The UK is experiencing a boom in microbusinesses and self-employment. Today there are 600,000 more microbusinesses (firms with zero to nine employees) in existence than there were when the recession first began in 2008, and 40 percent more than at the turn of the century. Likewise, the number of people working for themselves has increased by around 30 percent since 2000, with the result that one in seven of the workforce are now self-employed. Nor does this trend show any signs of abating; 183,000 more people became self-employed in the first quarter of 2014.
This phenomenon throws up a number of important questions. What ‘types’ of microbusinesses are becoming more commonplace? What has caused the large increase in recent years? And what effect are they having on the economy and wider society? The RSA and Etsy have launched a new project, The Power of Small, which seeks to answer such questions and better understand this changing community. Future phases of the project will consider the broader macroeconomic implications of a growing number of microbusinesses, such as what it means for jobs growth, innovation and productivity. However, this report – the first of three – focuses in particular on the individuals involved, including why so many people are turning to self-employment and what this means for them personally.
Our analysis shows that the self-employed are a diverse group undergoing a gradual but important change. The number of people running microbusinesses is growing substantially, yet the real activity appears to be happening at the small end of small, with the part-time self-employed accounting for much of the business activity witnessed in recent years. There are also signs that certain demographic groups are increasingly turning to self-employment – most notably women, the over 50s and young people – and in doing so are disrupting entrenched stereotypes. This much is acknowledged by most commentators in the field. However, there is considerable disagreement over what has caused such changes, and whether the boom is part of a long-term recalibration of our economy or simply a cyclical blip.
Our research identifies three myths in particular that have distorted the debate – the first being that most of the newly self-employed are there through no choice of their own. While levels of unemployment and self-employment are positively linked, this is only one part of the story. Our RSA/Populus survey finds that only 27 percent of those who started up in the recessionary period of the last five years did so to escape unemployment. A second myth is that most of the newly self-employed are low-skilled odd-jobbers scratching around for work. But look closer at the data and we see that the biggest increases in self-employment since 2008 have actually been in professional occupations (one of the highest skilled groups). Finally, there is the myth that the boom we are witnessing is a cyclical blip. Yet this ignores the fact that self-employment had been increasing long before the recession began.