Recognising the social and economic
impact of creative sole traders
Prepared for:
Creative Leicestershire &
Arts Council England East Midlands
December 2010
Enquiries about this report may be addressed to:
Fiona Dodd
Hannah Godwin
Jonathan Guest
TBR
Telephone: 0191 279 0900
Email: [email protected]
www.tbr.co.uk
TBR is the trading name of Trends Business Research Ltd
This report is © Trends Business Research, 2010
Table of contents
1.
1.1
1.2
EXECUTIVE SUMMARY ..................................................................... 1
ECONOMIC OR SOCIAL IMPACT? .................................................................. 2
SUPPORTING SOLE TRADING IN THE FUTURE................................................... 3
2.
INTRODUCTION ............................................................................... 4
3.
THE IMPORTANCE OF CREATIVE SOLE TRADERS ............................ 5
3.1
3.2
4.
THE FUTURE OF SOLE TRADING ................................................................... 5
SUPPORT FOR SOLE TRADERS ..................................................................... 8
SOLE TRADERS IN NATIONAL STATISTICS .................................... 10
4.1
THE ANNUAL POPULATION SURVEY ............................................................ 11
4.2
BUSINESS DATASETS .............................................................................. 13
4.2.1 Other agency approaches ........................................................................... 15
5.
5.1
6.
6.1
6.2
A LOCALISED SURVEY: THE SOLUTION?........................................ 16
SOCIAL IMPACTS ................................................................................... 17
APPENDIX ...................................................................................... 19
FURTHER DETAIL ON DATA SOURCES REVIEWED ............................................ 19
BIBLIOGRAPHY ..................................................................................... 21
1. Executive Summary
This document presents key findings from research to help Creative Leicestershire and Arts
Council England, East Midlands to develop a methodology to understand the social and
economic impacts of creative sole traders.
Sole trading is a common working practice in the creative industries, more so than in other
sectors. The nature of creative products can be seen to facilitate this practice, with the
‘content creation’ stage of the value chain providing a key opportunity for self-employed or
freelance individuals to supply their services1.
Forecasts from Working Futures and historical analysis from the Office of National Statistics
show that levels of self-employment, in general, have been increasing over the last decade
and that self-employment in the creative sector specifically is set to increase. As such, it
will be crucial for agencies to develop programmes of support that will advance this group
and support the government in delivering upon its call for an ‘entrepreneurial decade’.
The development of such support relies on detailed and robust evidence to inform
programme design and resource allocation. However, this evidence is not currently readily
available. Very little specific research has been undertaken to understand creative sole
trading, most instances have focused on identifying self-employment across all sectors. As
such, to date, data on creative sole traders and artists have been collected by various
organisations and at various geographic levels, and differences in methodological approach
have resulted in coverage that is not in any way comprehensive, largely not comparable and
in some cases fundamentally flawed.
With this in mind, the aim of the research was to understand the feasibility of using national
statistics to capture data on the economic impacts (such as employment, turnover per head
or gross value added) and social impacts (which were considered to cover aspects such as
impact on participant/consumer health, training of others, social inclusion or tourism) of
creative sole traders in Leicester.
The project has demonstrated that there is no ‘silver bullet’ solution to providing the data.
A number of sources of statistics that, on the face of it, should provide sufficient information
are not able to deliver insight on a local or detailed sector level. Additionally, many are
ineffective in isolating sole trading, in the truest sense of the term. I.e. Someone working
alone, independently running their business.
The most appropriate source of public data to identify sole traders was concluded to be the
Annual Population Survey (APS), one of the few that included the self employed as a
distinct category. Business datasets with national coverage, such as those available from
TBR and Experian, also provide the opportunity to identify businesses with only 1 worker.
The APS and business data can each provide an estimate for the number of sole traders.
However, each estimate has it limitations.
1
•
The APS has very little information on economic impact, is subject to significant
suppression at local levels (and at the detailed SIC codes necessary to define the
creative sector) and cannot specifically isolate self employed people who work
alone. The closest estimate possible using the APS is to identify those who are self
employed and working either independently or with a partner in the business.
•
Business data can provide greater accuracy in identifying sole traders. However, it
does have a tendency to underestimate the total figure. There are also limits to the
Technology Strategy Board, 2009.
1
amount of evidence that can be generated on the economic impact of sole traders
specifically from these sources (this is mainly driven by under representation of sole
traders on business datasets and the lack of a requirement to report financial
returns in full) and they do not provide any evidence on social impacts.
To demonstrate the variability across the data sources, Table 1 compares the estimates for
the number of creative sole traders operating in Leicester that it is possible to develop using
the APS and TCR.
