empty desks

Self-employed sector shrinks by £25b in ‘wake up call’ for government

Research highlights an 8% contraction in value of the sector, but also offers solutions for improvement

Research published by the Association of Independent Professionals and the Self-Employed (IPSE) this month has found that the value of the UK’s self-employed sector shrunk by £25bn in 2022.

The contraction represents an 8% decrease in the value of the sector since 2021. In reaction, IPSE has called on the government to “change course on its agenda for the nation’s smallest businesses” in a press release announcing the findings.

The research forms the basis of IPSE’s Self-Employed Landscape report, which has found the self-employed sector currently contributes a total of £278bn to the economy. The 2021 figure was £303bn.

IPSE analysed employment data from the Office for National Statistics Labour Force Survey as well as government estimates of business population and turnover.

Commenting on the findings, Andy Chamberlain, Director of Policy at IPSE, called them “very concerning.”

A clear path to improvement

However, while Chamberlain expressed concerns about the findings, he also suggested that they provide a roadmap to improvement, calling the findings “a wake-up call to government.” He continiued: 

“Policies which are detrimental to the sector, such as the IR35 rules and the VAT threshold acting as a cap on activity, should be reviewed.”

Ahead of the spring budget on 15th March, the government has also faced calls from its own MPs to revisit IR35 reform.

Sir John Redwood – the MP for Wokingham, Berkshire and a former Secretary of State – has recently urged Rishi Sunak and Jeremy Hunt to rethink the government’s approach to taxation.

Speaking to Sky News on Sunday, 12th February, Redwood called for changes to IR35 reform and a rethink of the planned increase to Corporation Tax due to take effect in April.

Positive findings hide behind worrying headline figure

While the IPSE report’s headline figure is a cause for some concern, it also features positive developments about the current state of the self-employed sector overall.

The segment has seen an increase in disabled workers and mothers. With both groups generally underrepresented in the wider workforce, the fact that self-employment offers working opportunities to diverse groups is something to celebrate. It’s also indicative of the sector’s importance to the overall economy.

Alongside this, the report has found that self-employment offers opportunities for older workers to become economically active or increase their economic output alongside other jobs.

The average age of self-employed workers is 48, and the number of self-employed workers aged 60 or older has increased by 7% since last year – accounting for 21% of the self-employed population.

Referencing these positive findings, IPSE’s Chamberlain called self-employment “an attractive option for key groups, particularly older workers.”

“If government is serious about growing the economy and tempting them out of economic inactivity, it should be doing all it can to make self-employment an attractive and aspirational option.”

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