• Link between the strength of a local economy and the rates and character of self-employment.
• Self-employed people need better access to training to respond to the changing world of work.
• Reform of taxation needed to future-proof self-employment.

New Centre for Cities’ research has revealed a post-financial crisis self-employment boom in Britain’s urban areas. But too many people working for themselves lack access to training – raising concerns about their long-term security and many cities’ future economic strength.

Self-employment in cities has risen by 44% since 2008, outpacing the national average by almost 25%. But nearly 80% of urban self-employment is mid and lower-skilled in industries such as construction – which is the most popular industry for self-employment in cities – transport, arts and personal services.

While cities need a mix of high and low-skilled employment, high-skilled service export work creates the strongest conditions for economic growth.

People in weaker city economies are more likely to be in lower-skilled self-employment. In Burnley the number of self-employed people has grown by almost 50% since 2008, but just 14% of them are in high-skilled work. Compare this to Cambridge where 42% of self-employed people are in high-skilled work – the highest proportion in the UK. The exception to this trend is Slough, which is the most productive city in the UK but has the lowest share of high-skilled self-employed people.

Everybody should undertake training to ensure their skills remain relevant, but this can be more difficult for self-employed people than employed ones who can access companies’ training funds. This will become a more pressing policy issue if the number of self-employed people continues to rise as it has done in the last decade.

Since 2012 there has been a rise in people supplementing regular employment through self-employment, particularly in cities with strong economies. In Cambridge 37% of self-employed people do this – double the amount in Blackburn.

Concerningly, few self-employed people undertake training to future-proof their skills against changes in technology and consumer demand. They are further disadvantaged by a tax system that prevents them from deducting many training costs, particularly training to acquire new skills, from income tax.

The Government should act to ensure that many of the self-employed people in economically weaker cities do not fall further behind as they manage the disruption caused by technological change.

Centre for Cities sets out three proposals for the Government:

1. Allow self-employed people to deduct training costs from income taxes: Self-employed people are allowed to deduct costs for updating skills relevant to their role – but not for new ones. The Government should incentivise the acquisition of new skills to allow self-employed people to move between industries.
2. Bring together businesses to invest in training: Industries with high rates of self-employment should build on the example of the construction sector and establish industry training boards that support people looking to upskill or retrain, with particular attention to self-employed individuals.
3. Strengthen local economies: A predominance of lower-skilled employment is often a reflection of weakness in the local economy. Policy incentives to attract more high-knowledge industries to struggling cities would provide better employment prospects for everyone, including people that are self-employed.

Centre for Cities’ Chief Executive Andrew Carter said:

“One in five jobs in cities is likely to be lost to automation and, though we are seeing a self-employment boom, too many people working for themselves in cities are in lower-skilled roles and lack access to the training they need to future proof their careers.

“The Government should act to make it easier for the growing numbers of self-employed people can develop their skills. The rules governing what types of courses self-employed people can deduct from income taxes should be relaxed and establish industry training boards that support people looking to upskill or retrain.

“Without measures such as these there is a very real risk that many self-employed people in Britain’s cities will face an uncertain future.”

Andy Chamberlain, Deputy Director of Policy at IPSE, said:

“This is a timely and excellent report that shows the enormous rise of self-employment in cities across the UK. And not only that, but also the rise of different types of self-employment: from full-time contracting to side-hustles, which allow people to add to their income and pursue a passion in their spare time.

“Crucially, the report also shows just how vital freelancers and the self-employed are for a range of key industries: particularly construction, finance, personal services and transport and communication.

“Despite the vital contribution of the self-employed, however, the report also highlights a key challenge: access to training. Unlike employees, the self-employed generally cannot get training through their client: they have to arrange it and pay for it themselves. Worse: time they spend on training is valuable time they are not being paid for.

“At IPSE, we fully support the Centre for Cities’s calls for self-employed people to be able to deduct training costs from their income taxes. We also believe the New Enterprise Allowance should be extended to give self-employed people mentoring and benefit support for two years.

“The self-employed are clearly a rapidly growing part of our workforce, making a vital contribution to many sectors of the economy – and the government must make sure they can access the training support they need.”

Ends

Notes to editors

About Centre for Cities:

• Centre for Cities is a research and policy institute, dedicated to improving the economic success of UK cities.
• We are a charity that works with cities, business and
• Whitehall to develop and implement policy that supports the performance of urban economies.
• We do this through impartial research and knowledge exchange.
• For more information, please visit centreforcities.org/about