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Self-employment and Microbusinesses - transforming the UK Economy

With falling living standards, high levels of in-work poverty and increasing inequalities, there is a quiet transformation going on in the UK economy which is changing many people’s lives for the better and challenging some of the dominant economic standpoints – the growth in self-employment. In the first of three reports on research by the RSA and Etsy, the RSA has revealed some surprising results, and challenges some of the popular myths.

Some interesting figures:

–        There are 600,000 more microbusinesses (defined as employing 1-9 people) in existence in the UK than when the recession began in 2008, and 40% more than there were in 2000. All other business types have experienced static or negative growth.

–        I in 7 of the UK workforce now self-employed – 15% of the total workforce. If current trends continue, this will be 1 in 6 in 10 years’ time.

–        Microbusinesses account for 95% of all private sector businesses and one third of private sector employment

–        Since the 1970s there have been 820,000 new microbusinesses

–        Self-employment accounts for nearly 90% of all new jobs added since 2008

–        The biggest increase has been in one person businesses which have grown in number by 60% since 2000.

–        In some demographic groups this trend is particularly strong – the over 50s, the young, women and immigrant groups.

–        Geographic spread is NOT London-centric – in fact in percentage terms, growth is higher in the regions

The RSA research explored (and is still exploring) reasons behind this. Their research identified and discredited some popular myths:

  1. Myth One – people are self-employed because they can’t get work and so have no choice. In fact only 27% of newly self-employed people since 2008 were unemployed
  2. Myth Two – the self-employed are largely low-skilled odd-jobbers. In fact the biggest growth has been amongst professional services
  3. Myth Three – it’s a cyclical blip caused by the recession. In fact self-employment has been increasing steadily since well before the recession

The findings seem to suggest that the reasons behind the shift are many – linked to demography (ageing population more likely to start a business), new technology which is reducing the cost of setting up and running a business and a shift in values, away from materialist ones towards a greater emphasis on the value of autonomy and meaning. Other factors could be the impact of new technology which has been steadily removing middle level jobs, a trend which has been accelerated by the recession, and the erosion of employee benefits, both of which have made self-employment a more attractive option than it used to be. Also, the media has changed the image of business owners who are increasingly seen as risk takers and pioneers. Markets have also changed with a switch away from heavy industry to the service industry with an increasing demand for tailored, unique and personalised products, best produced by local, small businesses.

Is it a good thing?

The research found that self-employment is often financially precarious with weak and irregular income, and stressful. Self-employed people work longer hours, earn on average less and are more isolated than people in employed work. However, they are also some of the happiest people because it offers greater autonomy, a sense of meaning and greater security.

Although there have been some policy initiatives to help the self-employed, there needs to be a much bigger focus on it – especially when thinking about tax changes and changes to the benefits system. The self-employed are a major factor driving our economy forward and have potential to do this more in the future. Small businesses, such as the many helped by Purple Shoots loans, bring huge added value to the communities in which they are based.

Source:  Salvation in a Start-up – Benedict Dellot, RSA

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