The continued growth of the contracting sector is a structural change in the UK’s labour market and is likely to accelerate, leading to improved prospects for contractors.
This is according to a Bank of England report, Self-employment: what can we learn from recent developments?, which confirms that there is no evidence that ‘hidden unemployment’ caused self-employment to shoot up during and after the economic downturn.
“We welcome the report from the Bank of England that confirms the boom in self-employment reflects a structural change to the economy and adds to the mounting evidence that the rise in self-employment is the continuation of long term shifts in the labour market,” says Association of Independent Professionals and the Self-Employed (IPSE) Director of Policy and External Affairs, Simon McVicker.
The report highlights that, whilst cyclical ‘pull’ and ‘push’ factors such as changing economic conditions will cause the self-employment rate and contractor numbers to fluctuate, other structural factors are having a greater long-term impact.
“The report supports the findings of our own research that has repeatedly shown the UK’s 4.6 million independent professionals to be masters of their own destiny rather than becoming their own boss out of enforced or hidden unemployment,” explains McVicker.
Structural changes can include the prevailing tax conditions, technological advances and the massive increase in outsourcing. The report also highlights that: “Individuals’ preferences may also play a role, especially since self-employment can, in principle, be a relatively flexible form of employment.”
What is most encouraging for the long-term prospects of contractors are the report’s conclusions that: “Increases in self-employment that are driven by long-term trends are likely to be composed of people who were ‘pulled’ into self-employment as a result of changes in technology, industrial structure or personal preferences, and tax/regulatory incentives.”
It goes on to say: “A large part of the increase in self-employment since 2008 does indeed seem to reflect trends that began before the recession.”
McVicker continues: “With the report categorically stating that the increase in those working for themselves has not happened out of economic necessity, it is hoped the report will sway those, most notably the Labour Party, still clinging to the belief that the rise of self-employment represents increased insecurity in the labour market.
He concludes: “The self-employed now constitute almost 15% of the workforce and have been the catalyst for economic growth and recovery in the UK and it is high time they are celebrated for this fact.”