Is the UK’s self-employed population set for an influx of employees?

At IPSE, we pay particular attention to figures estimating the UK’s self-employed population. Not only does it provide us with a clear snapshot of the sector’s impressive contribution to the UK economy, but any significant changes to the overall figure provides us with a strong indication of how recent government policy is impacting the sector.

As readers will be all too aware, many self-employed individuals have left self-employment – or the labour market altogether – in the last few years. A devastating cocktail of lacking government support during the pandemic and the subsequent implementation of reforms to IR35 in the private sector put many viable freelance businesses to the wall.

Unsurprisingly, this has been reflected in the Office for National Statistics’ figures on overall UK self-employment, with around 700,000 fewer self-employed individuals now operating in the UK since the onset of the pandemic.

IPSE’s Director of Policy, Andy Chamberlain, made this exact point earlier this week on BBC Breakfast, who were covering the dramatic drop in self-employment in the UK. Similarly, Sir John Redwood MP has also been championing the role of the self-employed and the devastating reduction in overall numbers in Parliament.

Employees seeking flexibility could provide the catalyst for growth

Despite this dramatic decline, there is some renewed hope that the sector could yet benefit from an influx of employees seeking the autonomy and flexibility that self-employment provides. Newly-published research by IPSE and accountancy provider Workwell now reveals that nearly one in four employees (24%) are considering switching from full-time employment to self-employment.

What’s more, nearly two-fifths of these indicated that they could make the move within the next 12 months.

When asked the reasons behind this newfound consideration for self-employment, employees cited the flexibility over how, when and where they work as the main driver. Similarly, other reasons included being their own boss, wanting to increase their earnings, dissatisfaction with their current work and even reconsidering what they want from life following the pandemic.

Upcoming Autumn Statement should embrace those considering self-employment

The Chancellor’s Autumn Statement next week presents an opportunity to prepare for this influx and help these willing entrepreneurs potentially realise these ambitions whilst also getting the sector back up to strength after the sharp decline during the pandemic.

After 13 years of less than favourable government policy towards the sector (to put it mildly!), we don’t expect any significant shift in approach. But, the following would be a welcome move in making self-employment a more attractive option to those considering it but also those that have left in the past few years:

• Removing the burden of IR35. This is one of the foremost push factors for former contractors who have left self-employment and a continuing factor in the UK’s rise in the economically inactive. If the government is serious about incentivising work, it’s vital that we remove this barrier to clients wanting to engage flexible talent.
• Make training in new skills tax-deductible. Employees considering self-employment may well wish or even need to hone their skills in order to establish a successful self-employed business. We should therefore be encouraging and cultivating these new ventures. Given the current (seemingly never-ending) talk of AI and the likely vital role of the self-employed in bringing this new technology to the market, this is also a particularly pertinent time for encouraging training in new skills.
• ISA reform. With 70% of the current self-employed population currently unable to access the LISA due to existing rules around age, the Chancellor should not miss the opportunity to tweak ISA’s rules to encourage greater use of these saving methods amongst the self-employed.