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August 15, 2014

Rise in UK self-employment 'mixed blessing'

The UK has seen the fastest growth in self-employment in Western Europe over the past year, according to the Institute for Public Policy Research (IPPR).

The number of self-employed workers rose by 8%, faster than any other Western European economy, and outpaced by only a handful of countries in Southern and Eastern Europe.

The IPPR’s analysis shows that the UK – which had low levels of self-employment for many years – has caught up with the EU average. If current growth continues, it says, the UK will look more like Southern and Eastern European countries which tend to have much larger shares of self-employed workers.

Rise in UK self-employment 'mixed blessing'Spencer Thompson, IPPR senior economic analyst, said: “Around 2,000 people a month are moving off benefits into their own business. The government’s response to the rise in self-employment has been to praise the UK’s entrepreneurial zeal, while increasingly promoting self-employment as an option to job-seekers.”

However, he added: “Some have seen it as a negative development, having legitimate concerns whether a lot of the new self-employed are actually employees by another name. The Monetary Policy Committee of the Bank of England, while divided on the issue, sees the rise in self-employment as a sign that the labour market may be weaker than it appears.”

Thompson said that not all self-employed people are ambitious entrepreneurs with growing businesses.

“The self-employed come in many shapes and sizes,” he said. “Some are entrepreneurs, driven by high-growth ambitions, innovation and disruptive business models, but many are sole traders simply looking to get by or small businesses happy to stay at their current level. The UK is just as much a nation of shopkeepers as a vanguard of cutting-edge capitalism.”

Chuka Umunna, shadow business secretary, said: “This entrepreneurial spirit should be encouraged, but worryingly we've seen self-employed people hit hardest by the cost-of-living crisis.”

Research by Labour shows that self-employed incomes fell by £2,000 on average since May 2010. This 14% drop compares with a 9% fall for those in regular employment. The Office of National Statistics (ONS) does not currently include the earnings of self-employed people in its published earnings figures.

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