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Enterprise in disguise and reluctant entrepreneurship
January 19th, 2012 |
5 comments
A report published this week by the Chartered Institute of Personnel and Development (CIPD) has posed some interesting questions about the current levels of self-employment and the ‘enterprise culture’ in the UK.
According to official figures there are 4.14 million people in self-employment (about 14% of total employment) and latest statistics available show that self employment was 300,000 higher in spring 2010 than at the start of the recession in 2008 – a rise of about 8%.
In addition figures published by Barclays at the end of December also estimate that there were 480,000 new business start ups in 2011, which is the highest level for 75 years.
The government have heralded this as a resurgence in the UK’s enterprise culture.
However the CIPD’s report suggests that these figures don’t tell the whole story, and Barclays have added a note of caution to the release of their start up estimates.
Enterprise analyst at Barclays, Dr Richard Roberts, has said that while there had been an increase in the number of people starting up as a result of spotting opportunities, many have also been as a result of redundancy and therefore had no choice.
Dr Roberts has also pointed out that the total stock of businesses would only edge up by about 1-2% as a result of the rise in firms closing down in the last year, and he has warned that quality of start ups may be a problem in 2012 when even more start ups could close down.
Our own team’s experience of working with Barclays and other banks in the start up sector for more than 20 years concurs with this warning. During previous recessions and downturns a rise in the volume of start ups brought a corresponding rise in both the number of poor quality new starters and in resulting enterprise mortality rates. Our view is that this will be a certainty again, perhaps even more likely with the scrapping of local face-to-face enterprise support and the associated loss of vital start up filtering and control of quality that went with it.
The CIPD’s analysis of the latest self-employment figures reinforces this view. They have reported that almost 25% of current self employed people are in the building/construction sector yet the number of self employed construction workers is now less than in 2008. In contrast to this those sectors with relatively smaller shares of self employed numbers – which they name as including education, finance, insurance, public administration, defence and social security – are those sectors which have seen the biggest proportional increase in self employment.
In other words high numbers of start ups are coming from the public sector and those other sectors that have experienced the highest levels of job losses. People from unskilled occupations are also reported to make up a fifth of the net increase.
Dr John Philpot, Chief Economic Adviser at the CIPD has summarised this as follows:
“The typical self employed person remains a skilled tradesman, manager or professional, but since the start of the recession the ranks of the self employed have been swelled by a much wider array of backgrounds and occupations, including many handymen without skills, picking up whatever bits and pieces of work are available. These self-employed ‘odd jobbers’ are helping to keep the lid on unemployment but their emergence hardly suggests a surge in entrepreneurial zeal. While some of these newly self-employed may make a long term commitment to being their own boss, it’s likely that most would take a job with an employer again if only they could find one”.
This enterpise-skeptical summary hits the nail on the head and it reflects our own experience while recruiting to fill posts in our team over last two or three years. We have seen a much higher number of applications for jobs we have advertised coming from self-employed people seeking a return to employment rather than enquiring for freelance/contract work, something we rarely witnessed prior to 2008.
There are also reports that some public sector organisations have been making employees redundant and then re-hiring them as self-employed to do the work they were doing while employed – but for fewer days and less money. This practice of ‘enterprise in disguise’ has already resulted in some employers being found guilty of breaching employment laws.
Intriguingly, there are now a number of professionals whose LinkedIn profiles state their current occupation both as ‘self-employed’, concurrent with them also being ‘employed’, for example as ‘Interim Manager’, at the organisation they name as being their immediate previous employer.
This ‘reluctant entrepreneurship’ has also spread into other sectors, with one prime example being a reported rise in the number of homeowners reluctantly becoming landlords for the first time. According to the Association of Residential Letting Agents (ARLA) almost half of its members have reported a rise in the number of ‘unplanned’ lettings in 2011. ARLA say that these reluctant landlords are cash-strapped home owners who have struggled to sell their property and have put their home onto the private rental market instead. This is an unregulated sector riddled with pitfalls for those unwary, inexperienced landlords who don’t understand the risks and fail to get appropriate advice on how to operate rental arrangements properly.
Does this rise in reluctant entrepreneurship, enterprise in disguise and self-employed odd jobbers warrant the claims made by politicians and start up ‘bible-bashers’ who suggest that Britain is experiencing a resurgence in enterprise?
Or does this camouflage true levels of unemployment and the extent of non-sustainable self-employment and enterprise?
Or is this, perhaps, an example of entrepreneurial zeal, but with a nod and a wink?
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5 Responses to “Enterprise in disguise and reluctant entrepreneurship”
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Surely it is good news that more people are becoming self employed rather than remain unemployed? A Chinese friend once said to me that the Chinese character for “crisis” was made up of the character for “danger” and “opportunity”. Becoming redundant is a danger but it can be an opportunity to change your life and look for a new career and for some people that might mean fulfilling a dream of working for yourself. There will be failures but I’m sure that many others will succeed in their chosen self employed business. And all will learn something about themselves which they should find useful in later life.
Comment was posted on Tuesday, February 14, 2012 1:13 pmIs this truly figures for start up businesses or the numbers of people registering as self employed with HMRC? Chris Lewis and Mervyn Pilley are on the mark; there are lots of people being classed as ‘sub contractors’ when in reality they are employees without that status.
Comment was posted on Friday, January 20, 2012 11:52 amAgree with the other comments so far. Increasingly, people are taking commission-only jobs and being told to register as self-employed. The HMRC needs to crack down as it’s little more than exploitation and ‘employers’ avoiding their responsibilities.
Comment was posted on Friday, January 20, 2012 11:51 amMany agency temps doing menial/unskilled jobs eg van drivers etc are forced to go self-employed even though they may be working long term for only one business (via the agency contract). Disguised employment if ever I saw it.
Comment was posted on Thursday, January 19, 2012 4:52 pmI’m afraid to say that I believe that the truth is that the Government is all too happy to have true unemployment figures camouflaged by this. In reality the vast majority of new ‘businesses’ are really not businesses at all just people desparate to earn any income they can from any source on any terms – a tragedy for the Country.
Comment was posted on Thursday, January 19, 2012 11:52 am