PCG: There's a structural change in UK labour market

Monday 24 February 2014

The UK labour market is experiencing something of a sea change, with new figures showing the way people work is evolving.

Data from the Office for National Statistics (ONS) revealed more and more Britons are choosing to go self-employed.

Indeed, the number of freelancers, sole traders and contractors in the UK has risen by 172,000 to reach 4.37 million. This is an all-time high for self-employment in the country and the number now accounts for 14.5 per cent of the total British workforce.

Georgios Nikolaidis, economic policy adviser at the PCG, stated: "This latest sharp increase in self-employment is more proof that the way we work is changing. The rise in those choosing to go into business on their own account is now outstripping the growth in traditional employment at a rate of almost three to one.

"The persistence of self-employment, growing uninterrupted from 2004 onwards, points towards a structural change in the labour market rather than a cyclical reaction to the financial crisis."

Mr Nikolaidis added that the number of people choosing to become freelancers has also increased. PCG research showed freelancer growth has been building momentum, rising by 63 per cent over the last decade.

For policymakers, the data has ramifications and suggests that a closer look needs to be taken at how we view and approach work.

With figures showing more people want to be their own boss and "take charge of their own personal 'brand'", the labour market needs to respond.

The trend is likely to only become more pronounced in the future, as businesses also see the benefits of contractors and freelancers.

"Businesses large and small are realising that incorporating this flexibility into their business model stimulates growth, mitigates risk and unlocks serious competitive advantages," Mr Nikolaidis explained.

He continued, stating that freelancing has started to cross sector barriers and is no longer just for certain professions and age groups.

Self-employed individuals now play an important part in the UK economy and ensuring they receive adequate support will be crucial for driving growth.

Demand for freelancers and contractors is certainly high too. In London, growth in temporary billings is now taking place at its fastest pace for 15 years.

The latest 'Report on Jobs' from KPMG and Markit revealed vacancies are increasing at the fastest speed since May 1998. January marked the second consecutive month of acceleration.

This has had a positive effect on contractor rates. Pay has now hit a 44-month high and 16 per cent of consultancies have recorded increased average temp pay. In fact, there has been no reports of declining rates.

When it comes to temporary appointments, the largest increase can be seen in the north of England, suggesting opportunities could abound for self-employed persons in the region.

This is happening at a time when employment growth as a whole is slowing, showing how the contractor market is bucking the trend.

The Labour Market Outlook from the Chartered Institute of Personnel and Development and SuccessFactors showed net employment has fallen to a balance of +16 from +24 in November 2013.

By Victoria McDonnell

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