Sharp rise in number of sole-traders a ‘worrying trend for economy’

Half of the 63,000 additional people in work since employment bottomed out in the first half of 2012 are working for themselves and have no paid employees.

The vast number of people that have set up their own business in that period but whose companies remain one-person operations may partly explain why an increase in the number of people employed has not translated into economic growth of corresponding value.

That’s according to economist, Annette Hughes of DKM economic consultants who believes the number of people working for themselves is a worrying phenomenon.

“It is a bit concerning that half [of those who found employment since Q1 2012] are self-employed with no paid employees. Perhaps we are not seeing employment translating into economic growth because of this,” said Ms Hughes.

“If they’re not earning a proper income, they won’t be contributing to the economy in the same way that others in employment might be,” she added.

The total number of people working for themselves as the sole paid employee in their business is now 231,000; the highest since the first quarter of 2008.

The sharp rise in sole traders raises a number of interesting questions, according to Ms Hughes.

“It is interesting that half are self-employed with no paid employees. It raises a whole host of questions. Are they genuinely setting up a new business?” she said.

Ms Hughes said that if the single-person businesses are genuine entities that are likely to have a future then they are to be welcomed, but warned that some may be persons who struggled to find employment so set up a business that may not be sustainable as their only alternative.