Going solo: self-employment in Wales

It is often said that small firms are the lifeblood of the economy. I’ve heard this phrase many times in speeches made inside and outside the Senedd chamber, extolling the value of small firms to the Welsh economy. Yet the phrase does little to explain the role that such firms play in the private sector.

Focusing on the smallest companies, there were, according to Welsh Government figures, 237,200 microbusinesses (firms with 0-9 employees) in Wales in 2016, employing 389,600 people. That’s an average of 1.6 employees per firm. With this in mind, the Federation for Small Business has rightly called for policies to grow the number of medium sized firms.

A significant majority of businesses however, will not grow beyond the micro-firm stage and their owner managers often have no desire to do so.  A self-employed lifestyle is enough for many. Such business owners would prefer to take a regular salary today than wait for the sometimes remote possibility of a bigger income at an indeterminate point in the future.

The contribution of the self-employed to our communities is however important, accounting for 38% of jobs growth in Wales between 2007 and 2016.  It is therefore welcome news that the FSB have commissioned a report entitled “Going Solo: Understanding Self-Employment in Wales” , written by Professor Andrew Henley and Dr Mark Lang. The report is launched at today’s meeting of the Assembly’s Cross Party Group on Small and Medium Sized Enterprises, which I chair. It illuminates the differences in patterns of self-employment across Wales.

The report recognises that, while it is vitally important to tackle the negative and exploitative consequences of the burgeoning ‘gig economy’ through employment contract regulation, gig workers are only a minority of the self-employed population. The report centres its attention on the positive economic contribution made by the majority of the self-employed.

The Northern Valleys (particularly the Caerphilly, Blaenau Gwent and Merthyr Tydfil local authority areas) have the lowest level of self-employment in Wales at 8.7%. The highest is Powys with 23%. The Valleys area also has the lowest level of female self-employment in Wales at 4.6% but not the lowest level of male self-employment. This could be at least partially explained by the ‘preponderance of construction self-employment in the Valleys’, a sector whose workforce is male-dominated.

Self-employed people in the Valleys also tend to have fewer educational qualifications, such as lower percentage levels of NVQs or other vocational qualifications and a higher percentage level of no qualifications at all, than those in urban or rural Wales.

Office for National Statistics figures last week showed that Wales has a lower unemployment rate than the UK average. However, Wales’ employment rate is also comparatively low. This means we have a relatively high population of people who are economically inactive- those of working age and not able to work- and the largest proportion of these people are to be found in the Valleys. The report suggests that the longer someone is unemployed or economically inactive, the less likely they are to consider self-employment.

The report identifies specific implications for policy that should be tailored to supporting and enabling self-employment.  It is clear that the Welsh Government needs to do more to encourage and grow sustainable self-employment. It should go beyond growing the construction sector, diversifying into other sectors of the foundational economy, supporting those businesses we use to satisfy our everyday needs.

Given that there are different patterns of self-employment in different parts of Wales, Welsh Government policy toward self-employment should be locally and regionally tailored to reflect this. There is no one-size fits all approach.

The report also calls for the Welsh Government to recognise that patterns of interaction between the self-employed are not usually competitive but rather more collaborative. Much has been written about the role of ‘social capital’, the knowledge and skills pooled in human co-operative activity. It is recognised that rather than find employees, self-employed people will ‘work with associates to deliver certain projects’.

With this in mind, Welsh Government should ensure that their procurement practices are open to collaborative bidding from such self-employed associates and are also open to bids from individual self-employed people. Collaboration should also be enabled by growing and rethinking existing self-employed and micro-business networks. Business premises, tailored to the self-employed, should also be made more widely available and it is encouraging that the Welsh Government is supporting pilot projects in this area.

The FSB report on self-employment is intended to be the beginning of a wider conversation. Self-employment doesn’t bring easily visible and immediate economic gains but it is the sector that keeps our economy ticking over. Growing self-employment numbers in areas in which they are under-represented will also add to the longer term sustainability of local economies. With regionalisation on the Welsh Government’s agenda, a review and upgrading of self-employment policy is now most welcome.

 

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