20th August 2014
Self-employment is at its highest level for 40 years with 4.6 million self-employed in the period April to June.
More people (both self-employed and employees) continuing to work beyond the state pension age, with self-employment among those aged 65 and over doubling from 241,000 in 2009 to 428,000 in 2014
The rise in total employment since 2008, has predominantly been among the self-employed though that is partly because many fewer people are leaving self employment than in previous periods.
The number of over 65s who are self-employed has more than doubled in the past 5 years to reach nearly half a million. Unsurprisingly self-employed workers tend to be older than employees. They are also more likely to work higher (over 45) or lower (8 or less) hours (see table below).
The number of women in self-employment is increasing at a faster rate than the number of men although men still dominate. The most common roles are working in construction and taxi driving and in recent years there have been significant increases in management consultants. The number of self employed included 167,000 in building and construction, 166,000 taxi drivers and 144,000 carpenters and joiners.
The average income from self-employment has fallen by 22% since 2008/2009.
Looking across the regions, 17.3% of Londoners in work were self-employed. The second highest self-employment rate was in the South West at 16.6 followed by the South East at 15.8%. The North East had the lowest self-employment rate at 10.8%. The highest local authority area for self employment was the Isles of Scilly, which had the highest self-employment rate of any local authority, with 33.2% of people in work being self-employed. This was followed by the Orkney Islands with 28.2% and West Somerset with 27.8%. The lowest local authority areas for self employment were Corby on 8.7% and West Dunbartonshire on 8.9%.
Commenting on the figures, Hargreaves Lansdown head of pensions research Tom McPhail says: “We see this as further evidence of the shift in working patterns away from the traditional model of employment with complete retirement from economic activity in mid 60s, towards a more flexible approach to retirement. We see retraining and later life education as a key element to the promotion of continued economic activity into later ages.
“It is interesting to note that the self-employed make higher personal pension contributions than employed workers; an average of £4,230 a year compared to £3,600 a year for employees (2012, latest figures available from HMRC). However given that taxi driving and chauffeuring is one of the most popular forms of self-employment, it may be that people are pursuing this option because they cannot afford to retire yet. Unlike their employed counterparts, the self-employed do not benefit from automatic enrolment into an employer funded workplace pension”.
However McPhail says that two impending reforms may be particularly relevant for the self-employed.
“The new single tier state pension in 2016 means that they will potentially be entitled to more generous state support from state pension age onwards. The full single tier pension will start at around £8,000 a year. The new pension freedoms announced in the Budget will present an opportunity for those aged over 55 to use some of their retirement savings to help fund the start-up of a new business,” he says.
The trade unions say the growth in self-employment is symptomatic of the low wage economy.
TUC General Secretary Frances O’Grady says: “Today’s figures nail the myth perpetuated by ministers that the UK’s new self-employed workers are all young entrepreneurs. In fact, almost half are over the age of 50.
“It’s great that older people are using self-employment to stay working and earning as they approach and even pass their state pension age, even if many are doing this because they can’t afford to retire.
“But it’s worrying that much of the recent increase is due, as the ONS says, to the limited opportunities for people to move out of self-employment.
“It’s not hard to see why some people would want to stop being self-employed as their average income has collapsed in recent years. The latest assessment of earnings from self-employment is £207 a week, less than half that of employees. They also don’t receive any sick or holiday pay, nor do they have an employer contribute towards their pension.
“Self-employment appears to be a key factor in the UK economy’s shift towards low-paid work. Many people want to work for themselves. But the growth in self-employment is reducing people’s pay, job security and retirement income – and is likely to be reducing the government’s tax take too.”