Self-employed sector shrinks by £25bn, according to new research

And the figures should sound a warning to the government to change course on its agenda for the nation’s smallest businesses, the UK’s freelancer trade body has said.

IPSE said the findings suggest that while the solo self-employed population remained stable at 4.1 million in 2022, the sector’s economic contribution plunged by an estimated £25 billion to a total of £278 billion — an 8 per cent 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.

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 per cent during this time, while the number of working mothers in self-employment has increased by 55 per cent since 2008 — now accounting for 13 per cent 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-plus age bracket growing by 7 per cent in 2022, more than any other age group, to account for a fifth (21 per cent) of the solo self-employed population.

Andy Chamberlain, director of policy of IPSE, said that while 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 £25 billion, 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,” he said

“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.”