Number of self-employed workers hits 18-year low as skills shortage bites

The number of self-employed workers in construction hit its lowest level for 18 years during 2021.

Recently released data from the Office for National Statistics (ONS) shows that in the fourth quarter of last year there were 773,000 operatives in the industry registered as self-employed. This was down from 881,000 in the first quarter of 2020 before the pandemic fully hit, and 179,000 lower than during the first quarter of 2019.

An 18-year record low level was recorded during the first quarter of 2021 when the stats body recorded 744,000 self-employed people working in construction.

The decline in self-employment has not been matched by an increase in direct employment, with labour shortages having dogged the industry for months. There were 1.07m people directly employed in the sector during the final quarter of 2021. This compared to 1.125m people employed in construction in the first quarter of 2020.

Andrew Eldred, director of workforce and public affairs at the Electrical Contractors’ Association (ECA), said: “One factor is likely to be older self-employed individuals chucking it in.

“I think another factor is large numbers of self-employed EU migrants going home during COVID and not now able, or particularly keen, to return post-Brexit. Some of the largest drops in workforce numbers that I am hearing about anecdotally have occurred in sectors like drylining, cladding and datacoms, which have had a lot of EU migrants in the past, and most of them are self-employed.”

Results of a poll called the Building Engineering Business Survey, released yesterday by the ECA and fellow trade bodies Select, the Building Engineering Services Association and the Scottish & Northern Ireland Plumbing Employers’ Federation, found that the current top concern of 41 per cent of companies is retaining existing staff. The poll also found that 47 per cent of respondents said that “attracting the right calibre of people to the business” was their biggest worry.

On the self-employed stats, Andy Chamberlain, director of policy at the Association of Independent Professionals and the Self-Employed, said: “The fall represents an 18-year low and is sadly in line with other sectors such as the artistic, media, and literary industries, which have also been devastated from the loss of work that self-employed workers have faced during the pandemic.”

He said COVID-19 was one of the main reasons, but reforms to tax rules called IR35 that mean contractors have to take on as PAYE staff the self-employed people they consistently use, have also caused people to walk away.

“The flawed reforms to IR35 in April 2021 have led to a significant number of self-employed workers leaving contracting altogether, with many finding that the confusion around the changes has led to clients mistaking contracts as inside IR35 and therefore causing contractors to pay more tax. For the construction industry more specifically, there have been fears that the number of self-employed construction workers has fallen as EU nationals abandon the UK following Brexit, but that’s not the only challenge,” he added.

Last year Construction News revealed, that the Department for Business, Energy and Industrial Strategy was planning to push the industry towards direct employment, in a bid to address the skills shortage. The Construction Leadership Council (CLC) and Unite union supported the drive.

Chamberlain called the policy “wrong-headed”. He said: “The way to upskill the whole construction workforce is to include the self-employed in training schemes. Self-employment has served the construction industry well and will continue to do so, if allowed to, and if given the skills to deliver.”

A CLC spokesperson said the current decline in self-employment “may reflect a range of factors including changes in government policy relating to self-employment, and the impact of COVID on some workers who may have chosen to retire or exit the sector”.

They added: “The Construction Leadership Council recognises direct employment as an enabler of apprenticeships, digital upskilling and competence. It has committed to develop good practice guidance in relation to direct employment, while also looking at the policy options to allow employers to move towards greater direct employment.”

Engagement work with companies is ongoing, they said, and it plans to update the industry on the work “shortly”.

Other data released by the ONS recently showed that vacancies in the sector dropped to a five-month low in January, to 38,000. This was the lowest since the period to the end of August when there were 35,000 unfilled roles. However, Gaelle Blake, from recruiter Hays, told CN last week that the drop was seasonal and demand for temporary vacancies was already ahead of where it had been in November.

The last time the number of self-employed workers was as low as in the third quarter of 2021 was in the second quarter of 2003, prior to the enlargement of the European Union the following year, when 10 countries, including Poland and the Czech Republic joined the bloc. Previously released data has shown a huge drop in the number of EU-born workers in the UK construction industry since 2019.

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