The sudden rise in self-employment across the UK has been explored in a recent report by The Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA), with five key ingredients being pinpointed for the increased number of British start-ups...
Having looked into the six tribes of self-employment and common misconceptions surrounding the new generation of entrepreneurs, the RSA now concentrates on the reasons behind the growing numbers of people choosing to start-up. So, how has it been able to happen?
1. A change in mindsets
Just as organisations are changing, so too are mindsets. For much of post-war Britain, running your own business was seen as a lesser form of work, particularly when compared to job opportunities in professions such as medicine, law and the civil service. In recent years, however, this stigma has begun to fade away. Business owners are now seen as pioneers, just as they were in the 18th and 19th centuries when the likes of Richard Arkwright were leading the industrial revolution. According to the Global Entrepreneurship Monitor, close to 80 percent of people now believe that those starting a successful business have a high level of respect in society – a figure that has risen steadily over the past decade.
However, this is not simply a case of more people passively admiring the self-employed, it is also about more people themselves enjoying the very acts of making, doing and selling. Conspicuous consumption is being challenged by conspicuous production, as starting and running a business becomes a deeply social and popular activity – not just a way to earn money but to express oneself and connect with others.
2. The entrepreneurial trigger
Labour economists have highlighted that mid-level opportunities are being stripped out of today’s organisations at a remarkable pace, leaving greater numbers of people with the prospect of working either in lovely or lousy jobs, which sit at polar opposite of the job market. Middle-wage occupations saw their share of employment decline in 16 major European nations from 1993 to 2006. This is partly due to the advent of computerisation and the spread of automation – once limited to certain occupations but now extending into everything from accounting to legal services. One Oxford University study indicates that as many as 47 percent of jobs are at risk of being automated over the next 20 years.
The impression here is that a lot of people are being ‘pushed’ into self-employment partly because of a lack of decent job opportunities and partly because those jobs that do remain are becoming less attractive. Yet this is only one part of the story. Rather than forcing people into self-employment, many of these organisational shifts should instead be seen as the ‘trigger’ that is releasing pent up entrepreneurial ambitions.
3. New markets
Forty plus years ago the UK was an economy still rooted in heavy industry and manufacturing. Yet fast-forward to 2014 and the economy is in an entirely different place. Today we are more likely to work in a call centre than we are in a car factory, and to be in an office surrounded by servers and computers rather than heavy machinery and assembly lines. In 1990, manufacturing accounted for a fifth of UK GDP, but now it is only a tenth. Contrast this with the service sector, which today accounts for over three-quarters of UK economic output. The reason this matters is because small businesses everywhere thrive in service industries – not least due to lower barriers of entry. Rather than have to invest in heavy capital to create products, microbusinesses can instead draw upon talented labour to generate services.
4. Our ageing society
One of the major drivers of the microbusiness boom we are witnessing today is likely to be an ageing society. The number of over 65s is set to increase by 50 percent over the next 20 years as baby boomers age, and many of these will continue to work well past the age of retirement. According to data from the Labour Force Survey, the number of people working past the point of state retirement has more than doubled since the turn of the century. A number of these individuals will opt to start their own business. The number of over 65s working for themselves has increased by 140 percent since the turn of the century, and half the increase in self-employment since 2008 was accounted for by the over 55s.
5. New technology
Technological progress is the final but crucial ingredient behind the boom in self-employment. While the broader impact of the internet age may be questioned by some, its transformative effects on the world of business are plain to see. Our own RSA/Populus survey found that over a third of self-employed people would not have been able to start their firm at all without recent advances in technology such as the internet, while another third said they could but it would have been less successful. Simply put, these technologies have sent the cost of doing business into freefall.
Whereas 20 or even 10 years ago you would require a bricks and mortar shop to stock goods, distribute them and build awareness of your brand, today all that is required is some form of workspace, a laptop and access to the internet. A recent survey by Barclays Bank found that the average cost of starting a business is now just £500. Crucially, what these new technologies have created are ‘variable cost structures’ that allow businesses to operate on a plug-and-play model.
What factors have enabled you to start-up? Let us know below...