Self-employment since the crash: Numbers up, earnings down

A good piece from the Guardian’s Phillip Inman, earlier this week, on the shift from paid jobs to self-employment. I’m not so sure that it’s an ‘untold story’ though, given that some of us have been banging on about it for a while.

This bit was interesting:

Since 2000 there are 1.2 million more self-employed businesses, making a total of 3.7 million. Not many of them register mega-incomes. One characteristic of self-employed businesses is that most report incomes small enough to fall under the VAT radar (currently £79,000). Only 100,000 of the businesses that have sprung up in the last 14 years are VAT registered.

I dug around a bit more in the BIS business population data.

According to BIS, in January 2013, there were 632,865 more businesses than there were in  January 2008. However, over the same period the number of firms employing people fell by 20,995. Of the new firms employing just the owners, there were only 17,495 more businesses registered for VAT.  Most of these new businesses were therefore firms which employed only the owners and had annual turnover of less than £79,000. There have been great fanfares about the number of business start-ups but, of over half-a-million created since the start of the recession, the vast majority are very small operations keeping one or maybe two people off the unemployment register.

A couple of weeks ago, Duncan Weldon wrote a piece about the changing to the labour market, drawing on the recent ONS employment statistics.

There are a record number of people in work (up 651,000 since the start of 2008). Of course we also have a growing population, so whilst number of people in work is up the employment rate (the percentage of the working age population in work) is still below it’s pre-crisis peak.

[T]here has been a very large rise in self-employment (+486,000) against a much smaller increase in the number of employees (+135,000).

I couldn’t resist sticking this on a chart.

Employment 2008-13

Ministers like to brag about the ‘record number of people in work‘ but 75 percent of the increase since the start of the recession has been due to the rise in the number of self-employed people. As the ONS pointed out last year, the sharpest increase in the number of self employed workers came after 2011.

But surely, at least all these new entrepreneurs must be creating wealth to boost the economy.

Alas, it would appear not.

According to the IFS Green Budget, over the same period, income generated from self-employment fell.

Screen Shot 2014-02-06 at 15.15.08

So, even with 486,000 extra people, the income from self-employment fell by nearly 2 percent.

The picture emerges of a large number of people competing for a decreasing amount of work, or, as John Philpott said, an army of odd jobbers scratching around for whatever hours they can get

As I’ve said before, too much self-employment really isn’t a good thing. It is a symptom of economic basket-caseness. The IFS reckons that the recovery is now “underway in earnest” and that growth will “remain firm over the coming five years”. Let’s hope they are right. We’ll know things are getting better when the number of self-employed workers starts to fall. By a lot.

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26 Responses to Self-employment since the crash: Numbers up, earnings down

  1. Annabel says:

    It took me five years to make an income out of my business when I founded it and whlst I do not dispute your data, one of the features of being a start up or new business is that you don’t make any money for a while. Some will return to employment and others will go on to make a decent living. It will be interesting to see how the longer term statistics pan out.

    By the way the reason why business owners are usually so anti the higher rates of tax is that we don’t even earn our basic rate of tax for years and when we finally make some money we get clobbered at higher rates. If the chancellor was serious about encouraging new enterprise he would allow us to carry forward our unused personal and basic rate tax allowances so we could use them at any point in the first five years.

    • P Hearn says:

      It’s important to understand this blog is written from a different mindset from yours. This is the received wisdom that without the public sector to guide us we’d all be lost, more tax is good, the rich should pay even more, savings in public spending are impossible / immoral / stupid and so on.

      Stick with your business. It’s tough in a way the 99% will never understand, but don’t let them grind you down! Have a good laugh at the dystopian predictions on blogs such as this, and when the whole welfare edifice finally collapses under its own weight, you can have a good laugh as reality dawns on the masses.

      • Rick says:

        “this blog is written from …. the received wisdom that without the public sector to guide us we’d all be lost, more tax is good, the rich should pay even more, savings in public spending are impossible / immoral / stupid and so on.”

        Really? Blimey! I’d never noticed that. And I write the bloody thing.

  2. David says:

    Completely agree with Annabel . The articles opinion misses too many worthy issues just one of which is that it exposes people to the reality of how that income is made . Too many employees , particularly public employees , have little idea or interest in how the surplus which pays their salaries is made . The economy needs more individuals taking the brave step of self employment .

    • Rick says:

      No David, it doesn’t. It really doesn’t. High levels of self-employment are symptoms of failing economies. Wealth is created by scale, not by lots of people scratching around under the VAT radar.

      • David says:

        Oh really ? I’m sure Annabel will be delighted to hear that she’s merely scratching around under the VAT radar ….apologies Annabel on Ricks behalf I’m sure you’ll register and pay up just like the rest of us have . Of course I jest , but seriously Rik I don’t agree with the summation you make . On the contrary , I am convinced that high public employment is a sure sign of an economy going nowhere . The drain on public finances (tax receipts from Annabel et al) is simply unsustainable unjustified and ‘unequitable’ (sorry couldn’t resist it) . Properly supervised (an admittedly rare event) public employees provide the essential support for the creation of wealth by OTHERS. Naturally we’d all like comfortable BBC careers accompanied by eye watering salaries , conditions and , best of all , F. S. pensions . However , bloated as the corporation undoubtedly is even they can’t create enough employment for us all !
        Apologies to any BBC employees but shouldn’t you be working and not reading inflammatory blogs and you’ll get your revenge when drawing that pension !

        • Rick says:


          I didn’t mention Annabel’s business. I wouldn’t because I don’t know anything about it.

          What has public employment got to do with this?

          What has the BBC got to do with this?

          Why are you attacking arguments I haven’t made? Is it because you have no evidence with which to counter what’s in the post, so you have to set up straw men to knock down?

