Just under 25 years ago, I started my own consultancy. It wasn’t my first company, but it was the first where I deliberately set out to stay as small as possible. There were times where I used sub-contract freelancers, and I found space for the odd student placement etc. whilst I was an academic, but essentially, it was just me and my wife, working from a room in my house. I suppose the business concept was not unlike the local groceries, mechanics, bookshops etc. known as “Mom and Pop Stores” in the US, except that we were selling engineering services.
Back in 1999, there were quite a few other “Mom and Pop Stores” in the engineering sector, doing the same kind of thing as us. There was also a large number of freelance contract engineers working through agencies, many of whom were effectively employees in all key respects other than tax burden, much to the annoyance of the UK tax authorities. Of course, the buoyant market for freelancers working through ‘personal service companies’ for tax reasons contributed to the development of the IR35 rules, a measure I will come back to later.
The problem for most little businesses is that they cannot compete on price with the “Big Box Retailers” like Amazon, Tesco, etc. However, unlike an independent bookstore or grocery, we found that we could actually compete with big consultancies on both price and quality. Big consultancy firms make money by charging out inexperienced people at sky-high rates. Without the enormous overheads, we could charge out a far more experienced engineer at a competitive rate and still make a healthy profit. In addition, we could offer agility: bigger consultancies would take weeks to process the procurement for urgently-needed site equipment, whereas we could simply go out and buy whatever was needed. Our business model addressed a gap in the market for independent process engineers.
Over the last twenty-five years, however, other measures have made it increasingly difficult for smaller players to compete effectively in the engineering sector. We used to have contracts with the UK Government, and with an assortment of large corporate entities, but the metrics used in tendering and procurement have changed, and now give greater and greater weight to criteria which favour other large entities. PQQs favour the size of your balance sheet and your PI insurance cover over your experience and even over your price.
Similarly, expert witnesses, most of whom were Mom and Pop businesses when I started, are being absorbed by companies which offer the big PII cover and balance sheet assurances to the big corporate clients. I don’t come across many reports written by genuine freelancers any more. There are problematic implications here. Many of the expert reports I see from people working on this basis suggest that maintaining independence is far harder as an employee, as is sticking to only offering opinions in your field of maximum expertise.
As for freelance contract engineers, their landscape has also changed. There was always a bit of a cultural difference between freelancers, agency staff and the salaried staff they worked alongside, but it was also understood that delivering successful engineering projects often relied on being able to rapidly staff up and down. This meant that we all had our place: ‘staffies’ got job security and predictable working patterns (at least theoretically), whilst freelancers commanded a higher hourly rate but at the price of less job security.
In recent years the IR35 rules – or more to the point, the fear of getting caught under them – has led to bigger companies ditching the freelancer contractors in favour of roles which offer the worst of all worlds- so-called “zero rights employment”. Judging by the number of emails from agencies I get every day, there is no shortage of opportunities which roll all the downsides of being a freelancer and a staffie into one badly-paid contract. Once you factor in your unbillable costs of commuting, accommodation and subsistence – not to mention the umbrella company fees – taking a commissioning role, especially in a remote location, might not pay much more than minimum wage. No wonder jobs like this abound – even if you find someone young/desperate enough to do it, they will be off at the first better offer.
It is interesting that, whilst wider society has begun to renew its appreciation of the small independent retailer or maker over the corporate giant, engineering seems to be going the other way. The challenge now is for independent freelance engineers to continue to carve out their own niches in amongst the land of the giants.
