Self employment boom continues to shape UK cities

New research from the Centre for Cities claims that we are still seeing the long-lasting consequences of the post-financial crisis self-employment boom in the UK’s cities. But too many people working for themselves lack access to training – raising concerns about their long-term security and many cities’ future economic strength.

Self-employment in cities has risen by 44 percent since 2008, outpacing the national average by almost 25 percent. But nearly 80 percent of urban self-employment is mid and lower-skilled in industries such as construction – which is the most popular industry for self-employment in cities – transport, arts and personal services.

While cities need a mix of high and low-skilled employment, high-skilled service export work creates the strongest conditions for economic growth.

The skills challenge

People in weaker city economies are more likely to be in lower-skilled self-employment. In Burnley the number of self-employed people has grown by almost 50 percent since 2008, but just 14 percent of them are in high-skilled work. Compare this to Cambridge where 42 percent of self-employed people are in high-skilled work – the highest proportion in the UK. The exception to this trend is Slough, which is the most productive city in the UK but has the lowest share of high-skilled self-employed people.

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Everybody should undertake training to ensure their skills remain relevant, but this can be more difficult for self-employed people than employed ones who can access companies’ training funds. This will become a more pressing policy issue if the number of self-employed people continues to rise as it has done in the last decade.

Since 2012 there has been a rise in people supplementing regular employment through self-employment, particularly in cities with strong economies. In Cambridge 37 percent of self-employed people do this – double the amount in Blackburn.

few self-employed people undertake training to future-proof their skills against changes in technology and consumer demand. They are further disadvantaged by a tax system that prevents them from deducting many training costs, particularly training to acquire new skills, from income tax.

What is needed

The Government should act to ensure that many of the self-employed people in economically weaker cities do not fall further behind as they manage the disruption caused by technological change.

Centre for Cities sets out three proposals for the Government:

1. Allow self-employed people to deduct training costs from income taxes: Self-employed people are allowed to deduct costs for updating skills relevant to their role – but not for new ones. The Government should incentivise the acquisition of new skills to allow self-employed people to move between industries.
2. Bring together businesses to invest in training: Industries with high rates of self-employment should build on the example of the construction sector and establish industry training boards that support people looking to upskill or retrain, with particular attention to self-employed individuals.
3. Strengthen local economies: A predominance of lower-skilled employment is often a reflection of weakness in the local economy. Policy incentives to attract more high-knowledge industries to struggling cities would provide better employment prospects for everyone, including people that are self-employed.

Image: Blackburn Open Walls Project