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IPSE Calls for Government Rethink as Self-Employed Figures Plummet

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RSS 22 July 2015
The self-employed labour market is in something of a pickle. 131,000 fewer people are working for themselves than a year ago. Upcoming reforms do nothing to reverse the trend. It begs the question, Does the government understand self-employment enough to rejuvenate the sector?

March-May 2014 ONS figures showed 3,271,093 self-employed workers putting in full time shifts. Those records also show that there were 1,328,095 working for themselves on a part time basis at that time. Give or take, that's 4.6 million people working for themselves in total.

Late last week, ONS published the 2015 figures for the same rolling quarter. What a difference a year makes.

The number of full time self-employed fell to 3,160,241. Those working part time but for themselves dropped to 1,308,251.

You may argue that 4.469M people working for themselves is still a healthy number. But a drop of 131,000 independent professionals in a single year has got the alarm bells ringing at IPSE.

Chris Bryce, IPSE's talisman and CEO, was quick to react to last Friday's publication. Alluding to how the self employed labour market has helped support the overall employment figures, Bryce beseeched the government to rethink the elements of last week's budget. In particular, those that will have a detrimental affect on contractors and freelancers directly, and indirectly on the economy as a whole.

Last week, we reported on the government's target of an additional 2 million in employment at the end of their term in office. Our focus there was on the CBI's concerns over how many apprenticeships will make up that figure. Moreover, how the lack of quality of those apprenticeships may indeed harm economic growth.

Bryce also mentioned the government's ambitious figure, and in a similar vein. He believes that the government will struggle to make that figure at all with its current focus. If the Chancellor doesn't address new and potential legislation that looks set to make self-employment less attractive, the labour market has lost a close ally.

From the ONS figures, it's clear that figures were already greatly in decline come May. In view of potential changes to reliefs available to umbrella companies and Personal Service Companies (limited or via intermediaries), it will be of great interest to see how strongly this trend continues for June and July. We'll keep our eyes peeled as those publications become available in August and September this year.

What are the possible barriers?

With a drop of 2.85% in the number of self-employed, you'd think that the government would be looking to redress that balance. There's little evidence of that following the budget.

Without the flexibility that temporary workers bring to firms of all sizes, businesses will struggle to remain competitive. They'll be faced with a choice; either:

  • go without specialist skills needed to develop or grow in line with technology;
    • or:
  • overcommit by employing full time staff for roles that would be more suited to short-term contract assignments.

There's already a skills shortage, which was the crux of our post last week about the quality of apprenticeships. Fewer people having the belief that they can make their specialist subject a viable business will compound the problem.

How's that? Those skills will go under-utilised as skilled contractors look to shore up their own future by opting for full time employment. Then, rather than the whole market have access to those skills, they'll remain in-house, even if that employer may not need that service on a full time basis.

It's costly to the business, soul-destroying for the specialist and perilous to economic growth. But that's the way the government is headed.

Legislation reforms and proposals will see fewer people going it alone

With the official IR35 discussion document launched last week and the changes to supervision, direction and control envisaged, the talent pool will dry up.

No one in their right mind is going to gamble their security by risking setting up their own brand if they're going to be no better off than employees doing the same job. Yet these are the changes that the Chancellor wants to introduce to level the playing field.

That said, the government has launched its own review into self-employment. The hope is that external viewpoints from entrepreneurs will help them understand the challenges faced by independent professionals day in, day out.

The question is this: If 131,000 ex-self-employed people can see writing on the wall, what language are they speaking in Whitehall?

It may well be English. But the silver spoons in the cabinet need to be removed so that the rest of us can understand the government's garbled message on the labour market.

Image credit: "Outsource", Stuart Miles via FreeDigitalPhotos.net

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