018, he added, noting that ferry prices had also eased back after an extraordinarily high summer peak.

UK inflation had been relatively subdued for a number of years before the EU referendum result of June 2016. However, the “Brexit” verdict prompted a sharp fall in the value of the pound, which in turn drove inflation upwards. The pound has since recovered, and in turn inflation has started to fall again, plunging from 3% at the close of last year to 2.4% in June. Although it started an upward trajectory during July and August, it now appears to be resuming its downward path, suggesting that the inflationary effects of the pound’s fall may be fading away.

For the self-employed, the news is especially welcome as it will ease business running costs and, as IPSE’s Deputy Director of Policy Andy Chamberlain observes, will allow people in all walks of life across the UK to feel that they have more money in their pockets. In effect, income, in real terms, has grown.

However, Chamberlain pointed to the latest quarterly Freelancer Confidence Index from IPSE, a survey tracking the income, confidence and attitudes of freelancing and contracting professionals, which found a modest decline in income in 2018.

The fall in inflation, he noted, may have helped confidence amongst these flexible independent workers to grow again despite the squeeze on income. However, warning of “dark clouds on the horizon”, he added: “There is still no clear plan to mitigate any effects of Brexit on the self-employed, and government policy on IR35 is highly likely to slow down growth in the sector.

“The government should prioritise the wellbeing of the self-employed sector as we enter this crucial time for the economy. That means reversing its position on IR35 changes in the private sector, or, at the very least, delaying any changes until 2020 at the earliest.”

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