Understanding recent falls in self-employment in the UK

Self-employment in the UK has fallen since the onset of the coronavirus (COVID-19) pandemic. This article explores changes in the characteristics and composition of self-employed workers and flows out of self-employment to other economic activity statuses. Includes data from 2019 onwards.

• After two decades of growth, there were sharp falls in self-employment during the coronavirus (COVID-19) pandemic from a peak of 5.0 million at the end of 2019 down to 4.2 million in early 2022, largely driven by people flowing out of self-employment to become employees.
• Large increases in the number of self-employed workers remaining in the same job but reclassifying their labour market status to “employee” were observed between April and September 2020 (coinciding with the introduction of the furlough scheme), most commonly among business directors and partners, and those in high-skilled occupations.
• Self-employment has fallen across all industries, most notably in construction where numbers reduced from 914,000 in early 2020 to 765,000 in early 2021, though the level increased to 799,000 in early 2022 and construction remained the largest self-employment industry.
• Self-employment fell most sharply among men during the coronavirus pandemic, down from 3.3 million in January to March 2020 to 2.7 million in the same quarter of 2022, the lowest level of male self-employment for over a decade.
• Among women self-employment fell, from 1.7 million in January to March 2020, to 1.5 million in January to March 2022; the lowest level since 2016. 
• The average (mean) age of people in self-employment remained fairly steady through the coronavirus pandemic at 47.5 years in January to March 2019 and 47.6 years in the same quarter of 2022, though the number of self-employed workers aged 45 to 54 years fell by almost a quarter of a million (239,000) between these two periods.

After two decades of growth, there were sharp falls in self-employment during the coronavirus (COVID-19) pandemic

Prior to the onset of the coronavirus pandemic, self-employment in the UK had been steadily increasing, peaking at 5.0 million people in October to December 2019 (15.3% of total employment). Since then, the numbers have fallen considerably, down to just under 4.2 million in October to December 2021 (12.9% of total employment), a level last seen in 2013. However, in January to March 2022, there was a slight increase to just over 4.2 million people in self-employment (13.0% of total employment).

Figure 1: Self-employment peaked at 5.0 million people at the end of 2019 but has since fallen to 4.2 million

Number of people aged 16 years and over in self-employment (thousands, seasonally adjusted), UK, January to March 2000 to January to March 2022

Looking at quarter-on-quarter changes in the levels of employment over the past two decades, the recent falls in self-employment were similar in size to those experienced by employees during the global financial crisis period, which began in 2008. Our analysis of self-employment published in 2016 found increasing levels of self-employment between 2008 and 2015 to be one of the defining characteristics of the UK’s economic recovery, though the rise was considered to be an extension of the trend started in the early 2000s.

Figure 2: Falls in self-employment during the coronavirus pandemic were similar in size to those experienced by employees during the financial crisis

People aged 16 years and over in employment (thousands, seasonally adjusted), UK, quarter-on-quarter change from January to March 2000 to January to March 2022

Notes:

1.“Other” includes “Unpaid family workers”’ and “Government supported training and employment programmes”.

This article explores the net changes in inflows to self-employment and outflows to other labour market statuses from January 2019 to March 2022, and the extent to which some workers have reclassified their status from self-employed to employee while staying in the same job. We also look at changes in self-employment across industries and occupations, in the types of self-employment and hours worked, and in the demographic and regional composition of self-employed workers.