Technological changes and other labour market trends are not only changing demand for jobs10 and skills11, they are also fundamentally changing the way people work.
In recent years, self-employment and the proportion of it that makes up the gig economy has been at the centre of heated debate. The rise of new ways of working has led to suggestions self-employment will play an even bigger role in the future,12 and much has been said about the pros and cons of self-employment. On one hand, many highlight the opportunities it offers in terms of increased flexibility, a chance to be your own boss and turn a ‘hobby’ into a business. On the other, many point to the downsides of self-employment, suggesting it fosters instability and insecurity, putting additional pressures on individuals.13
These debates raise important questions around existing employment practices and policies, and whether they are fit for the 21st century, questions the Government asked the Taylor Review14 to explore.
Yet, while it is crucial the UK has a national framework for ‘good work’ and self-employment, little is known about how self-employment plays out across the country. This offers limited insight to policymakers on how the significance and nature of self-employment varies across different local economies, what the impact of this national policy will be in different places and what this means for creating ‘good jobs’ up and down the country.
The aim of this paper is to fill this gap. To do so, it uses self-assessment data made available by the HM Revenue and Customs (HMRC) on a residential basis (see Box 1 for methodology). The report looks first at how self-employment varies across the country, both in terms of significance and its nature. Second, it identifies how the picture has changed over time. Third, it sets out what needs to change in national and local policy.
Box 1: Defining self-employment and methodology
According to the Government, a person is self-employed if ‘they run their business for themselves and take responsibility for its success and failure’.15 Self-employed individuals are not paid through the Pay As You Earn (PAYE) system, they do not have the employment rights and responsibilities of employees, but can choose what work to do, when and how to do it.
Someone can be both employed and self-employed at the same time. In 2016, 75 per cent of all self-employed individuals in the UK were self-employed only, whereas 25 per cent were both self-employed and employed in another job. In this report, the ‘self-employed’ refers to both groups, unless otherwise specified.
To look at the geography of self-employment across the country, this report uses data from the Annual Population Survey for high-level statistics (such as national or city-level figures), and then uses new data made available by HM Revenue and Customs (HMRC) for more detailed analysis (such as industry breakdowns or change over time).
HMRC has tax record data for each individual in the UK and the data on self-employment is based on self-assessment forms filled in by every self-employed individual. Given that the data covers the entire population of self-employed people in the country, it is much more precise than any other survey-based data available on self-employment. However, its limitation is that it cannot reveal the reasons why a person is self-employed.
The analysis is based on self-assessment data held by HMRC, and it is restricted to individuals who completed either the SA103F and/or SA103S supplementary form. It excludes individuals who are deceased, those whose total turnover is equal to zero or less than £10, net profits are less than £10 or net losses are less than £10, to remove any potential error in the data.
HMRC data is collected on a residential basis, capturing where a self-employed individual lives, rather than their place of work. This differs from Centre for Cities’ usual approach and means the analysis will not always capture, in its entirety, where economic activity takes place.
This work contains statistical data from HM Revenue and Customs which is Crown Copyright. The research datasets used may not exactly reproduce HMRC aggregates. The use of HMRC statistical data in this work does not imply the endorsement of HMRC in relation to the interpretation or analysis of the information.
Box 2: Defining cities
The analysis undertaken in this report compares Primary Urban Areas (PUAs) — a measure of the built-up areas of a city, rather than individual local authority districts or combined authorities. A PUA is the city-level definition first used in the Department for Communities and Local Government’s State of the Cities report. The definition was created by Newcastle University and updated in 2016 to reflect changes from the 2011 Census.
The PUA provides a consistent measure to compare concentrations of economic activity across the UK. This makes PUAs distinct from city-region or Combined Authority geographies. You can find the full definitions table at centreforcities.org/city-by-city/puas.