After two decades of growth, there were sharp falls in self-employment during the coronavirus (COVID-19) pandemic from a peak of 5.0 million at the end of 2019 down to 4.2 million in early 2022, largely driven by people flowing out of self-employment to become employees.
Large increases in the number of self-employed workers remaining in the same job but reclassifying their labour market status to "employee" were observed between April and September 2020 (coinciding with the introduction of the furlough scheme), most commonly among business directors and partners, and those in high-skilled occupations.
Self-employment has fallen across all industries, most notably in construction where numbers reduced from 914,000 in early 2020 to 765,000 in early 2021, though the level increased to 799,000 in early 2022 and construction remained the largest self-employment industry.
Self-employment fell most sharply among men during the coronavirus pandemic, down from 3.3 million in January to March 2020 to 2.7 million in the same quarter of 2022, the lowest level of male self-employment for over a decade.
Among women self-employment fell, from 1.7 million in January to March 2020, to 1.5 million in January to March 2022; the lowest level since 2016.
The average (mean) age of people in self-employment remained fairly steady through the coronavirus pandemic at 47.5 years in January to March 2019 and 47.6 years in the same quarter of 2022, though the number of self-employed workers aged 45 to 54 years fell by almost a quarter of a million (239,000) between these two periods.
After two decades of growth, there were sharp falls in self-employment during the coronavirus (COVID-19) pandemic
Prior to the onset of the coronavirus pandemic, self-employment in the UK had been steadily increasing, peaking at 5.0 million people in October to December 2019 (15.3% of total employment). Since then, the numbers have fallen considerably, down to just under 4.2 million in October to December 2021 (12.9% of total employment), a level last seen in 2013. However, in January to March 2022, there was a slight increase to just over 4.2 million people in self-employment (13.0% of total employment).
Looking at quarter-on-quarter changes in the levels of employment over the past two decades, the recent falls in self-employment were similar in size to those experienced by employees during the global financial crisis period, which began in 2008. Our analysis of self-employment published in 2016 found increasing levels of self-employment between 2008 and 2015 to be one of the defining characteristics of the UK's economic recovery, though the rise was considered to be an extension of the trend started in the early 2000s.
This article explores the net changes in inflows to self-employment and outflows to other labour market statuses from January 2019 to March 2022, and the extent to which some workers have reclassified their status from self-employed to employee while staying in the same job. We also look at changes in self-employment across industries and occupations, in the types of self-employment and hours worked, and in the demographic and regional composition of self-employed workers.Back to table of contents
The biggest movement out of self-employment during the coronavirus (COVID-19) pandemic was driven by flows into employee status
Here we look at changes in people flowing into self-employment and out of self-employment to other labour market statuses: employees, unemployed and economically inactive.
A positive net flow means that more people moved into a particular status than out, whereas a negative net flow means that more people moved out of a particular status than moved in. For example, in January to March 2019, 140,000 workers who were self-employed in the previous quarter became employees, while 210,000 who were employees in the previous quarter became self-employed. This gave a positive net flow of 71,000 (difference because of rounding) people into self-employment during that quarter.
Prior to the coronavirus pandemic, more workers were flowing from employee status to self-employment than from self-employment to employee status, creating positive net flows, which contributed to the peak in self-employment at the end of 2019. However, this trend reversed during the coronavirus pandemic, with net flows from self-employment to employee status at their greatest level in July to September 2020, at 165,000.
In the quarterly periods between April and December 2021, net flows from self-employment to economic inactivity became the main driver of the overall decrease in self-employment (while net flows into self-employment from employee status started to become positive again), though to a lesser extent than earlier falls driven by net movements to employee status.
Net flows from self-employment to economic inactivity were at their highest levels between April to June and July to September 2021 among those aged 55 to 64 years, at 42,000 and 44,000 people, respectively. However, in October to December 2021, the net movement from self-employed to economically inactive was more evenly split between those aged 35 to 54 years (26,000) and 55 to 64 years (24,000).
Figure 3: The trend of net flows into self-employment was reversed during the pandemic, with the largest outflow seen in July to September 2020, though there are early signs of recovery
Inflows, outflows and net flows between self-employment and other labour market statuses, people aged 16 to 64 years (thousands, not seasonally adjusted), UK, January to March 2019 to January to March 2022
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Since then, self-employment flows have displayed signs of returning to where they were in 2019. In January to March 2022, net flows into self-employment from other labour market statuses were all positive, at 39,000 from employees, 17,000 from unemployment and 38,000 from economic inactivity, totalling 95,000.Back to table of contents
There were large increases in the number of workers moving from self-employment to employee status but remaining in the same job (reclassifying) between April and September 2020
In a National Statistical blog published in January 2021, it was observed that around 500,000 workers had switched their status from self-employed to employee since the start of the coronavirus (COVID-19) pandemic, though the number who had changed jobs had not increased from normal levels. One suggestion was that the coronavirus pandemic could have changed people's perceptions of whether they were self-employed or an employee. Some of these workers would previously have set up companies and therefore considered themselves self-employed. However, because they paid themselves through PAYE, after the furlough scheme was created, they realised they were able to claim, and so started describing themselves as employees.
