Should we be worried about the self-employment boom?

The UK is becoming the 'self-employment capital' of western Europe, but is it a sign of slack in the economy?

by Rachel Savage
Last Updated: 12 Mar 2015

Self-employment is booming in the UK, at such a rate that our workforce could soon look decidedly southern European. It climbed 8% year-on-year in the first quarter of 2014 – a jump only shy of those in Slovenia, Cyprus, Bulgaria and Lithuania.

Self-employed workers now make up 14% of the UK’s workforce, according to the research by think tank IPPR, ahead of 10% in France, 11% in Germany and all of the Baltic and Nordic nations.



Britain still pales in comparison to the beleaguered economies of southern Europe, where self-employment is 17% in Spain and Portugal, 23% in Italy and a staggering 32% in Greece. But these latest figures will stoke the debate over just how secure the economic recovery is, despite unemployment tumbling to 6.5% and stonking GDP growth.

Around a third of the rise in employment since 2010 has come from self-employment, leading many economists to point the finger as productivity has stagnated and wages still lag inflation. The Resolution Foundation, a think tank, estimates the self-employed earn 40% less than the employed.

But there hasn’t been any increase in the number of people self-employed for less than six months since 2012, the Office for National Statistics said last month. Much of the increase came from people delaying retirement, with more than half self-employed workers having gone it alone for at least a decade.

If wages really start to recover, rather than edging up in fits and starts behind inflation, then self-employment won’t seem like such a bad idea after all. But if that elusive ‘slack’ in the economy stays stubbornly put, the number of people working for themselves, but not at their full potential, should start to jab policy makers into action.

Tags:
Economy

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