1. Home
2. IPSE News
3. Blog
4. How 2022 impacted the solo self-employed sector

How 2022 impacted the solo self-employed sector

• 08 Feb 2023
• Joshua Toovey

The self-employment sector has slowly started to recover over the past year after previous periods of uncertainty, restrictions and reforms.

However, the continuing impact of the IR35 reforms, rising inflationary pressures and government tax policy towards the sector has unquestionably combined to bring about a challenging landscape for those that choose to work for themselves.

We know from our IR35 research over the past 12 months that those freelancers deemed ‘inside IR35’ – often as a result of a blanket assessment or blanket ban from clients – were likely to report a drop in their quarterly earnings and on average, by 30 per cent.

Similarly, our survey of IPSE members and the wider self-employed community from August 2022 revealed that, as a result of the cost-of-living crisis, 27 per cent reported that they were concerned about incurring debt and 23 per cent concerned about covering mortgage repayments.

Using our latest research from the annual Self-Employed Landscape report, we take a closer look below at how the past year has impacted the sector, reviewing demographic, occupational and regional changes whilst also analysing the overall economic contribution of the UK’s solo self-employed workforce.

Overall population

Following two successive years on a downward trend, this year the number of solo self-employed (self-employed individuals without employees) in the UK has remained stable at 4.1 million.

There are now 1.9 million freelancers (those operating in the top three SOC codes) in the UK, up one per cent from 2021. The number of freelancers as a proportion of the overall solo self-employed population has remained at 46 per cent – the same figure as our findings in 2021.

Despite the overall population figures remaining stable from 2021, we are yet to see a return to the workforce of the many individuals that left self-employment due to the pandemic or IR35. If the government is serious about incentivising the economic inactive to return to work, embracing the self-employed sector would be a good place to start.

Economic contribution

The research now reveals that the solo self-employed sector contributes an impressive, estimated figure of £278 billion to the UK economy per year. Moreover, highly skilled freelancers (SOC1, SOC2 and SOC3) are estimated to provide approximately £126 billion of the £278 billion that solo self-employed workers generate – accounting for 45 per cent of the overall contribution.

Interestingly, this represents a decrease on our findings from 2021, where the solo self-employed contributed an estimated £303 billion a year. With the overall population figures remaining stable, the current estimate is based on a lower average turnover for solo self-employed businesses. This can be attributed to a multitude of factors, such as the fact that the IR35 reforms have reduced income, government tax policy towards the sector and the fact that freelance businesses now have higher overheads as a result of increasing inflationary pressures.

Regional changes

Despite overall numbers of the solo self-employed remaining stable compared to 2021, the research reveals disparities across the UK’s regions. Whilst Northern Ireland, London and Scotland experienced increases in their total solo self-employed population, Wales saw a sharp drop in their population over the last 12 months.

Occupational changes

The report also reviewed the major occupations of the solo self-employed workforce, with the UK’s self-employed predominantly working in construction and building trades (360,000), as road transport drivers (284,000), in artistic, literary and media occupations (274,000), or in agricultural and related trades (189,000).

It’s been a mixed picture in terms of changes in the size of SOC groups within the solo self-employed population, with decreased reported by some SOC groups counteracted by increases in other occupational groups. The greatest decrease in numbers has been in SOC7 Sales and Customer Service Occupations, decreasing by nine per cent since 2021.

With the report revealing the impressive contribution of the sector, it’s time government embraces this sector and these groups by incentivising rather than disincentivising self-employment.

Self-employment remains one the most dynamic parts of the economy – supporting clients but also wider economic growth – yet government policy towards this sector over the last few years has not reflected this sizeable contribution. If the government is serious about it’s plans for growth, then supporting those that choose to work for themselves and incentivising self-employment for the economically inactive will be key.

Read the full report here