A million people in the UK are planning to give up being self-employed after seeing their earnings decimated by the Covid-19 pandemic.
Ahead of official figures on Tuesday that are likely to show a further jump in unemployment, a report from the London School of Economics found that a two-decade long trend in favour of more people working for themselves was under threat.
The study by the LSE’s Centre for Economic Performance (CEP) found that in August – a month that saw the economy rebounding from the first lockdown – 58% of the UK’s 5 million self-employed had less work than normal. A fifth of the self-employed anticipated quitting altogether, rising to 58% for those under the age of 25.
Stephen Machin, co-author of the report and director of the CEP said: “While the growth in self-employment has been one of the key trends in the labour market in the past two decades, there are now early signals that this trend could be set to reverse.
“By the summer, there had already been a sharp fall in the number of self-employed workers – this may be primarily due to the lockdown, but for some it will be due to realising the risks of self-employment.”
The CEP, which questioned 1,500 self-employed workers, found that 32% of respondents to its survey had fewer than 10 hours work a week in August.
By contrast, more than a quarter (28%) of self-employed people who find work through digital apps in the gig economy said they had more work than usual in August. But the CEP said its survey found that 78% of these app workers felt their health was at risk while working.
Rishi Sunak has supported the incomes of self-employed workers affected by the pandemic through the self-employment income support scheme (SEISS), which offers grants of 80% of their usual earnings but has been criticised for being badly targeted and failing to help many freelancers and contractors. The Treasury select committee has said more than a million workers have slipped through the support net.
Maria Ventura, co-author of the report and research assistant at CEP, said: “The government support for the self-employed to date, while valuable for those eligible, has not reached all self-employed workers and the newly self-employed appear to be particularly vulnerable. The extension of support through to April 2021 and the recently announced changes further widen the gap between those eligible and those ineligible for SEISS grants.”