More people than ever are becoming their own boss, but what does this mean for the UK economy?

Throughout 2011 and 2012, national statistics continued telling us that, despite 2.6 million people being out of work in the UK, the job market was steadily growing. However, no matter how many new jobs were created, the rate of unemployment refused to shift.

Unfortunately, for the many millions of jobseekers, 40% of the jobs being created were held by self-employed people starting their own businesses. This massive rise in self-employment means that currently 1 in 7 working adults in the UK are their own boss, which is the highest record of self-employment in UK history.

It’s very easy to blame this rise in entrepreneurship and self-employment on the recession alone, but is the reality that a more fundamental shift in attitudes has changed the way we look at work in the UK?

The recession has had an undoubtedly huge effect on the rates of self-employment, and many people set up their own businesses in an attempt to keep themselves afloat, or because they became disillusioned with the stagnant job market.

One such entrepreneur is Hung Siu-see, who started up her own events business after she was made redundant in 2009. “At first, I just started the company in an attempt to make a little extra cash to help pay rent, but within a couple of years the business had become one of my main sources of income” Siu-see told us.

Perhaps the rising levels of self-employment have less to do with economic downturn, and more to do with technological advances. Thanks to communication technology and the internet, now anyone with an entrepreneurial mindset can run their entire business from their laptop, or even their smart phone. Gone are the days when it would have cost many thousands just to buy the office equipment needed to set up a company, before you even factored in advertising and other costs.

The growth of internet marketing and advertising has also been a huge factor in the rise of self-employment, as small businesses can now reach large numbers of customers for free (or almost for free) in ways which were unthinkable just 15 years ago. Social media, SEO and email marketing have given business owners affordable means to market themselves to thousands of potential clients, meaning that finding customers is easier than ever for the small business.

However, technological advances haven’t just benefitted workers; employers too are slowly waking up to the hiring opportunities the internet has given them. Because the technology wasn’t in place to allow employees to work remotely in the past, having an office and access to equipment was essential. However, modern employees can now work from anywhere with an internet connection and be able to liaise with colleagues in real time.

This has changed the way employers look at hiring staff, as they no longer need to hire permanent employees. When hiring a freelancer, you don’t have to cover extra costs such as health insurance, pensions, sick pay, sick cover, holiday pay, maternity/paternity leave and other related costs.

Therefore, in most cases, it actually works out much cheaper to simply hire a freelancer on a project-by-project basis, rather than hire one dedicated staff member.

This change in the way services are traded in the UK may be the real driving force behind the recent rise of entrepreneurialism, but is this a change for the better, or will there be unseen consequences for the self-employment boom?

Although self-employment has put hundreds of thousands back into work, on average, self-employed people make just £12,000 a year. This is substantially less than someone would make working full time for minimum wage, and is bad news for the UK economy as a whole. Since 1 in 7 working people in the UK are self-employed, this means that, including children and dependents, more than 20% of the population are struggling just to scrape by, let alone spend the sort of money needed to help the economy continue to grow.

Even worse, because the average earnings among the self-employed are so low, this means that the potential for expansion, traditionally the primary aim for most entrepreneurs, is virtually non-existent.

So, if self-employment is so gruelling for most small business owners, does this means that we should expect to see the number of self-employed rapidly drop as the job market grows and more people return to working for larger companies?

Not necessarily. Because of the technological advances discussed earlier, many business thinkers, such as Andrei Cherny, anticipate that large employers will increasingly hire freelancers in lieu of permanent staff. This could mean that over the coming decades the job market will continue to shrink as we move towards a more open, fluid employment market where freelancers sell their skills and bid over work and projects.

So, if the job market is slowly becoming more entrepreneurial, what can be done to support the new business owners and guarantee that they have the skills and knowledge necessary to make their business a success?

Mark Pearson, award winning digital entrepreneur and CEO of My Voucher Codes, thinks it all comes down to education and inspiration.

“When a person decides to make an entire business out of their skill, their job stops being merely that one role. For example, if someone becomes a freelance copywriter, they now have the responsibility of not only crafting great copy, but handling the logistics of running a business, and finding new clients through effective marketing.

Unfortunately, there simply isn’t enough affordable, quality training out there for entrepreneurs. Our education system is very good for teaching us the skills we need to become good employees, but it doesn’t necessarily nurture entrepreneurial skills, and doesn’t teach people skills which are applicable when running a business.

If we’re to see Britain’s many new entrepreneurs succeed, there needs to be a support network available for them, to train them and teach them essential business skills. Until that day comes, the responsibility falls to them to educate themselves. The internet is a fantastic learning resource, and combined with social networks like Twitter, all you could ever need to inspire and teach you is right at your fingertips.”

So, as Mark says, perhaps the solution to Britain’s employment issues isn’t to force entrepreneurs back into jobs, but to equip them with the necessary skills they need to succeed independently.

Author Bio

Scott is the content editor and business writer at My Voucher Codes. When he’s not writing about subjects ranging from social media to travel, Scott spends his free time learning Mandarin and distance cycling.

Starting a business? Need guidance and a route to funding? Check out IncuBus London