Since the job market started recovering in 2010, 40% of new jobs have been created by the self-employed, meaning that one in seven of the UK’s total workforce are now self-employed. This is not only the highest ever proportion of business owners in the UK, but the highest level of self-employment in Western Europe, too.
Crucially, young people who are traditionally the least likely to become self-employed make up a significant portion of the newly self-employed.
The Global Entrepreneurship Monitor from the University of Strathclyde – a university that has one of the highest-ranked UK business schools – found that almost 14% of young people want to start their own business. A survey by GMAC, administrators of the GMAT business school entry exam, found that 11% of graduates are entrepreneurs or are self-employed.
Part of this huge rise in self-employment is undoubtedly down to the effects of the global recession and the economic downturn in the UK. With youth unemployment sitting at almost 25% throughout 2011 and 2012, many young people were locked out of careers and jobs, leaving many to choose between unemployment, and self-employment.
Belinda Love Lee, a freelance graphic designer and artist based in Cardiff, turned to freelancing because she couldn’t find any studios which were hiring. “None of the doors were opening. At that time, I started getting more and more freelance gigs so I just decided to go with it,” she said.
“I'm so glad I decided to take the leap down the 'less steady income route' because I've always wanted to work independently, but I just thought that I needed more studio experience to qualify. Little did I know that I would do so well on my own.”
Belinda’s tail echoes the stories of thousands of young entrepreneurs who set up their own businesses – not because they wanted to be their own boss, but because they had no other choice. A study conducted by the Guardian newspaper found that as many as one in four self-employed workers were looking for a job in a larger company and would abandon their business if a they received a suitable job offer.
This would suggest that as the UK job market improves, and more jobs become available, we can expect to see the number of self-employed people in the UK drop.
However, leading US economists believe that in the coming decades we can expect to see levels of self-employment rise. They believe that this shift is down to technological advancements and the internet, which is fundamentally changing the way we work.
Just 15 years ago, any prospective business owner would need a start-up loan to cover office supply costs and advertising – before they even started trading. These days, with a little imagination you can drop £500 on software and successfully run a business from your laptop, even a smartphone, from anywhere in world, choosing your own hours.
Perhaps the largest revolution has been in acquiring customers and advertising. The small businesses of a decade ago had to rely on networking, word of mouth and paid adverts, whereas modern business owners can use the internet to reach potential customers, for free.
The information technology revolution has also had a huge impact on larger companies and employers. Modern communications technology means that workers are no longer tethered to the office, and can work remotely whilst keeping in contact with each other in real time.
Equally, the need for shared office hardware has been eliminated by affordable software and technology, meaning that workers no longer need to come into the office to complete tasks.
However, the most fundamental changes to our working culture may be caused by how the internet has changed the way companies hire staff. All of these technological developments mean that companies don’t need to hire as many permanent staff anymore, meaning that they can hire freelancers on a project-by-project basis and eliminate costs such as pensions, holidays, sick pay, maternity leave and health insurance.
In the past freelancers raised their prices to cover these costs, but the economic downturn and the subsequent rise in the number of freelancers means that prices have been driven down, making hiring freelancers much more affordable and attractive to large companies.
So, if this shift into a more open, skill-based job market is here to stay, what effect will it have on the UK as a whole?
Its prospects look bleak. The average self-employed person earns just £12,000 a year, meaning that almost 15% of the UK’s workforce is barely earning enough to support themselves, and for business school graduates this is a significant drop in earning.
This level of income is not enough to buoy the UK economy. The self-employed and entrepreneurs have traditionally sought to expand their businesses – creating more jobs for the economy. However, a lack of profit and resources means that the kind of rapid expansion we saw from entrepreneurs in the 90s and early 2000s is looking extremely unlikely from this contemporary crop of business owners.
So, as more and more graduates turn away from traditional jobs and become their own bosses, how can they expect to become successful and earn enough to help Britain take its last steps out of the economic quagmire of the last half decade or so?
Mark Pearson, award-winning digital entrepreneur and CEO of My Voucher Codes, thinks that the UK’s small business owners and freelancers need more support and education to become successful businesspeople.
“When a person decides to make an entire business out of their skill, their job stops being merely that one role,” Mark said. "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.”
He thinks that there isn’t enough affordable, quality training out there for entrepreneurs – despite the rise in provision of entrepreneurial training at most business schools in the UK.
“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…. Skills which are applicable [to] running a business,” Mark said.
“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.”
He points to the internet and social media as sources of entrepreneurs’ inspiration. “All you could ever need to inspire and teach you is right at your fingertips,” added Mark.
So, it stands to reason that if we are to see the coming generations succeed in an increasingly entrepreneurial world, we need to see a shift in the way business skills are taught, and the importance we place on independent, critical thinking.
Otherwise, young people may be left with a set of redundant skills in a fundamentally different working world from the one we know.
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University of Strathclyde Business School
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