Small Talk: Half the workforce could be freelance soon, but ministers haven't noticed

Could one in two people really be working for themselves within five years? That’s the prediction of PeoplePerHour, an online platform that matches people looking to get jobs done with freelancers capable of doing them. It says that on current trends, more than 50 per cent of working people will be doing at least some freelance work, even if some of them also have a day job.

While PeoplePerHour has an obvious axe to grind here, the forecast is not so outlandish. The Office for National Statistics said last year that self-employment was running at a 40-year high, accounting for 15 per cent of workers. Other studies have put the figure even higher. The Association of Independent Professionals and the Self-Employed says the number of freelancers has grown by 12 per cent over the past four years.

It’s easy to explain away the higher self-employment of recent years by saying that many freelancers would rather have taken jobs with employers had they been able to find them. But while this may account for some of the increase, there are other things going on too. Platforms such as PeoplePerHour make it easier for freelancers to source work, reducing the instability and uncertainty traditionally associated with self-employment. The availability of broadband and cloud-computing solutions make it more straightforward for people in many professions to work for themselves with little upfront capital investment.

In this new world of permanent connectivity, buyers want immediate fulfilment – but this requires a level of flexibility from suppliers that large corporations are often unable to offer. Agile freelance workers are able to respond instantly to customers’ needs – or, if they can’t, those customers will find someone who can.

Meanwhile purchasers are increasingly willing and able to break up the work they require into small, specialised chunks, sourcing each part from expert providers.

Just as changing working patterns will increase the demand for freelance and self-employed workers, so too is the supply likely to rise. Studies show that self-employed workers are more satisfied – a Populus survey published last year found that 84 per cent of self-employed people were happier with their jobs than they would be if they were employed, even though many of them earned less. They cited the ability to work at a time and a place of their choosing – a pattern of work more compatible with a decent work/life balance.

This large and growing chunk of the workforce has been overlooked by policymakers. While governments talk up their pro-business credentials and pledge support for small and medium-sized enterprises, you never hear them talk about the needs of freelancers or the self-employed. The result is that such workers are routinely ensnared in policy and legislation designed with other types of entity in mind. They get caught out by employment regulation, for example, or landed with tax regimes that do not fit their circumstances.

In extreme cases, freelancers even find themselves targeted by government. The IR35 legislation, for example, was introduced to stop people pretending they are freelancers as a tax planning strategy, but has landed thousands of self-employed people in a bureaucratic nightmare. If half of the working population is going to be working freelance within five years – even if only for some of the time – policymakers will need to address their needs.

The Government’s Valuation Office Agency’s pledge to resolve 95 per cent of outstanding business rates appeals by next month looks doomed to failure after a spike in claims. Some 201,000 businesses filed challenges to their bills in the first quarter, after the Treasury announced that only businesses making claims before 1 April would be allowed to backdate their appeals to April 2010, the last time that valuations were updated.

Jonathan Kinsey, the executive director of CBRE Rating, said the volume of appeals could prevent the VOA from preparing properly for the next revaluation, due for 2017, and also stymie attempts to overhaul the system. “Businesses have been promised a root-and-branch reform of the system, but this shouldn’t come at the expense of those still waiting for a resolution to their claim,” he added.

The number of small businesses aiming to raise funding via the Government’s tax-efficient Enterprise Investment Scheme (EIS) reached a new high last year. Analysis by Radius Equity suggests there were 2,925 applications during the 2014-15 tax year, with companies hoping to encourage investors through access to the tax incentives the scheme provides.

The popularity of EIS has risen since 2012, when the amount that companies could raise under the scheme rose to £5m. This effectively extended its reach to larger and more stable businesses. The number of companies using the EIS to raise cash has roughly doubled over the past five years.

With the first post-election Budget due next week, small business groups have called for the EIS to remain untouched.

“The EIS is one of the few schemes designed to increase funding to SMEs that has been a wholesale success,” said Gary Robins, a director of Radius. “It is now an important component in the funding of growth companies.”

“I’m a member of the Clark footwear family, but my intention had always been to avoid the shoe business. In the end, I got sucked in a different way.

“Around 12 years ago, a childhood friend of mine who blamed a series of injuries on his footwear came to me with a prototype for a barefoot shoe. The idea was to have a shoe with an ultra-thin but puncture resistant sole: your feet are incredibly complicated and well-designed, but traditional shoes undermine the way they are supposed to work, which is often why people get knee and back injuries.

“It took us several years to develop the idea, but by 2008, we were able to launch Vivobarefoot. The shoes were popular straight away, but in 2010 sales started to really take off. That was the year when so many people were reading Chris McDougall’s book Born to Run, and that year also saw Daniel Lieberman, a Harvard professor, publish research on the benefits of barefoot running in Nature.

“Last year we sold 350,000 pairs and we’re expecting a 30 per cent increase this year. Most of our shoes are made in China, but we also have a social enterprise project in Africa and a high-end manufacturing facility in Portugal.

“I’m definitely something of a black sheep in the Clark family, but many other members of the family wear our shoes. We’ve even tried to talk to Clark’s about partnerships on a couple of occasions, but that hasn’t happened yet.”