Self-employment in cities

Changes in the labour market and the gig economy are playing out differently across the country.

Report published on 9 October 2019 by Elena Magrini

Summary

Since the financial crisis, Britain’s urban areas are experiencing a self-employment boom. But too many people working for themselves lack access to training — raising concerns about their long-term security and many cities’ future economic strength.

This report finds that self-employment in cities has risen by 44 per cent since 2008, outpacing the national average by almost 25 per cent. But nearly 80 per cent of urban self-employment is mid and lower skilled in industries.

Findings

  • Urban self-employment has grown faster than non-urban self-employment and it now accounts for 52 per cent of all self-employment in the country. Since 2004, there has been a 35 per cent increase in self-employment across the country, growth five times higher than that of overall employment.
  • Urban self-employment is overwhelmingly concentrated in a few industries and in lower-skilled occupations. Construction, transport and storage, arts and entertainment and personal services account for 13 per cent of all employment in cities, but for 54 per cent of all self-employment.
  • In cities with weaker economies, self-employment is more likely to be the only source of income and to be lower skilled. In weaker city economies, the share of self-employed individuals in lower-skilled occupations is even higher. In contrast, self-employment that offers the opportunity to carry out additional work in higher-skilled roles alongside employment is much more concentrated in cities in the South of England and in Scotland.

Recommendations

As the world of work continues to change, it is important employment legislation develops accordingly. To better support self-employed people to thrive in the labour market of the future, this is what needs to change:

    1. To support individuals: allow self-employed people to deduct the costs of any forms of training from income taxes. Currently, self-employed individuals can deduct training costs when it goes towards maintaining skills necessary for their current role, but not for new skills. Given the rapid changes in the labour market, it is important people can acquire the skills they need to adapt to these changes, and shift from one occupation to another if necessary.
    2. To support industries: government should bring together businesses in industries with high rates of self-employment to invest in and pool resources to fund training. In the construction industry, for example, there is already a training body — the Construction Industry Training Board — in which companies actively contribute by paying a levy to improve skills. This model should, firstly, be improved to make it easier for self-employed people to access training and, secondly, be replicated by other industries with high shares of self-employment.
    3. To support places: for struggling cities in particular, the best way to support self-employment is to strengthen the overall economy. These places should focus on creating more vibrant labour markets, where high-skilled individuals and businesses want to locate, by facilitating the creation and exchange of knowledge through improvements in skills and the quality of business environment on offer in their city centres. This would broaden and improve the choices available to individuals, indirectly benefiting self-employed people too.

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