Self employment – are we sowing the seeds of a catastrophe?

Self employment accounts for almost two thirds of the new jobs created in the UK since the 2008 financial crisis according to the Office for National Statistics (ONS).

Effectively these are micro businesses and many of the 4.6 million people in this category, according to the ONS, are older people, often offering “white collar” consulting and skilled services.

This may be keeping people off the unemployment register and the Government, naturally, attributes it to entrepreneurial spirit and more people wanting to be their own boss. It is also hoping that many of these micro businesses will grow and be significant providers of future new jobs.

However, there is some evidence that most micro business owners are working longer hours than employed staff, for lower remuneration and that many will have to continue working well beyond retirement age.

This development raises two important concerns. Firstly, how are these businesses being funded while the statistics indicate that banks and other finance providers are not lending to micro and small businesses? Are they depleting personal savings or growing consumer debt? And how will they fund retirement?

Secondly, if the earnings from self employment are lower than they for those in direct employment, notwithstanding the impact on the economy due to a reduction in spending, is this change in employment patterns sowing the seeds of a yet unforeseen catastrophe?

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