Table 1: Comparison of estimates across data sources
Data
Source
Measure
Creative Sole
Traders in
Leicester
730
APS
The number of people who are
self-employed
APS
The number of people who are
self-employed, and work on their
own or with a partner, but with
no employees
570
TCR
Number of businesses employing
only 1 person
310
Limitations
Some of these people may also employ
others and therefore are not ‘sole traders’.
As such, the figure over estimates the true
number.
This measure effectively cuts out selfemployed people who employ staff.
However, as those who are self employed
and working with partners are still
included in the count, this figure still over
estimates the true number.
Small companies and independent workers
are the most difficult to capture on
business datasets, as such this is likely to
be an under estimate of the true number.
Source: TBR 2010
Taking the limitations of existing statistics into account, a test survey of sole traders was
conducted to establish if primary research was a viable option. The response rate was low
and as such did not return statistically significant findings. However, it did deliver useful
insight as to the propensity of respondents to provide the required information in this type
of exercise.
The results indicate that creative sole traders are largely willing to provide financial and
social impact data and that having the information easily accessible when completing the
survey is a more important factor than concerns over financial privacy. Those refusing to
disclose information were consistently in the minority of respondents, and tended to be
fewer in number than those who were willing to provide the information, but did not have it
accessible at the time of completing the questionnaire.
The results also show that those who did not answer the financial questions also tended not
to respond to questions about the possible social impacts of the firm. This could suggest
that concerns over privacy of financial data are not necessarily a significant barrier to
information sharing and that the driving factor in generating data on creative sole traders is
more to do with having a large enough sample of people willing to answer survey questions
‘in general’.
As such, if a large enough sample were achieved, it seems reasonable to suggest a primary
survey could be used to generate important data on the economic and social impact of sole
traders.
1.1 Economic or social impact?
For many, it is a point of debate as to whether estimating the economic value of creative
sole trading is a ‘useful’ exercise in itself. Some in the creative sector would argue that the
intrinsic value of creative activity at this level does not lie in how much revenue is
2
generated, or the level of productivity existing in the workforce and that these are often not
the ‘core’ objectives of this kind of activity. This is particularly the case in participatory
artforms, or for those delivering cultural heritage activities, where the delivery of social aims
and impacts are the primary driving factor of the organisation.
However, rather than negating the need to consider economic value in this group, this
creates the potential to consider a ‘double bottom-line’, whereby these sole traders are
measured on the dual basis of profitability/productivity and of meeting the social aims of
their business.
It is also important to consider that social impact can often by an indirect by-product, where
sole traders are not aware of the ‘additionality’ of their activity. Enabling them to measure
against a ‘double bottom line’ would further support the development of evidence of both
economic and social impact.
However, whilst neither can currently be measured effectively it is difficult to judge which
business case the sector needs to make. Is the economic impact or social impact argument
more effective? Further, are the social impacts of this group thoroughly understood and
appreciated in the context of the Government’s Big Society agenda? With the focus
currently on the voluntary and not for profit sector, is the social contribution of creative sole
traders recognised and valued in the same way?
1.2 Supporting sole trading in the future
Whatever the answer it is clear that in an entrepreneurial decade, sole traders will play an
increasingly significant role in the economy and particularly in the creative sector.
Analysis of the number of ‘job years’ provided by firms in the creative sector and their
counterparts in the rest of the economy has identified a specific area of support for creative
sole traders. The data show that creative sole traders tend to struggle to make the
transition to employing people, with a higher proportion failing after taking on staff
compared to non-creative businesses. This isn’t the case if the business is started by
multiple individuals, with small businesses having greater success in growing their
workforce.
Given these findings it is clear that supporting expansion amongst sole traders who want to
grow their business is crucial. However, this poses some further key questions:
•
If development agencies are to encourage existing sole traders to grow and take on
employees, do they have the resources necessary to support the transition and help
businesses sustain the growth?
•
Should the imperative be on encouraging more people to work collaboratively to set
up as an employing business from the outset, rather than as sole traders?
•
Is there a risk that support for those who wish to work independently and maintain
that over the long term will fall down the agenda?
3
2. Introduction
This document presents key findings from research to help Creative Leicestershire and Arts
Council England, East Midlands to develop a methodology to understand the social and
economic impacts of creative sole traders.
The aim of the research was to understand the feasibility of capturing data on economic
variables, such as employment, turnover per head or gross value added and social impact
variables, which were considered to cover aspects such as impact on participant/consumer
health, training of others, social inclusion or tourism.