          • David says:

            Rick , don’t take on so . Your remark regarding ‘lots of people scratching around under the VAT radar’ made in juxtaposition to Annabels comment appeared (to me) to suggest that ‘self employment’ is not to be celebrated , or indicative of a failing economy and at the very least the remark is somewhat insensitive . Whereas I think the opposite albeit with some reservations .
            I assume that if self employment , from which a great many successful business’s develop , is an unhealthy sign then that only leaves public employment for us ? My caricature of the BBC as being the epitome of public employment can surely be forgiven in the light of recent events there . I guess that I have become over sensitive to the current notion that would have us believe , private employment bad …public employment good .
            So , no straw men and I don’t aim to counter the post just suggest a little balance .
            To be clear , I think the posting is excellent like so many of your others or I wouldn’t be here .

    • P Hearn says:

      Spot on David, but save your breath. Best to let these folks know it all, keep your head down and quietly make some money.

  3. dongately says:

    Annabel – it’s not just that it takes a while to generate income, the fact is the majority of small businesses fail – and if they fail badly they’ll leave a legacy of unpaid creditors, which isn’t really that healthy. Glad you had a good experience but the vast majority of new start-ups collapse after a couple of years – you’re one of maybe 5% of new business owners

    When small businesses do succeed they are often reliant on a place in the supply chains of much bigger businesses – they act as tentpoles and are the real drivers of growth. Growth in the potential suppliers to larger firms without growth in demand from larger firms is not a good sign. They only serve to drive the price down for other providers and that just amplifies the transfer of wealth to existing concentrations of capital. It’s really destructive

  4. Francesca says:

    it’d be interesting to know how many are casual workers rather than start ups. You might want to check this video out: it’s a video made by people in the creative industries who don’t get paid cos it’s all part of building your portfolio/CV etc. (in Italian with English subtitles)

    • David says:

      In a way it isn’t relevant Francesca . If they offer the market place something it wants enough to pay for they will prosper , employed or self employed . Most start ups begin (startup?) like mine did all those years ago with not just no income but a steady drain on savings until they hopefully make a return big enough for the worker/entrepreneur to take some sort of income , and its a scary time especially if he/she has responsibilities like a young family , mortgage etc .

  5. P Hearn says:

    Well, I’m going to close my small business in the morning and get a corporate job. I apologise to the British people for having some initiative, daring to risk failure, failing to fail, and for thinking for one moment that I could try to build something worthwhile.

    Having learned my lesson, I solemnly promise to stop at once*

    (* this may not be true)

  6. David says:

    Quite right too Mr Hearn . Fancy failing to fail , how could you ! Maybe you could reconsider Monday morning ?

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  9. Steve Williams says:

    Has there ever been a more ridiculous pity party than the previous two comments on this thread? Really should be preserved for internet infamy.

  10. Billy says:

    I spoke to some guy selling the Big Issue the other week. He said he was self-employed. Would not tell me how much he was on but was adamant he wouldn’t work for minimum wage because he valued himself. The assumption I made was that he was earning more selling the BI than he would be on min. wage. I wondered how much the government are subsidising his business – whether he was eligible for housing benefit, council tax relief, tax credits – or whether the selling of the BI had risen up the ranks of potential careers to the extent that one could fund rent, council tax and living expenses from selling it. After pondering it a while I walked a few streets down and found a women also self-employed as a BI seller. I wondered how many self-employed BI sellers my town of 30,000 needed. There was either a strong demand for the BI or something was amiss.

    Self-employment is the new “Disability”. Gets people off the official unemployment figures but I doubt it is saving any money or creating much wealth.

    • P Hearn says:

      Not sure how many BI sellers are distorting the figures in your town, but I can certainly show you lots of jobs at my local council that don’t add any value either and are also, by definition, being subsidised by the taxpayer.

      Given that the majority of tax payers themselves receive more back from the state in benefits than they pay in through taxes, it’s unlikely the system will change, since turkeys seldom vote for Winterval.

      Until we end welfare as currently structured, both corporate and individual, this debate is academic since no alternatives will be countenanced.

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  14. Jd Morgan says:

    below is my reply to comments made on huff Post by a Colin Shingler

    ………….Have you ever seen the turnover rate for the self employed.

    The last figures I saw, about two years ago stated that almost a half failed in the first year of operation.
    Another serious dent in the tax take, as many of those who went under either went bankrupt or never made enough to even pay tax.
    The bulk of the new start ups were in business’s where they either had little business experience, were stupidly undercapitalised, or were entering a market already over stuffed with like competition.

    Those that have survived, it was stated, were in the main, entering with novel enterprises, with little competition, good marketing skills, and adequate initial funding.

    Most of these who start up, do so on a one man /woman basis, so they don’t actually take on many others. Preventative problems exist such as NI contributions, proper office bureaucracy, VAT, income tax, holiday pay, and of course, for a newbie enterprise. rather prohibitive insurance cover.

    Not so easy when you have limited official skills, experience or funds, and that is why so many start ups fail so quickly, but as usual a typical Tory supplicant to the altar of capital, will ignore the bad news, and pump up the false figures taking only the total number of start ups, without deigning to mention the very high percentage of instant failures.

    I tried to answer the points he made on a consecutive basis, and I did not refer to any source other than my own memory and personal experience of being self employed, and in reality never making a profit, not even a decent basic income most of the time, and that was not over a year or so, but ever since 1970. until I retried at 74 four years ago
    Many of my colleagues and competitors in construction, on a self employed basis, ‘enjoyed’, (if one can use the term,) working for themselves., The only main benefit was not having to pander to the ‘boss’ which many find, and I suggest,found to be oppressive and domineering.
    yes it was freedom of a sort, but one still had to get stuck ion to even break even.

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