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The self-employed workforce in Wales

26 March 2020

As the UK Chancellor prepares to announce a package of support for self-employed workers affected by the coronavirus (Covid-19) pandemic, this short blog posts sets out key facts about the self-employed workforce in Wales.

In 2018, it is estimated that there were 206,000 self-employed people in Wales, equivalent to 14.1% of the in-work workforce – slightly less than the UK average of 15.1%.

There is significant local variation in the relative size of the self-employed workforce across Wales – rural areas tend to have higher rates of self-employment compared to more urban areas.

More than 97% of the self-employees in Wales do not employ any workers – this is higher than the UK average of 92.5% suggesting that Welsh businesses tend to be smaller in size.

Around 40,000 (20%) of self-employees in Wales work in the construction trade – this means that a further fifth of the self-employed workforce could be out of work if restrictions are further tightened.

Self-employed workers in Wales are three times as likely to be working in the agriculture industry compared to the UK as a whole.

Over 26,000 of Wales’ self-employed work in the retail, wholesale and hospitality industries. This sector could be particularly adversely affected by social distancing measures and travel restrictions put in place to combat the spread of the virus. And though less than 31% of the self-employed workforce in Wales are women, female workers account for 42% of self-employees in this sector.

Data from the Survey of Personal Income suggests that the earnings of self-employed taxpayers mirror that of other taxpayers across most of the income distribution. The exception is at the very top end of the distribution, where the incomes of self-employees vastly exceeds that of other taxpayers.

But in 2015, around a third of the self-employed workforce were earning less than the personal allowance and not paying any Income Tax. Half of the workforce were earning less than £14,500 a year. When we include the entire workforce (including non-Income Tax payers), self-employed workers tend to have lower average earnings than their employed counterparts, reflecting the large number of people self-employees on relatively low levels of income.

Though the self-employed workforce have benefitted from a slightly strengthened safety-net due to the recent increase in the generosity of Universal Credit, they have not seen an equivalent to the Job Retention Scheme that has been made available for employees. This means that ‘replacement rates’ (out of work income as a share of in work income) for the self-employed will be significantly below those of employees.

The measures that will be announced by the Chancellor later today are expected to go some way towards remedying the inconsistency between the support on offer to the self-employed and employees.