A new report has found that almost nine in 10 UK businesses have been forced to increase their rates for contractors to attract the right talent.

Much of the UK is experiencing a labour shortage at the moment, driven by a number of distinct factors, and the world of freelancing and contractors seems to be no different.

However, the main impact forcing the rates of contractors higher appears to be IR35 reform in the private sector.

According to the new study, of those firms that had increased their rates for contractors, 75 per cent were required to raise the amount paid by more than 10 per cent.

The research also showed that 77 per cent of end clients now find engaging contractors difficult, with half describing the process as “challenging”.

Despite rising rates, 90 per cent of the companies questioned intend to extend their use of contractors during the next year and a half to fill gaps in their workforce or to support further growth.

Surprisingly only 31 per cent of businesses had increased rates due to fears of non-compliance. Instead, contractor costs (53 per cent), talent attraction (42 per cent) and project delays (42 per cent) were seen as the bigger risks of using a “bad IR35 solution”.

The report stated: “For businesses that rely on the contractor workforce to deliver projects on time and to budget, access to a talented flexible workforce is vital to growth.

“With job vacancies reaching an all-time high, presenting an attractive, compliant and competitive IR35 offer to talent is the best way to regain some control in an uncertain environment.”