2018 Outlook for small businesses and freelancers 

Small businesses have been called the back-bone of the UK economy. And, from figures released by the Federation of Small Business (FSB), it looks like this is true. What does 2018 hold for Small Businesses, including freelancers?

Some interesting statistics from 2017

  • small businesses accounted for 99.3% of the 5.7 million private sector businesses at the start of 2017
  • 99.9% of these were classed as SME’s
  • the total number of people employed by SME’s was 16.1 million, equating to 60% of all private-sector employment in the UK
  • annual turnover from SME’s totalled £1.9 trillion

Source: FSB

Freelancers make up nearly 35% of small businesses. According to The Association of Independent Professionals and the Self-Employed (IPSE):

  • the number of freelancers in the UK is nearing 2 million
  • between 2008 and 2016, the number of people choosing to become freelancers increased by 43%
  • freelancers contributed £119 billion to the UK economy

What is impacting the sector 

No-one is immune to the effects of Brexit, even small businesses. At the Autumn Budget Statement, the most worrying announcement was the OBE’s reduction to the UK growth forecast. They have slashed it from 2% to 1.5%. Plus, productivity growth was also reduced. Experts are saying that this can be attributed to the uncertainty that has been created by Brexit.

According to research undertaken by Market Inspector, Brexit will:

  • hit UK exports the hardest. In 2015, the UK export market was worth £133 billion. Brexit could see this value drop by £4.5 billion a year
  • This figure equates to an 8.8% reduction

The research also suggests that the loss of access to the single market could cost the UK economy £75 billion a year. This will ultimately impact on employment and the labour market.

Business rates have also been a key concern for small businesses. Rates have been steadily rising. In 2016-17, business rates are expected to total £29 billion. There was good news for business owners in the Autumn Budget, with the announcement that business rates would increase in line with the Consumer Price Index (CPI) instead of a Retail Price Index (RPI). This is estimated to save business owners on average 0.09% by 2018/19.

There was also some other good news for small businesses and freelancers, when plans were announced to delay the launch of Making Tax Digital for businesses with a turnover less than £83,000.

What’s in store for 2018?

As the New Year looms, we look into our crystal ball and try to predict what may be install for small businesses and freelancers in 2018.

The view by many is that there is an increasing ‘entrepreneurial’ spirit that exists in the UK which will push more people into setting up their own small businesses or to become a freelancer. This ‘entrepreneurial’ spirit is felt across the UK. According to the FSB, the top places for SME’s are Birmingham, London, Hull, Leeds, Liverpool, Manchester and Newcastle.

The world of work is changing, and there is a growing trend amongst businesses to bring in highly skilled individuals to work on a flexible basis. If this trend continues (which it is expected to do) this will only drive up the demand for talented freelancers.

AJN Accountants are specialists in helping contractors, freelancers and small businesses to save tax and time.

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