UK Markets close in 5 hrs 27 mins

Self-employment shrinks by half a million as one in five consider quitting

Saleha Riaz
·3-min read
The ONS said the number of people who changed from reporting themselves as self-employed to an employee was 277,000 in Q3 2020, the highest level since records began. Photo; Getty Images
The ONS said the number of people who changed from reporting themselves as self-employed to an employee was 277,000 in Q3 2020, the highest level since records began. Photo; Getty Images

New data has revealed that the number of self-employed people in the UK has fallen to 4.5 million, down from 5 million at this time last year, and one in five who are left anticipate leaving self-employment, amid the economic fallout of the coronavirus pandemic.

The first set of figures is from the Office for National Statistics (ONS), which said the number of people who changed from reporting themselves as self-employed to an employee was 277,000 in Q3 2020, the highest level since records began.

In a statement, the national chairman of Federation of Small Businesses, Mike Cherry, said: “Our self-employed community was fundamental to our recovery from the last recession. If we want it to play that same role again, policymakers must do more to support it.

“The economy will be permanently changed by Covid, and we need to encourage more of those who are leaving jobs that will not return to launch enterprises that will be here for years to come.”

He said the FSB has worked with the government on an initiative called Enterprising You in Manchester, which explores ways to increase the take-up of training opportunities among the self-employed. He urged for this to be rolled-out more widely.

Cherry also said universal credit – government support for those on a low income, out of work or who cannot work – needs to be “permanently reformed so that it reflects the realities of starting a new business.”

Meanwhile, the Centre for Economic Performance (CEP) at the London School of Economics and Political Science said more than half (58%) of self-employed workers had less work than usual in August 2020, and 20% now expect to leave self-employment as a result of the crisis. The figure rises to 59% of those aged under 25.

READ MORE: UK unemployment rises at fastest pace since 2009 as redundancies hit record high

The study said the easing of pandemic restrictions over the summer only had a marginal effect on the self-employed.

A survey conducted in September showed even after England’s first lockdown lifted in July, 32% of self-employed workers had fewer than 10 hours of work a week in August.

On the up side, one group of self-employed workers – those who find work through smartphone apps in the “gig economy” – had a different experience, with around 28% reporting more work than usual in August.

However, the survey found that 78% of such workers felt their health was at risk while working but felt forced to do so any way for fear of losing future work.

It also found that a third of respondents think “normal activity” for businesses will not resume until after February 2021 – and one in 10 think it will never resume.

Women were more likely to have less work than usual in August than men, after taking account of differences in respondents’ ability to work from home.

READ MORE: EU accuses Amazon of warping competition on its marketplace

Stephen Machin, co-author and director of the CEP, said: “While the growth in self-employment has been one of the key trends in the labour market in the past two decades, there are now early signals that this trend could be set to reverse.”

The situation looks particularly dire as the UK settles into another lockdown, this time for one month.

UK unemployment has risen at its fastest pace in more than a decade, with redundancies surging to a record high between July and September.

The unemployment rate reached 4.8% in the three months to September, up from 4.5% a month earlier and as expected by analysts, according to ONS figures published on Tuesday.

Joblessness edged higher as layoffs grew and more people began hunting for work even before new national lockdowns hobbled economic activity in England, Wales, and Northern Ireland.

WATCH: What is the Job Support Scheme and how has it changed?