UK braces for mass redundancies in coming weeks: How can freelancers prepare?

James Cockett, CIPD Senior Labour Market Economist, said one in four (25%) employers are planning to make redundancies in the three months to March 2025, another record high outside of 2020 when the COVID pandemic struck the UK economy. We examine the implications for the economy and how freelancers can best prepare for the coming weeks.

Forty-two per cent of employers in our survey plan to raise prices because of these increased employment costs, with 68% of retailers and 59% of employers in hospitality opting for this response.

“Major fiscal event” sparked mass redundancies

Cockett said between quarters the HR body witnessed what it is calling a “major fiscal event” that has set in motion an arguably downbeat employer sentiment:  the Autumn Budget 2024.

“Two-fifths of employers believe changes to National Insurance (NI), announced by Chancellor Rachel Reeves, will increase their employment costs to a large extent. These tax hikes, to fund increases in spending on public services, are likely to have inflationary and employment effects, echoed by the recent Bank of England Monetary Policy Report. Forty-two per cent of employers in our survey plan to raise prices because of these increased employment costs, with 68% of retailers and 59% of employers in hospitality opting for this response.”

The quantitative analyst continued, “The impact on hiring can be seen by the third of employers who plan to reduce the number of employees through redundancies and/or recruiting fewer workers, because of these increased employment costs.”

But the pain doesn’t stop there. He said the survey findings revealed that employers also plan to reduce the number of overtime/bonuses and reduce the hours worked by staff.

He said, “Troublingly, one in four employers expect to cancel or scale down plans for investing in or expanding their business. This is particularly pertinent among private-sector SMEs. One in five organisations also plan to cut back on training expenditure. Lack of investment in business goes against the UK Government’s growth agenda, and low investment in people and skills is likely to have longer-lasting impacts, creating skills gaps and making the UK a less attractive place to invest. Our data suggests, however, that the investment in public services may ease recruitment and retention difficulties in the longer term.”

Take the good with the bad

In response to increased employment costs, 42% of employers reported that their organisation will be impacted and plan to raise prices. A third (32%) of employers plan to reduce the number of employees through redundancies and/or recruiting fewer workers.

However, some employers still plan to recruit. Sixty-four per cent of employers plan to recruit in the next three months, down from 67% in the previous quarter. Recruitment intentions have fallen across all sectors, though. They remain highest in the public sector at 76%. Sixty-one per cent of employers in the private sector plan to recruit in the next three months, down from 65% in the previous quarter.

Plus, the median expected basic pay increase remains at 3% and expected pay awards in the next 12 months will remain stable in the private and voluntary sectors (both at 3%) but have fallen in the public sector from 4% to 2.5%.

What does all of this mean for freelancers?

As independent workers it means costs will likely go up for any business-related products or services you purchase. Negotiate for better deals any chance you get.

In its initial forecast, the Office for Budget Responsibility (OBR) estimated that Budget policies will increase CPI inflation by 0.4 percentage points in 2025–26. In the tax year, it assumes firms pass on 60% of the higher costs to workers and consumers, via lower wages and higher prices, leaving 40% to be absorbed by the employer in lower post-tax profits.

The CIPD data suggests only 22% of employers plan to absorb the costs and take lower profits. The OBR plans to deliver revised forecasts for the UK economy on 26 March. So put that date in your calendar!

All of this uncertainty means freelancers will have to keep on top of redundancy news, which is a sad state of affairs but often a means to see which industries and companies may need flexible, highly skilled talent to avoid employee-related costs.

More companies looking to hire freelancers

Some 10% of employers said they would be looking to cut costs by hiring more zero-contract workers. Employers in the healthcare, hospitality and information and communications sectors were among those favouring this trend the most.

Industries that have suffered a significant fall in the net employment balance, driven by a rise in the proportion of employers who believe their staff levels will decrease:

• retail: +23 to +1
• arts, entertainment and recreation: +10 to +2
• hotels, catering and restaurants (hospitality): +18 to +7
• transport and storage: +28 to +11
• administrative and support service activities and other service activities: +29 to +15
• primary and utilities: +37 to +22
• construction: +43 to +27

Construction recruitment hit with growing pains

Last quarter, just 1% of employers in construction believed their staff levels would decrease in the next three months. Despite the UK Government outlining large scale housing and infrastructure plans in the last quarter, one in 10 employers in construction now believe there will be a fall in staff levels over the coming period. However, post-pandemic redundancies, retirements, and Brexit, have made recruitment difficult. There just are not enough construction and building trade workers available in the UK to carry out the government’s housing agenda.

Be prepared to negotiate in tough times

That said, once companies make cost cuts, they can also see it as an opportunity to cut even more, which could mean they try to decrease their freelancer budgets. That sounds counterproductive but department heads will be encouraged to keep costs down any way they can. That means freelancers have to be prepared to negotiate but not, so they are out of pocket, but simply working smarter. For example:

• Charge for your expertise, insights and experience. Not your time.
• Create a package that values your expertise and quality of output with new and existing clients. Avoid offering just one end product. Outline what one assignment entails and the benefits to the client that this will entail. This process will be catered to your line of work and industry know-how.
• Don’t let new clients milk you. Set out clear deliverables, fees or rates and any extra charges at the start of the negotiations and have these written in your contract or a Statement of Work.
• Ensure your online profile and portfolio are updated and in easy-on-the-eye formats for prospective clients and recruiters to clearly see the calibre of your work and experience. Snoop the competition or fellow freelancers for online portfolio inspiration!

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