Microbusinesses outgunning large firms in the UK’s fastest growing industries

New figures released by the RSA think tank show that microbusinesses now account for the greatest share of employment in some of the UK’s fastest growing industries, including education, computer programming and personal services. The implication is that firms with 9 employees or less are becoming increasingly important to the UK’s economic growth prospects, the RSA said.

Released to coincide with today’s RSA Self-Employment Summit, held in partnership with Google and Etsy, the figures revealed that there are now over 5 million microbusinesses in the UK, with their numbers having grown by 53 percent since 2000. In stark contrast, the number of large firms (classed as 250+ employees) has increased by just 2 percent over the same period.

The RSA found that microbusinesses account for 41 percent of employment in the 20 fastest growing industries, as measured across 2010-2014. This is despite only making up 34 percent of overall employment. Microbusinesses are home to 75 percent of workers in personal service activities, 45 percent in computer programming and consultancy, 57 per cent in education, and 40 percent in human health activities.

An upcoming RSA report, The Second Age of Small, will argue that shifts such as these signal the return of microbusinesses to the forefront of the economy. Interim findings, drawn from interviews with expert stakeholders and academics, suggest that microbusinesses are likely to thrive in the industries of the future, particularly those founded on relationships, experiences, artisanship and care – all qualities that are more likely to be found among microbusinesses and the self-employed people behind them.

Commenting on the report, Senior RSA Researcher Benedict Dellot said:

“The number of self-employed workers now stands at a record 4.52 million people, and there have never been as many microbusinesses as there are today. Some economists dismiss these firms as being lightweight, unproductive and inefficient – even a burden on our economy and society. Yet our findings reveal the exact opposite: microbusinesses are taking centre stage in our emerging industries. Whether it is a computer programmer, educational tutor or personal trainer, microbusinesses and the self-employed people behind them are much better placed than large firms to create value in new markets and meet the changing desires of consumers.

We have called this phenomenon the ‘Second Age of Small’ – a phrase that captures how the economy is returning to its roots. The pre-industrial revolution was characterised by cottage industries where most people made handmade goods and worked in small teams. Yet these small economic units gradually became replaced by large firms as new technologies, managerial science and a consumer taste for cheap products came to the fore. But now we seem to be going full circle. Why? First, because consumers are turning away from mass produced goods for more meaningful products. And second, because technology has diminished many of the advantages of scale. The lesson for government and wider society is to start treating microbusinesses and the self-employed more seriously.”

Today’s Self-Employment Summit, held in partnership with Google and Etsy, brings together a wide range of panellists to discuss this phenomenon. Panellists include Rohan Silva, Will Hutton, Polly Toynbee, Stella Creasy MP, Jo Swinson MP, Geoff Mulgan and Emma Jones.

Summit Agenda

10:30 – 10:40: Introduction by chair, Anthony Painter, director of Institutional Reform, RSA

10:40 – 11:00: Opening remarks, Adam Lent, director, RSA Action Research Centre

11:00 – 11:45: Session #1: Solving the self-employment puzzle

Panellists: Emma Jones, Enterprise Nation; Tom Hodgkinson, The Idler; Steven Toft, Flip Chart Fairy Tales blogger; Patricia van den Akker, Design Trust; and Sarah O’Connor, Financial Times

12:15 – 13:00: Session #2: Entrepreneurship in a digital age

Panellists: Nicole Vanderbilt, Etsy; Sam Conniff, Livity; Jon Steinberg, Google; and Anthony Painter, RSA

13:45 – 14:15

A day-in-the-life ‘in conversation’ session hosted by Peter Day, BBC global business correspondent. Participants to include: Steve Coles, social entrepreneur and business consultant and Fiona Crawford, Helter Skelter

14:15 – 15:00: Session #3: Searching for a new kind of capitalism

Panellists: Geoff Mulgan, Nesta; Will Hutton, Hertford College, Oxford; Vicky Pryce, Centre for Economics and Business Research (CEBR); and Adam Lent, RSA

15:45 – 16:30: Session #4: Improving the living standards of the self-employed

Panellists: Rohan Silva, former adviser to the PM; Mark Littlewood, IEA, Nida Broughton, SMF; Ben Dellot, RSA; and Polly Toynbee, The Guardian

16:30 – 17:30: Session #5: Question time

Panellists: Matt Hancock, Conservative MP; Jo Swinson, Liberal Democrat MP, Stella Creasy, Labour MP; and Matthew Taylor, RSA Chief Executive

Notes to editors

1. For more information contact Luke.Robinson@rsa.org.uk or call 020 7451 6893 or 07799 737 970

Previous research by the RSA showed that the rise in self-employment accounted for 90 per cent of all jobs growth during the recessionary years of 2008-13. Should these rates continue, the RSA predicted that the number of people in self-employment could outgrow the public sector workforce by 2018.