Looking in more detail at the flows from self-employment to employee status from January to March 2019 onwards, we can see the extent to which workers moved to a different job or remained in the same job but reclassified their employment status. It should be noted that the estimates are based on self-reported or proxy-reported responses to the Labour Force Survey.
Among those moving from self-employment to employee status, more people reclassified their employment status without changing their job than those who moved and changed their job. In the April to June 2020 and July to September 2020 quarters, there were large increases in the number of workers who reclassified compared with previous quarters, at 188,000 (78.1% of all workers moving from self-employment to employee status) and 218,000 (81.6%), respectively. Of the 188,000 reclassifiers in April to June 2020, 112,000 (59.7%) were men and 76,000 (40.3%) were women. Of the 218,000 reclassifiers in July to September 2020, 140,000 (64.2%) were men and 78,000 (35.8%) were women.
Another factor, which may have affected the way people classify their employment status, was the announcement in the 2018 Budget of reforms designed to tackle non-compliance with off-payroll working rules (sometimes known as "IR35"). These rules make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same Income Tax and National Insurance contributions as employees. The reforms were expected to be implemented on 6 April 2020 but were postponed for one year as part of the government's response to COVID-19.
Before the reforms were implemented in April 2021, 155,000 workers (72.8%) who moved from self-employment to employee status in January to March 2021 reclassified, but this then fell to 88,000 (62.2%) in April to June 2021. In the latest period (January to March 2022), the numbers of workers reclassifying (not changing) and changing their job were closer, at 75,000 (53.5%) and 66,000 (46.5%), respectively.Back to table of contents
Self-employment has fallen across all industries with the composition across sectors remaining similar
The construction industry has the largest number of self-employed workers and there were 914,000 in this sector during January to March 2020. This fell by 16.3% to 765,000 in the same quarter of 2021 (most of which was during the third national lockdown) but numbers increased to 799,000 in January to March 2022.
The industries with the greatest percentage falls of self-employed workers between the January to March periods of 2020 and 2022 were financial and insurance activities (by 29.2%, from 100,000 to 71,000), public administration and defence, social security (26.2%, from 49,000 to 36,000) and information and communication (25.4%, from 255,000 to 191,000).
Looking at flows between 2019 and 2020, 61,000 people who were self-employed in the professional, scientific and technical activities sector moved to become employees, of which 84.3% remained in this sector. Between 2020 and 2021, 33,000 left self-employment to become an employee, of which 71.4% stayed in this industry.
Of those moving from self-employment in the construction industry to become employees between 2019 and 2020, similar numbers changed (22,000) and did not change industry (21,000). In the following year (2020 to 2021), 8,000 left self-employment in construction to work as an employee in a different sector, with just 1,000 remaining in construction as an employee.
The extent of reclassification (changing employment status without changing job) among people moving from self-employment to employee status appeared to be relatively mixed across industry sectors. The industry with the highest number of workers reclassifying in both 2019 to 2020 and 2020 to 2021 was banking and finance at 137,000 (68.3%) and 109,000 (55.5%), respectively.Back to table of contents
There were large falls in self-employment among those in the most highly skilled occupations
Self-employment appears to have fallen most sharply among those in managerial, director and senior roles (down 30.9% from 811,000 in January to March 2020 to 560,000 in January to March 2022) and those in professional occupations (down 14.8% from 861,000 to 733,000 in the same period).
At the same time, there has been a large percentage fall in self-employed workers in elementary positions, reducing by around a quarter (25.5%) from 302,000 in January to March 2020, to 225,000 in January to March 2022.
Most of the fall in self-employment was seen in those "working for themselves"
Between January to March 2020 and January to March 2022, the number of self-employed people working for themselves fell by 14.6% from 3.5 million to 2.9 million. There were also notable decreases among those running a business or professional practice and sole directors of their own business (down by 180,000 (17.7%) and 170,000 (22.6%), respectively in the same period). Decreasing trends have also been observed among sole proprietors in UK businesses in recent years.
In January to March 2022, the number of those doing freelance work appeared to have recovered most, to just 36,000 (5.5%) below the level in January to March 2020 (645,000).
