Urgent action needed to avert stampede away from self-employment, Inquiry warns

23 December 2020

The government must take urgent action to avoid a ‘stampede’ away from self-employment, according to a new report from the cross-party Inquiry into the Future Self Employment.

The Inquiry, which is made up of independent experts, politicians, and industry figures was set up by trade union Prospect and is supported by Community union and the Federation of Small Businesses.

The Inquiry took evidence from self-employed workers and groups affected by the crisis, policy experts and a mass survey of the self-employed. The final report is due in February however they have released an interim report in light of the urgency of the situation.

The key findings of the Interim Report are:

  • Over 50% of self-employed workers had lost 60-100% of their household income in 2020
  • 64% were less likely or unsure if they wanted to continue to be self employed in the future
  • 73% had been unable to access DWP support such as Universal Credit
  • 88% did not believe that support for the self employed in the pandemic had been commensurate with their tax contribution

In response the Inquiry has called for the immediate introduction of a Self Employment Stabilisation Scheme (SASS) to complement and build on the existing Self Employment Income Support Scheme (SEISS).

The SASS would close existing gaps in the SEISS scheme, such as for company directors, the newly self-employed those who are caught by the cliff-edge thresholds in the SEISS scheme. In addition the SASS would introduce sectoral funds in areas with large freelance workforces, such as the creative industries, to support these workers and halt a flow of vital skills out of these sectors.

The Inquiry argues that this additional support is necessary to enable a swift economic recovery in 2021, and that failure to offer this support with cause long-term economic damage by destroying small businesses and driving people out of self-employment. With the vaccine offering hope of a return to normality quickly, the cost of a few months of extra support must be weighed against the likely damage caused if no action is taken.

These are interim recommendations and do not necessarily reflect the views of every member of the commission.

Prospect general secretary Mike Clancy, who commissioned the Inquiry, said:

“The news that barely a third of all self-employed and freelance workers are confident they want to continue to work in this way should be a massive wake-up call to the government.

“These workers have powered our economy in recent years and this flexible workforce were lauded by ministers as key to our prosperity. But the way they have been treated in this pandemic is disgraceful and will have consequences for our ability to recover in 2021 in beyond.

“In the long term we need fundamental changes in how these workers are treated. For now, the government has to listen immediately to this Inquiry and introduce a scheme to halt the stampede away from self-employment that that their policies are causing.”

Community general secretary Roy Rickhuss said:

“Our findings must serve as a catalyst to ensuring that those self-employed workers who have so far missed out on government support, urgently receive it.

“Over 60% of self-employed workers feel less likely or unsure they want to be self-employed or freelance in the future. This would be nothing short of a disaster for our economy, prospects of an economic recovery and the livelihoods of thousands of working people and their families.

“Government must wake up to these figures and act immediately on our recommendations to ensure that thousands of self-employed people are not plunged into further financial hardship as a result of this pandemic, and that this vital section of the UK workforce continues to play a fundamental role in our economy.”

FSB National Vice Chair Martin McTague said:

“The self-employed community was fundamental to our recovery from the last recession, but the Government often struggles to understand and appreciate the contribution of this vital part of the economy.

“If we want it to drive a similar bounceback over the months ahead, we need to give sole traders the help and support they desperately need, and encourage more of those who are out of work to strike out on their own.

“From proposals for a directors income support scheme, to Universal Credit reform, to adjustments to the Self-Employment Support Scheme, our expert group is recommending a range of much-needed interventions which, if the Government adopts them, will put the economy on the right footing in 2021.”

Inquiry into the future of self-employment: Interim report

Download the report