Spending cuts could bring opportunities for freelancers

The wide-spread public sector cuts announced by the Chancellor in the Comprehensive Spending Review could have a silver lining for contractors as Government departments turn to more freelancer support.

PCG - 'value for money'

Freelancers can play a vital role in Britain's economic fight back and the UK's 1.4 million freelance workers provide great value for money to both the public and private sectors.

John Brazier, Managing Director of freelancer group, the PCG, believes freelancers are better prepared than most to weather the storm and have a brighter long term forecast for Britain. Mr Brazier said: "Every single sector of our society will feel the impact of this far reaching review; from a PCG perspective it will be some time before we can directly assess the consequences of the review for our members. What we can say with confidence is that the public sector has increasingly engaged freelance workers throughout the UK because of their flexibility, skills and value for money.

"Despite these economically challenging times having this flexible and skilled workforce available will allow the public sector to call on a range of skills and resources when and where they need them. Freelancer flexibility on tap must be beneficial to all concerned. It can help local and central government control costs while providing the best service possible."

Brookson - 'not all bad news'

Martin HeskethMartin Hesketh, managing director, Brookson, providers of specialist accountancy and financial advice, said: "The significant spending cuts outlined in today's CSR will have implications for the contractor community, however, it may not be all bad news.

"OK, huge cuts have been announced across the public sector but this was inevitable and can hardly be a surprise to many of us. However, it is perhaps not all doom and gloom for self employed professionals.

"Planned cuts to governmental departments including energy and climate change (18 per cent over the next four years), transport (21 per cent), culture, media and sport (24 per cent) and defence (7.5 per cent) may pose more of an opportunity rather than a threat for contractors.

"In a nutshell, a government department wishing to tighten its purse strings will inevitably turn to making job losses for permanent members of staff. Contractors provide unrivalled benefits to a department head wanting to manage their budgets effectively. Employing a contractor to do the job required on a "needs must" basis presents an attractive option over a full-time employee.

"Also, there is good news for contractors based in the transport sector with a proposed investment of £30 billion from the Government into transport projects. Projects including the Mersey Gateway Bridge, Network Rail, Cross Rail, East and West Coast main lines and the London Underground network could provide fruitful opportunities for the contractors in that area.

"We anticipate this spending review could lead to the potential growth in the number of contracts available for self employed professionals."

Parasol - 'opportunities'

Rob Crossland, Chief executive of umbrella group Parasol, said: "Public sector spending cuts have the potential to create lots of opportunities for contractors as ultimately, the work of the public sector still needs to be done and employing contractors could be a low cost solution.

"It's not wage costs to the public sector that is the major issue here, it's pension contributions running at circa 15 per cent, with travel and subsistence expenses for public sector managers on top, creating a ticking financial time bomb that needs addressing.

"As an example, for a public worker on a salary of £25K, pension costs would be an additional £3,750. Employing a contractor to do the same job would still incur the £25K salary cost but would save £3,750 year on year. There is no need to reimburse contractors for their travel and subsistence expenses either. You aren't simply making a one off cost reduction; hiring contractors can help to make huge annual budget savings.

"The bonus for the public sector is that it will also have access to highly skilled, experienced and motivated individuals to complete projects without the need to supply a host of benefits and no redundancy costs when their services are no longer required. There is also the option to include longer payment terms in any contract, compared to paying employees on a weekly or monthly basis, which then creates cash flow savings for the public sector. This was of course one of the suggestions made by Sir Philip Green in his recent public sector spending review.

"It's easy to say contractor roles will be cut in order to save money but the fact remains they are ultimately cheaper to employ. As a controversial aside, fewer permanent employees within an organisation also means less union membership, which in turn depletes the union power base."

Clearsky - 'lower rates'

Derek Kelly, Managing Director of contractor accountants Clearsky, said: "Skilled contractors who do find work in the public sector may potentially have to lower their rates to be more attractive to public sector clients. However, the trade off is this might be acceptable in return for the security of a longer assignment paid for by the UK government.

"As an aside, the Chancellor has confirmed that he expects 490,000 job losses in the public sector, which equates to about eight per cent of all public sector employees. Although this is a huge reduction for the public sector, it does take place over four years and, according to economists, the private sector would need to grow by just two per cent in order to absorb the lost jobs.

"What should be of more concern to contractors, particularly those who rely on offshore tax avoidance schemes such as EBTs (Employee Benefit Trusts) to maximise their take home pay, is the proposed war chest allocated to HMRC in order to tackle non compliance in the tax system.

"There has been some extremely strong language used by politicians in recent weeks to describe tax avoiders and whether or not this is justified, EBT contractors should be feeling nervous at the moment and be reviewing how they manage their tax affairs."