Self-employed overcounted for decades by official data

Official statistics have overstated the size of the UK's self-employed population for two decades, according to the Institute for Fiscal Studies (IFS).

The share of national income flowing to those with the highest incomes has also been over-estimated, adds the think tank.

The mismeasurement stems from a longstanding error in the Survey of Personal Incomes (SPI) - a dataset created by HMRC, derived from tax returns and widely used across government for internal modelling.

The number of people with self-employment income has long been smaller than official statistics suggest. Between 2002/03 and 2017/18, the SPI overcounted the number of individuals with income from sole trading or partnerships by more than 500,000 each year on average - an overestimate of around 14%.

Rapid growth in self-employment is a more recent phenomenon than previously estimated. The SPI suggests a steady rise in self-employment since 2000, but the new data show that growth was in fact much slower before 2009/10, only matching growth rates seen in the SPI after the financial crisis.

Isaac Delestre, Senior Research Economist at the IFS, said:

'The rise of self-employed work has been one of the most important features of the UK labour market over the last 20 years.

'But these new data reveal a different narrative to the one told by official statistics – with the period preceding the financial crisis showing much slower growth in the self-employed population than we previously thought. That begs the question: what changed after the financial crisis that led to an acceleration in the growth of self-employment?'

Internet link: IFS