Using a MacBook Pro Retina Display with USB3 external drives I am trying to find out if working directly from a USB3 external hard drive will slow down the Mac's performance in using software such as Photoshop CC. I realise this is not purely a Mac specific question, but I can't find the answer elsewhere. 

Basically I need to free up disk space on my Mac, and want to work with files stored on the USB drive. Is this acceptable practice or is it better practice to keep the files I wish to work on stored on the Mac's internal drive, and then only use the USB drive for storing files and backing up? 

The most common files I work with are large resolution photographs, and the software I use most is Photoshop CC.
The answer to your question depends on your setup, how you've configured Photoshop, and the actual external drive.

Typically one would have Photoshop configured to use the internal drive for its scratch disk location, so in that sense you won't overly slow your work down.

However, it's highly likely that you'll notice read/write speeds to be slower when saving and opening files from the external drive, although how much will depend on the actual drive and what you have installed as an internal drive. 

For example, if your internal drive is an SSD the difference will be quite noticeable, especially with larger files. However, if your internal drive is only a 5400rpm drive you probably won't notice any difference. And of course it'll be somewhere in between for 7200rpm drives or fusion/hybrid drives.

Regardless of what you do, make sure you have a backup regime in place. So if you use the external for your Photoshop work, then invest in another drive for Time Machine (or other) backups!

Some tips:


the more RAM you have, the better. Make sure your Photoshop preferences allow as much memory as possible.
make sure you have a reasonable amount of free space on your internal drive, not only for scratch disk purposes, but also for virtual memory usage.
you can work with a few files off your external USB as a test before moving everything across 
once again, make sure you have a backup regime in place!