Given what we know about the rise in self-employment, we would expect to see an increase in the number of no-employee businesses and that is what has happened over the last fifteen years.
Despite this, though, the share of turnover accounted for by these businesses is actually less than it was in 2000. Their share of total employment has risen from 13 to 17 percent while their share of turnover has fallen.
Turnover per worker has increased for the largest companies, fallen significantly for small firms and collapsed for microbusinesses. The number of non-employee businesses has increased by 74 percent, their total turnover is only up by 24 percent in real terms. That means a lot more businesses needing to be fed from a pot that hasn’t grown by very much.
Again, this corroborates what we know from the analysis of ONS, DWP and HMRC figures about the drop in self-employed earnings. The number of self-employed might have increased but, relative to the size of the economy, the amount of business they have generated hasn’t. The numbers don’t look all that great for small businesses either, while medium-sized ones have just about held their own.
On average, according to the NPI research, businesses with no employees turn over £53,000 a year, which is well below the VAT threshold. As the BIS figures show, this is where most of the growth in the number of businesses has come from over the past 15 years.
Source: BIS Business Population Estimates
What seems to have happened is that the usual churn of small and very small businesses has slowed down so the number of people who might normally have been expected to stop running businesses has fallen. As the NPI’s research earlier this year showed, people are staying self-employed for longer.
At one time, a hairdresser or fast food outlet might have folded once there was one too many on the high street and its owner either gone back into employment or retired. Nowadays they tend to keep going. This acted as one of the shock-absorbers for the economic downturn. Whereas some countries saw their unemployment rate rise after the recession, the UK’s self-employed gritted their teeth, hung on for dear life in barely viable businesses and buoyed up the employment figures.
There was a heated argument between Frances Coppola and Tim Worstall last month about whether the gig economy would create much economic growth. These figures suggest that, when you consider how many more of them there are, one-man businesses in this country haven’t created all that much growth between them over the past decade-and-a-half. In terms of people employed, this may be the age of the gig economy but in terms of money, despite a huge increase in their number, Britain’s microbusinesses have a smaller share of the economy than they did fifteen years ago. In that sense, our gig economy hasn’t grown, it’s shrunk.