Reclassification was most common among business directors and partners, and those in high-skilled jobs
Looking in more detail at people who changed their status from self-employed to employee while staying in the same job (reclassified), this shift was most commonly reported by those who described their type of self-employment as:
a partner in a business or a professional practice – 86.8% (97,000) of those moving from self-employed to employee reclassified in 2019 to 2020 (with the remaining 13.2% (15,000) changing status and changing job) and 79.9% (47,000) reclassified in 2020 to 2021;
running a business or a professional practice – 85.7% (90,000) reclassified in 2019 to 2020 and 63.6% (62,000) in 2020 to 2021
a sole director of your own limited business – 70.4% (105,000) reclassified in 2019 to 2020 and 68.5% (94,000) in 2020 to 2021
This corresponds with the high proportion of those working as managers, directors and senior officials in the highest skilled occupation group reclassifying their status but not changing their job when moving from self-employment to employee status. In 2019 to 2020 and 2020 to 2021, this applied to around 8 in every 10 of these workers at 81.7% (180,000) and 78.5% (113,000), respectively.
A similar proportion of workers in administrative and secretarial occupations (79.2%, 23,000) also reclassified in 2019 to 2020, while 63.5% (24,000) and 65.9% (39,000) of process, plant and machine operatives reclassified in 2019 to 2020 and 2020 to 2021, respectively.Back to table of contents
Falls in self-employment have been largely driven by a reduction in full-time male self-employment
The number of self-employed men working full-time fell sharply through 2020 and then stabilised at around 2.2 million in each quarter through 2021 and into early 2022. The number of self-employed women working full-time and people working part-time stayed relatively stable over the period.
There were greater falls in average actual hours worked among the self-employed than among employees during the coronavirus (COVID-19) pandemic
Prior to the coronavirus pandemic, average actual hours worked were similar among male workers who were self-employed and employees, and slightly lower among self-employed females than female employees.
In April 2020, average actual hours worked fell to the lowest points of 20.8 hours for self-employed men (compared with 27.4 hours for men employees) and 11.2 hours among self-employed women (compared with 20.4 hours among women employees). Since then, average hours have gradually returned to (and sometimes surpassed) those recorded before the coronavirus pandemic.
Figure 9: Average actual hours worked fell more sharply during the pandemic among those in self-employment compared with employees
Average actual hours worked in reference week by men and women aged 16 years and over who were self-employed or an employee (seasonally adjusted), UK, Week 1 2019 to Week 9 2022
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Falls in self-employment have been highest among men and workers aged 45 to 54 years
In January to March 2020, there were 3.3 million men (65.6% of all those in self-employment) and 1.7 million women (34.4%) in self-employment. This represented a slight decrease for men (33,000) but an increase for women (85,000) compared with the same quarter in 2019.
During the coronavirus (COVID-19) pandemic, numbers fell most sharply among men, down to 2.7 million in January to March 2022 (16.5% lower than the same quarter in 2020). This was the lowest level of male self-employment for over a decade.
Among women, self-employment fell by 11.4% between January to March 2020 and January to March 2022, down to 1.5 million women, the lowest level since 2016.
In terms of age, the largest fall among self-employed workers was seen in those aged 45 to 54 years, from 1.3 million in January to March 2019 to 1.1 million in January to March 2022. Despite this, the average (mean) age of people in self-employment has remained fairly steady at 47.5 years in January to March 2019 and 47.6 years in January to March 2022. In comparison, the average age of employees in these two periods was 40.6 years and 40.9 years, respectively.
Data for self-employed workers according to disability status and nationality (UK, EU and non-EU) are available in the data tables accompanying this article.Back to table of contents
Most self-employed workers remain clustered in London and the South East despite these regions seeing the largest falls
The largest falls in the number of self-employed workers were seen in those living in London and the South East, reducing by 168,000 (18.2%) and 112,000 (14.8%), respectively between January to March 2020 and January to March 2022. However, one-third (1.4 million) of all those in self-employment in the latter period (4.2 million) remained clustered in these two regions.
In contrast to all other areas of the UK, levels of self-employment appear to have increased in Wales since the onset of the coronavirus (COVID-19) pandemic, though the level in January to March 2022 (202,000) was comparable with the same quarter in 2019 (204,000), which then fell to 183,000 in January to March 2020.
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Understanding changes in self-employment in the UK
Dataset | Released 06 July 2022
Estimates of self-employment by various characteristics (including comparable estimates for employees), and flows between self-employment and other labour market statuses.
EMP14: Employees and self-employed by industry
Dataset | Released 17 May 2022
Employees and self-employed by industry (Labour Force Survey). This table is updated four times a year in February, May, August and November.
