If you do your maths you'll find there's not a lot of difference in the total cost of buying it outright or subsidised on contract when you take your monthly tariff into account.
exactly for the same mins and texts and data it often works out very similar (usually sim free works out about £20-£30 cheaper over a 18 month period) so why on earth would anyone ever choose to sign up to be locked into a contract?
esp when considering: with sim only at
any time if there is a better deal from any network you are free to switch therefore saving you money,
and most importantly if for any reason you were to get into finantial difficulties (ie redundant) because you are not tied into the contract you can instantly stop that outgoing and drop to a top up based PAYG, if you ever look at a money saving forum you will see tons of people who got a 24month contract and only a short way in have either lost the phone or been redundant and they are stuck having to pay that contract which they only got because they wanted that phone.
also it's not as simple as compering a fixed contract tariff to the exact same sim only tariff, you have to look how much mins and texts you actually use a month,
you will find many people pay for hundreds more mins and texts than they actually use a month, where the only reason they are paying that much is because that is the tarrif price that was offered for the phone they want.
Which is another benefit of sim only, you may need 3000 texts at the start of your contract but 8 months in you may only be using 300 because (since you already pay for data and because most of your friends have smartphones) you have started using email (or something like pingchat) instead of texts, at which point drop your tariff down and save £10/£15 a month.