Contractors are an intrinsic part of the UK’s economy. That is according to the Royal Society for the encouragement of Arts, Manufactures and Commerce’s (RSA) report entitled ‘The Second Age of Small’, which found that microbusinesses, including the self-employed and contractors, are a significant driver of UK productivity.
The report confirms that there are now 5m microbusinesses – defined as firms with 0-9 employees – which is a huge increase from the year 2000, when there were 3.5m similar sized enterprises. Microbusinesses now represent 96% of all private sector firms in the UK.
According to Chris Bryce, chief executive of the Association of Independent Professionals and the Self Employed (IPSE): “This report confirms much of what we know about the self-employed. They work incredibly hard…but often don’t get the recognition they deserve.”
Contractors are here to stay
ContractorCalculator CEO Dave Chaplin agrees, adding: “Contractors have swelled in numbers since the recession and are now a mainstay of our economy. It is important that those contingent workers who deliver vital strategic skills, often making up for the shortfall in available skilled permanent staff, are recognised and rewarded for the support they provide.”
The RSA’s findings reveal that a shift has been taking place in the size and shape of UK business. As contractor numbers have increased, the amount of all other sizes of business has either stagnated or shrunk. This is in stark contrast to the last century, where small business levels declined to less that one million by the early 1970s.
While the report concerns itself with weighing up the pros and cons of this paradigm shift in the economy overall, it indicates that contracting is an extremely successful career and lifestyle choice today and is a huge incentive for others thinking about moving into the contractor arena.
Innovation and technology are catalysts for change
Of particular significance is the report’s suggestion that technology is an enabler for the self-employed. New technologies have definitely eased the administrative burdens of working independently, but for contractors with technical and IT backgrounds, including those with niche skills in digital and big data, the opportunities are even greater.
Reading between the lines of the RSA report, technically competent contractors can expect to gain commissions in an ever-widening range of areas, including media, music and food.
Innovation in general terms is usually regarded as an area in which only bigger companies with money can invest, but the RSA challenges this by arguing that flexible small businesses can alter course quickly and easily to move in new directions, whereas larger firms are wary about investing in risky areas.
Disruptive technologies such as the Internet of things (IoT) become more attractive to businesses with modest growth targets. Again, contractors have been shown to perform well in this specialist market; particularly where larger firms struggle to keep abreast of innovation.
Construction, long recognised as core contractor area by ContractorCalculator, is also identified by the RSA as a popular sector for those choosing to work for themselves.
Contractors are increasingly highly qualified
Skills shortages are worsening and contractors are filling this talent gap. The Second Age of Small report notes: “Rising skill levels mean that people have never been better equipped to work for themselves. The proportion of the self-employed workforce with a degree or equivalent has risen from 20 to 28% since 2001.”
In fact, the report found that 47% of contract workers are in professional and technical positions compared with 43% of employees.
This confirms the trend towards contingent workers being commissioned for their strategic skills, highlights Chaplin: “It is hard to discard the positive impact made by those who are self-employed, when highly regarded contractors are being placed into senior positions, including change management and corporate governance.”
The data against contracting is unreliable
Among the arguments for why microbusinesses are not a good growth prospect for UK Plc., is that productivity in the UK has not kept pace with other countries following the economic recovery.
This has been explained as being the result of unproductive self-employed workers, but the RSA report suggests that published figures, such as unreliable small business VAT submissions, are misleading.
Also, the relatively low sales turnover rates during the early years of a microbusiness can also keep productivity figures unrealistically low. However, once contractors have bedded in, they are likely to contribute and earn much more in the long term.
It ‘feels’ good to be a contractor
One of the key findings of The Second Age of Small report is how good it ‘feels’ to be a contractor. Despite the persistently negative views of being self-employed, contractors are, it seems, among the most satisfied workers in the jobs market.
Chaplin concludes: “This latest study into the reasons why contracting is increasingly popular, which includes autonomy, decision-making, and relations with management, highlights that contracting is increasingly becoming a positive career choice.”