The specific objectives for this research which are reported here were to understand:
1. How this element of the sector workforce is represented in national statistics.
o How creative sole traders feature in standard data sources, such as the
ABI, IDBR, LFS, commercial datasets.
o What gaps exist in national statistics and
How can the economic impact of sole traders in the sector be
calculated?
[Where relevant] how can the social impact be calculated?
2. How other agencies approach assessing the contribution of sole traders.
o How regional bodies and local authorities approach assessing the
contribution of this group.
o How local authorities incorporate the sole trader in their LEAs.
3. The sole trader/freelancer way of working.
o How other studies and research see the role of the creative sole trader
developing in the world of work over the next 10 years.
o How working practices might change and affect the sector over the next 10
years.
This report is structured as follows:
Section 3 presents a brief account of the importance of sole trading for the economy and
the creative sector and the current view on the future of sole trading. It provides an
overview of the information generated as part of a broader literature review.
Section 4 contains a review of the data coverage of creative sole trading within national
statistics and looks at how other public bodies have used data to investigate sole trading in
the economy.
Section 5 presents the findings from a bespoke survey of creative sole traders, which tested
primary data collection as a route to developing evidence on this group.
Together these sections allow an assessment to be made of gaps in national statistics, as
well as to provide insight into a possible methodology which would allow these gaps to be
addressed.
An appendix to the document contains further detail on the data sources assessed in the
research and a list of references for the full literature review.
4
3. The importance of creative sole traders
It is often difficult to define ‘sole traders’, as several terms found in the literature are used
relatively interchangeably: entrepreneur, freelancer and self-employed. However, selfemployment status is commonly used as a proxy.
The literature shows that the existence of sole traders increases competition, variety and
innovation in the economy2. However, in order to survive, ‘micro-firms’ such as these need
to distinguish themselves from other businesses, for example by providing new or better
services. For this reason, people generally enter into sole trading after the age of 30, when
they have accumulated the necessary human and financial capital.
Sole trading as a working practice is perceived to be more likely to occur in the creative
industries than in other sectors. The nature of creative products can be seen to facilitate
this practice, where vital creative input is required in the ‘content creation’ stage of the
value chain, providing a key opportunity for self-employed or freelance individuals to supply
their services3. Creative individuals see running their own business as a way of retaining
control of their creativity and how it is used in the wider market. This makes them
economically dynamic and supports self-employment/sole traders in retaining control of
their business. It may also contribute to explaining why only around a third of sole trader
businesses grow to employ others4.
Research shows that the creative sector is a significant and growing part of the economy
and is positively associated with both the economic development of an area and greater
quality of life.5 Given the prominence of sole traders in the sector, accurately understanding
their prevalence and impact is vital if this way of working is to be supported in the future.
However, existing research has tended to focus on either the creative sector as a whole, or
investigating sole traders and their motives and characteristics. It is important to bring
together these two strands of research and to build upon the existing knowledge of this
working practice.
3.1 The future of sole trading
Taking self employment as a proxy for sole trading, the chart below considers trends in self
employment across all sectors of the economy since 1959. Following a jump from
approximately 10% of the workforce being self employed prior to 1981, since the mid 1980s
levels of self employment have tended to remain at 12-14% of the total workforce.
In order to show the variance in the self employment rate, the chart below compares levels
employment and self employment, indexed to 1995. It shows that whilst there was a dip in
the late nineties to approximately 90% of the 1995 level (shown as 0.9 on the chart), levels
of self employment have been rising across the last decade.
2
3
4
5
For example, Audretsch and Frisch (2002), (Acs and Armington, 2002).
Technology Strategy Board, 2009.
Leadbeater and Oakley, 1998.
Creative & Cultural Skills Footprint, 2008/09.
5
Trends in Employment & Self Employment, indexed to 1995
1995 = 1, figures are shown varying above or below this level.
E.g. The self employment rate of 0.5 in 1959 points to a rate of half the 1995 level.
Source: ONS (LFS/APS) (TBR Ref: PN00809R, WTS1/C3)
Working Futures provides an insight into how this is likely to change going forward. The
most recent Working Futures (2010-2020) is due to be published in the middle of 2011, and
the 2007-17 report6 did not produce sector level detail. However, although it does not take
into account the effects of the recession, the 2004-2014 iteration provides a useful
indication.
As shown in Table 2 below, the 20047 forecasts predicted a decline (-8%) in self
employment across the whole economy, with the rate of self employment returning to an
early 1980s rate. By 2007, the whole economy forecasts had improved, showing an
increase (5%) in self employment to maintain the 13% rate. However, in the creative
sector (shown here through the Creative & Cultural Skills and Skillset footprints) the selfemployment rate is predicted to increase (by 11% and 15% respectively for each Sector
Skills Council’s footprint).