X02: Labour Force Survey Flows estimates
Dataset | Released 17 May 2022
Labour Force Survey (LFS) flows estimates. These estimates are usually published four times a year in February, May, August and November. They are not designated as National Statistics.
X07: Labour Force Survey weekly estimates
Dataset | Released 12 April 2022
Labour Force Survey (LFS) weekly estimates of employment, unemployment, economic inactivity and hours in the UK. All estimates are calculated from highly experimental weekly Labour Force Survey datasets. This dataset is now discontinued.
Self-employed are those people who regard themselves as self-employed, that is, who in their main employment work on their own account, whether or not they have employees
Employees are those who are in employment and paid a wage by an employer for the work that they do; this category may be further subdivided into permanent and temporary employees.
Actual hours worked
Actual hours worked statistics measure how many hours were actually worked. These statistics are affected directly by changes in the number of people in employment and in the number of hours that people work. The figures are seasonally adjusted to take account of calendar-related absences from work during the reference period, such as public holidays and time off work for school holidays. The figures are also affected by other absences from work, such as those resulting from sickness.
Average hours worked statistics measure the average number of hours worked per week.
In the context of this article, reclassification refers to people changing their labour market status from self-employed to employee without changing in job. The estimates of reclassification in this article have been calculated based on respondents' labour market status in two consecutive quarters or years, and their length of time spent continuously employed in their current job. If this length of time is three months or more for quarterly data, or one year or more for annual data, it is assumed that they have changed their labour market status without changing job.
A person's industry reflects the type of economic activity in which their business or employer is engaged. Industry breakdowns using the Labour Force Survey (LFS) should also be interpreted with caution, as they are based on respondents' views about the business for which they work. This may not be the same as the industry in which businesses are classified in estimates of the national accounts.
More information about industry classification can be found in our Standard Industrial Classification 2007 methodology information.
A person's occupation is defined by the nature of their job within their business or organisation. Jobs are classified based on the qualifications, training and experience required for competent, thorough and efficient conduct of the tasks that comprise a job. Users should be aware that on the LFS, respondents self-report their occupation so estimates are based on people's own views on their jobs.
To allow for comparisons over time, data from January 2021 onwards have been mapped from the Standard Occupational Classification (SOC) 2020 to SOC 2010.
More information about occupation classifications can be found in the SOC 2010 methodology information.Back to table of contents
Measuring the data
This article relies on data collected from the Labour Force Survey (LFS), the largest household survey in the UK.
More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in our LFS Quality and Methodology Information (QMI) report.
The LFS performance and quality monitoring reports provide data on response rates and other quality-related issues for the LFS.
LFS estimates published on 14 June 2022 have been reweighted for periods from January to March 2020, using updated Pay As You Earn (PAYE) Real Time Information (RTI) data. This uses the same method of applying growth rates from PAYE RTI data as that implemented in July 2021. The non-response bias adjustment, previously implemented for England, Wales and Scotland data, has now also been applied to Northern Ireland data. However, all analysis contained within this article that is derived from the two-quarter longitudinal or two-year APS longitudinal datasets have not had the reweighting applied, and therefore the non-response bias adjustment has not been applied to Northern Ireland data. These datasets are scheduled to be reweighted later in the year. Our Impact of reweighting on Labour Force Survey key indicators: 2022 article explains the impact and gives a more detailed reweighting timeline. Dataset X08: Impact of LFS reweighting on key Labour Force Survey indicators includes estimates of key LFS indicators using both old and new weighting methodology, and the revisions between the two series.
There are two types of Labour Force Survey (LFS) longitudinal datasets: two-quarter and five-quarter. These are weighted using the same population estimates as those used in the main quarterly LFS datasets, although the weighting methodology differs (see Section 9: Technical note). Consequently the estimates are broadly consistent with the published aggregates, but not entirely. Also, the datasets are limited to people aged 16 to 64 years.
Both types of dataset contain a flow variable with 11 categories, with all combinations of employment, unemployment and economic inactivity accounted for, plus two categories for those entering and leaving the 16 to 64 years population over the quarter. For the purpose of this analysis, those entering or leaving this population are excluded from the measured sample. The stock of the employed, unemployed and inactive at each quarter can therefore be estimated by summing the corresponding flow categories.
For some analysis, the two-quarter datasets have been used in order to gain some insight into the quarterly changes in the headline aggregates.
For more detailed analysis, the Annual Population Survey two-year longitudinal datasets have been used. These are produced for January to December periods and provide larger sample sizes to look at trends that may occur over a year. More information about longitudinal LFS and APS data can be found in Volume 11 of the Labour Force Survey -- user guidance.
Please note the detail in the Reweighting section above. Analysis based on longitudinal datasets is not based on reweighted data.
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