Self-employed sector shrinks by £25bn seen as ‘wake up call’ for government

New research suggests the self-employed sector’s contribution to the UK economy fell by an estimated £25bn in 2022 is a “wake up call” for government to change course on its agenda for the nation’s smallest businesses, the UK’s freelancer trade body has said.

The findings, released by IPSE (the Association of Independent Professionals and the Self-Employed), suggest that whilst the solo self-employed population remained stable at 4.1m in 2022, the sector’s economic contribution plunged by an estimated £25bn to a total of £278bn – an eight percent contraction compared to 2021.

The figures come as IPSE launches the latest edition of its ‘Self-Employed Landscape’ report, which tracks both the Office for National Statistics’ Labour Force Survey and the government’s own business population and turnover estimates, to estimate the economic contribution of the solo self-employed.

The report provides a yearly snapshot of the sector and reviews the size, make-up, and overall contribution of the those who work for themselves.

Despite the fall in the sector’s economic contribution, the 2022 Self-Employed Landscape report yielded positive news for groups underrepresented in the workforce. The self-employed disabled population continued its trend of year-on-year growth since 2013, increasing by 42% during this time, whilst the number of working mothers in self-employment has increased by 55% since 2008 – the latter now accounting for 13% of the solo self-employed workforce.

The average age of the UK’s solo self-employed is now 48 years old – one year older than 2021 – with the 60+ age bracket growing by seven percent in 2022, more than any other age group, to account for a fifth (21%) of the solo self-employed population.

Andy Chamberlain, Director of Policy of IPSE, said: “Whilst the self-employed population has been resilient at best – and stagnant at worst – it is very concerning that the sector’s economic contribution has fallen by £25bn, pointing to a less rewarding operating environment for solo business owners.

“This research should act as a wake-up call to government. 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.

“We know that self-employment is 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.”