6
Working Futures 2007-2017: Evidence Report 2
http://www.ukces.org.uk/upload/pdf/Working%20Futures%203%20FINAL%20090220.pdf
7
Working Futures 2004-2014: Sectoral Report
http://www.ukces.org.uk/upload/pdf/working%20future%20sector%20report%202004-2014.pdf
6
Table 2: Self-employment forecasts
Total SelfEmployment (000s)
Sector
2004
2014
% change in
Total Self
Employment
% workforce
Self-Employed
2004
2014
Creative & Cultural Skills
161
178
11%
41%
40%
Skillset
87
100
15%
36%
35%
3,873
3,577
-8%
13%
11%
2007
2017
% change
2007
2017
4,204
4,397
5%
13%
13%
Whole Economy
Whole Economy
Source: Working Futures 2004-2014 and 2007-17 (TBR Ref: W0/S3)
However, the 2004 forecasts also showed that across the creative sector, although there is
a positive predicted % change in the number of people who are self employed, the
proportion of the workforce employed in this way was set to decrease. It will be interesting
to see how this has changed when the 2010-2020 Working Futures is published in 2011.
Current rhetoric around the economic recovery suggests that self-employment will increase
significantly, as this will be the route many people will take if existing private sector
companies cannot create sufficient jobs to cater for the contraction of the public sector.
With this in mind, it is important to situate the likely future of sole trading within the context
of current policy and strategy for entrepreneurship and economic growth:
‘Entrepreneurs are in the limelight like never before. With the UK economy starting to
show signs of growth, the nation’s entrepreneurs are being heralded, by the media
and the coalition Government, as pioneers forging a new age of prosperity. The
entrepreneurs of this country have been thrust centre-stage, tasked with creating
new opportunities, spearheading economic growth and creating jobs and new
markets.’
Tom Bewick, Chief Executive, Enterprise UK
‘Make a job, Don’t take a job’ (Nov 2010)
It is the ambition of the Government that the economy will become more enterprising and
diverse. To do so, The Enterprise Directorate (within the Department for Business,
Innovation and Skills) aims to boost enterprise, start-ups and small business growth across
the UK.
The call from Government is for an entrepreneurial decade in which the private sector
creates new employment and grows its existing employment base. As such, it is interesting
to consider the differing contribution of sole traders and micro businesses to job creation
and differences between the sustainability of the employment created, in order to
understand where support should be focussed.
The following table provides an insight into the number of ‘job years’ provided by firms in
the creative sector and their counterparts in the rest of the economy. The data considers
the number of years of sustained employment generated by a sample of businesses and
sole traders in Leicester, the rest of the county, the region and the UK, which started in
2003 and were still operating at the end of 2009.
Table 3 (below) shows that the average number of job years provided by creative and noncreative sole traders (those who started as and remained sole traders across the period) is
very similar. However, when creative sole traders start to employ other people, these
organisations struggle to survive and the number of years of work provided drops. For
7
example, creative sole traders in Leicester that grew to employ additional staff over the
period, only managed to provide an average of 9.6 job years, compared to 13.2 years for
similar non-creative enterprises in Leicester. This pattern is reflected across geographies.
Table 3: Average number of job years per firm
Leicester Leicestershire8
East Midlands
UK
Creative sector
Remained Sole Traders
Sole Traders that employed staff
Small businesses9
5.5
6.0
5.8
5.9
9.6
11.1
13.3
16.0
24.3
19.9
21.1
21.7
Other sectors
Remained Sole Traders
5.6
5.9
6.0
6.0
Sole Traders that employed staff
13.2
12.9
14.5
17.1
Small businesses10
22.8
23.7
22.8
23.3
Source: TBR W4/S0
The contrast to the job years provided by small businesses (those starting with at least 2
employees) is perhaps unsurprising. However, of note is the higher success rate and
greater level of employment provided by creative small businesses in Leicester (24.3 years),
compared to small businesses in other sectors in Leicester and the averages for all other
locations. Particularly, small businesses in Leicester City have a greater level of growth
success than their contemporaries in other areas of Leicestershire.
It is interesting to reflect on these findings alongside the notion that creative individuals see
running their own business as a way of retaining control of their creativity and how it is
used in the wider market (noted above). The loss of ‘control’ that ensues when taking on
employees and accommodating their views and perceptions on how the business should
operate, is likely to be a key driving factor in the failure of businesses that start as sole
traders and then grow to employ. Where people work together to start up a business this
seems to be much more effectively negotiated, perhaps with the balance/shape of ‘control’
instituted in the objectives of the business (and therefore innate from the outset).
