Nearly one in seven Britons are now self-employed and earn 40% less than a typical employee, a major new report has found.
The Resolution Foundation's new study sheds new light on the state of job security in Britain as the number of self-employed has risen by 650,000 to 4.5 million since the recession started five years ago, which represents 15% of the active workforce.
The recession has hit self-employed Britons especially hard, as their average weekly income is 20% lower than it was in 2008, with a typical self-employed worker now earning 40% less than a typical employee.
An Ipsos-Mori survey commissioned by the Foundation as a part of the report found that 27% of those who became self-employed in the past five years to do so because they had no other choice, an increase from 10% five years ago.
The Resolution Foundation report warns: “The analysis paints a worrying picture of the security and vulnerability of self-employed people on both a short and long term horizon.
"Only 30 per cent of self-employed people are contributing to a pension, compared to 51 per cent of employees. Our survey also indicates that a minority of self-employed people are experiencing difficulties getting mortgages, tenancies and accessing personal credit and loans, specifically due to being self-employed."
Gavin Kelly, chief executive of the Resolution Foundation, said: “Self-employment is often a highly precarious existence which isn’t that well supported by public policy. High levels of self-employment seem likely to be here to stay and policy-makers have some catching up to do.”
“The growth in self-employment over recent years has been astonishing – but the reasons for it are complex. Some of it can be explained by a workforce that is getting older and putting off retirement for longer, some of it may be down to our growing appetite for being our own boss, and clearly much of it is due to weakness in the jobs market meaning there are fewer other options.”
Labour’s shadow business Secretary Chuka Umunna said: “This report shows that the cost of living crisis facing the self employed is often more acute than for others.
“That is why, unlike this Tory led Government, we will reduce the cost of doing business for the self employed by reducing the average small business’ energy bill by £5,000 with Labour’s energy price freeze, by improving access to finance with a British Investment Bank and regional banks, and by setting up a UK Small Business Administration to champion their interests at the heart of Government.”
A Department for Work and Pensions spokesman said: "Of the 691,000 extra people who have found work over the last year nearly three fifths are employees of firms. But small businesses and entrepreneurs are the heartbeat of the continuing success of the country and as the economy grows, these self-starters may well become the employers of the future.
“The truth is the number of people in work has increased by 1.35 million since 2010 - over a million of these jobs are full-time. We now have the highest employment rate for five years and record numbers of people are in work.”