Tips for Contractors

Contracting in a Recession - What to Expect and How to Survive

With the exception of falling oil prices and a slight lift in house sales*, it seems that the economic outlook remains grim. Of course, in the November 2008 pre-budget report the Chancellor was optimistic about the strength of the British economy and "confident that the slowdown will be shallower and shorter" than many other people believe. But while employers may have been riding the storm over the last year as demand fell and inflation pushed up their costs, the most recent employment figures suggest they're finally being forced to cut staff numbers.

In October, the number of people unemployed in the UK jumped at its highest rate for 17 years. Worse, November's figures revealed that this was no one-off; the month saw unemployment rise to an 11-year high of 1.82 million people. Redundancies continue to go up, at the same time that vacancies fall.

It seems that the looming recession is already having an effect on employees, then, but what do the figures mean for contractors? Do fewer permanent positions also mean fewer opportunities for freelance and contract work, or will it be a boom time as employers keep a tight cap on permanent staff numbers, handing out ad-hoc work and short-term contracts?

Boom or Bust

There isn't much cheer for businesses or employees at the moment, and contract workers are no exception. The Professional Contractors Group (PCG)'s 2008 membership survey, published in November, showed that its members' confidence in the overall economy had plunged. At this time last year, 30.5% of members expected things to improve over the following 12 months. In this year's survey (opens PDF), just 4.6% did, and an overwhelming 60.4% expected things to deteriorate.

"These definitely are difficult times for freelancers," says John Kell, the PCG's policy and external relations manager. "We know from our survey that confidence among them has fallen through the floor this year, and there is less work around."

But, Kell explains, as the recession takes hold and employers look for flexible staffing solutions, it's possible that freelancers and contractors could find themselves in a better position than most.

"It is a complex phenomenon," he says. "It may be that as we get further into a recession and clients want to reduce their employee headcount, they might take some freelancers on to keep things ticking over."

It certainly wouldn't be unprecedented, in fact, IT contractor Paul Bunkham thinks he may have been here before. "I've not been freelance during a recession," he says, "but I was when the dot-com bubble burst which I thought would prove a problem.

"In fact it seemed there was still a lot of work around - albeit in daft places - as big companies didn't want to take on permanent staff for new projects only to lay them off six months later."

However, Kell warns against being overly optimistic: "It's not going to cancel out completely the overall effect, which is that there's less work available," he says.

Making the Most

So if there's less work available, and potentially more contractors fighting for it, how can contractors and freelancers maximise their chances of winning and keeping work?

"IT freelancers, and other freelancers for that matter, are still people with skills in short supply, and work still needs to be done," says Paul Bunkham, but he adds that flexibility is key.

"I'd say they'll still get work, but will maybe have to compromise a bit by travelling a little further, or taking on some less interesting jobs."

Another clear message is that professionalism, quality and punctuality remain vital. We spoke to the commissioning editor of a national magazine, who told us: "The key methods for getting and retaining work remain the same as ever:

• Clearly communicate what kind of work you can do.
• Provide samples and references when necessary.
• Be available (whether on the phone or online) to discuss potential work when it arises.
• Produce good quality copy on deadline.

However, while it may be an employers' market, contractors should be wary of making too many compromises. "One thing to not change is your rate," Paul Bunkham says.

"People will be undercutting you, but will eventually get in to the trap of having taken on too much work too cheaply. The client will go and find someone to get the work done properly at the going rate.

"Moreover, going in too cheap will often put people off."

But what can be done if the work simply isn't there? As John Kell rues: "If economic conditions are tough, we can't wave a magic wand and make them better again."

There are organisations and representative bodies offering help to contractors and freelancers. For freelancers, groups like Shout99 can help put you in touch with others who may have been in a similar boat, and experts who can help keep you out of trouble. Many areas or industries also have loose networks of freelancers who may be able to help. If you're not already part of one, you could ask around your industry - or consider starting a group.

The PCG has also been trying to prepare its members for uncertain times. "Hopefully our existing members will have followed our advice and will have a good financial buffer in their business to tide them over," Kell says.

"For those who haven't, we're also looking at producing guidance on claiming Jobseekers' allowance, which we've started to get enquiries about in significant numbers for the first time."

This last is an ominous sign, perhaps, but Paul Bunkham explains that even here, contractors have an advantage. "If the freelancer is incorporated, has been successful recently and makes a loss over the next couple of years, then they can actually claim some tax back.

"Not many employees will be able to do that if they get made redundant."

While the overall picture may not be good, it's clear that contractors' flexibility gives them an advantage in many ways. Only time, and the impact of the various measures being taken to prop up the economy, will reveal how significant the slowdown will be, but planning and professionalism will give you the best chance of riding out the storms ahead.

[* Published by Coverzones, November 2008]