More than two thirds (71%) of public sector projects have been cancelled or delayed as a result of talent leaving, according to research by ContractorCalculator.
The IR35 legislation, in force since 2000 to counter tax evasion by contractors, saw changes introduced in April.
The public sector has seen 27% of its contractors leave, with 61% stating their refusal to work under the new system.
One of the big losers has been the NHS, which has seen 25% of its departments lose half of their flexible staff.
The changes have caused a deep dissatisfaction among contractors, with 39% considering changing careers altogether, due to the new reforms, according to the report.
In addition, 50% of respondents say they’ll never work in the public sector again if caught by the regulation, and 46% said they would do so if the government shouldered the additional costs.
“These findings should be a wakeup call to government and serve as a prompt to repeal the entire legislation,” said ContractorCalculator CEO Dave Chaplin.
“HMRC was warned that this would happen and now we have the evidence that shows just how damaging the changes have been – diminished access to the flexible workforce has caused irreperable damage to multiple vital public services, projects have been cancelled and others are running over budget by millions of pounds,” he added.