Contractors are the key enablers of enterprise, entrepreneurship and growth, and are playing an essential role in helping the UK economy recover from recession. This is according to research presented to MPs on the All Party Parliamentary Group (APPG) for the freelance sector at the Houses of Parliament on 6 July 2011.
The research was presented by academics and experts, who pointed out that contractors are not failed growth companies or entrepreneurs, as they are often unfairly branded. Instead, single-person contracting businesses offer exactly those kinds of growth and entrepreneurial businesses that enable enterprise, offering as they do the right skills and expertise at the right time and on a flexible basis.
Some of the most significant research findings presented at the PCG-organised event proving the economic benefits of the contracting model were focused on the construction sector. This means there are still huge gaps concerning other mainstream contracting sectors, such as IT and engineering, which PCG plans to fill.
Lessons from the construction sector
Construction contractors and their economic role have been the focus of recent research by Professor Andrew Burke. The founding director of the Bettany Centre for Entrepreneurial Performance and Economics at Cranfield School of Management, Burke says that contractors enable the use of predominantly specialised labour “on a contingent basis”.
His research shows that contractors, or construction freelancers such as labour-only subcontractors or ‘pricework subbies’, boost productivity, lower costs, promote innovation and de-risk much of the economic activity in the sector.
Because construction firms don’t have huge teams of specialist employees, who may spend up to 80% of their time relatively unused, barriers to entry are lower, competition is much fiercer and access to finance in the sector is easier as a result.
Where project implementation is a moving target and lead times can only be a matter of a few weeks, without a flexible workforce UK construction firms would be simply unable to complete projects on the same basis as they do now.
PCG insights into other mainstream contracting and freelancing sectors
PCG’s Managing Director John Brazier presented some of the key findings from a 2010 National Freelancers Day survey conducted by ComRes. The survey’s results highlighted what business leaders in client organisations consider to be the key trends in freelancing, which suggest contracting will continue to grow:
- 60% of business leaders believe it would be more difficult for businesses to operate without contractors
- 62% believe that working patterns are becoming more suitable to freelancers
- 55% believe that over the next ten years there will be a growing trend to contracting
- 64% believe that the traditional nine to five working day no longer applies to the people they work with.
However, when it comes to why contractors are hired, there are some marked differences in what contractors think versus what clients think. Brazier explained that 84% of contractors think the clients use them because they bring skills not available in-house. In contrast, only 35% of business leaders think this, and 44% say they use contractors to manage peaks in workload.
84% of contractors think the clients use them because they bring skills not available in-house. In contrast, only 35% of business leaders think this
John Brazier, PCG
How UK contracting compares globally
The Recruitment and Employment Confederation’s (REC) Chief Executive Kevin Green highlighted that the UK is the second best place to employ people, after Denmark, based on the ease of employing a worker and the overall level of regulation.
The UK also attracts the highest level of inward direct investment in Europe by overseas companies; Green explained that this is largely due to the flexible labour market supported by a sophisticated agency sector and an international talent pool.
And Professor Patricia Leighton, of the Universities of Hertfordshire and Leicester, drew attention to the growing international trend towards self-employment. “The value of freelance work is becoming recognised,” she reported.
Contractors as enablers of real growth
According to Burke, contractors are the enablers of enterprise, what he describes as “the entrepreneurs’ best friends”. Without the flexible workforce, small to medium sized enterprises (SMEs) launched and run by entrepreneurs would find it difficult to grow rapidly, if at all.
The research undertaken by Burke on the construction sector, commissioned by construction recruiter Hudson Contract Services, highlights the dependence that construction firms and their clients now have on flexible workers in that sector.
It has also raised the issue that there may be an optimum level of contractors required at any one time to ensure that the needs of contractor clients are met, and that these organisations’ growth is facilitated by access to what Burke describes as a ‘contingent’, or flexible and available on-demand, skilled workforce.
Data to support the importance of contractors and to determine their optimum level does not currently exist outside of the construction sector. PCG has pledged to address this gap in time for an autumn report, on the ‘value of freelancing’, aimed at MPs and ministers.