It would certainly seem that the creative sole traders struggle most to make that transition
to employing firms in Leicester and this could be an important area for additional support.
Further, the data shows that ‘making a job’ is most productive (in terms of the number of
job years created) if businesses start with more two or more employees. In an economic
climate where the private sector is being called upon to create a significant number of new
jobs, what does this mean for sole trading as a working practice?
3.2 Support for sole traders
The Government has pledged support for entrepreneurs, small and medium businesses to
establish themselves and thrive, thus driving growth for the private sector, which is key to
economic growth. One important focus is encouraging entrepreneurialism and an
entrepreneurial culture across the UK by reducing the barriers which restrict enterprise. In
order to do so, steps are being taken to provide11:
8
Excluding Leicester
Small firms started with at least 2 people.
10
Small firms started with at least 2 people.
11
http://www.bis.gov.uk/policies/enterprise-and-business-support
9
8
•
•
•
•
Improved access to finance.
A more positive business environment, which supports growth and ease of starting
a business, and where new businesses and economic opportunities are more evenly
shared between regions and industries.
Better and more targeted business support.
Building a more entrepreneurial culture, equipping people with the skills and
ambition to start a business.
In addition to this, sole traders will soon be able to access a one-stop-shop for starting a
company (April 2011) and will receive more encouragement to grow their business12. It is
likely that there will be more of an emphasis on supporting the development of skills to
enable the commercialisation of ideas, which will be crucial for sole traders and
entrepreneurs. Creative sole traders therefore will play important role in the ambitions of
the Government by contributing to the cultural shift of more and better entrepreneurialism
which aims to ‘make a job’ rather than ‘take a job’.13
Whilst the Local Enterprise Partnerships (LEPs) are being established, the infrastructure
supporting economic development across the country remains in a state of ‘flux’, with little
information yet available about specific plans moving forward. However, it is clear that the
national strategy is for this group to play an important role in the economy. As such, a key
consideration for many LEPs will be leveraging any available national funding to support and
develop enterprise and new firm formation (and therefore sole trading) that aligns with local
priorities for businesses and economic development.
Arts Council England acknowledges that individual artists, sole traders and micro businesses
are an important part of the arts sector, and make a key contribution towards great art.
Whilst the organisation does not prioritise sole traders or individual artists over any other
size or type of creative activity, their funding programme Grants for the Arts (GFTA) is open
access and welcomes applications covering all types of artistic ideas or activities. Applicants
must demonstrate that they seek to contribute to at least two of the five ‘Achieving Great
Art for Everyone’ strategy goals of excellence, reach, engagement, diversity and innovation.
The organisation has moved away from actively targeting specific types of artist or activity,
as it has done in the past, and instead seeks a ‘fairer’ approach, where applications are
invited from all, and tries to fund a diversity of different organisations at different price
points. The National Portfolio (succeeding the Regularly Funded Organisations funding
stream) is less suitable for individual artists’ applications, as one of the conditions is that
applicants be a properly constituted organisation, which many individual artists are not.
Although individual artists do not feature explicitly in the Arts Council strategy, the Arts
Council is aware of the potential ‘invisibility’ of this type of activity, due to their operation
below the VAT threshold. The Arts Council intends to work with other organisations whose
remits include business support, such as Local Enterprise Partnerships and Local Authorities,
particularly should gaps be identified in the distribution of Arts Council funding through the
main streams, GFTA and the National Portfolio.
12
13
BIS (2010) A strategy for sustainable growth
Enterprise UK (Nov 2010) Make a job, don’t take a job
9
4. Sole traders in national statistics
As part of this work, TBR undertook an assessment of key national data sources to better
understand how creative sole traders feature in national statistics and what gaps exist. The
overarching objective for this data review was to ask of each dataset:
‘What is the coverage of the required variables and is it sufficiently detailed?’
The assessment criteria for each data source were as follows:
• Coverage by at least 4 digit Standard Industrial Classification (SIC)
o In order to accurately identify creative activity and be able to discount noncreative activity.
• Coverage by at least 4 digit Standard Occupational Classification (SOC)
o In order to accurately identify creative activity and be able to discount noncreative activity.
• Consistent coverage across the UK
o This discounts any datasets which cover only a limited area.
• Available at required geography
o Data is required at the minimum of local authority level to allow analysis at
a suitably local level.
• Correct definition of sole traders
o Ability to distinguish between the self-employed, partnerships and other
‘zero class’ (non-employing) firm statuses.
• Suitable frequency of update.
o At minimum, annual updates are required to ensure that the data source
can be used on an ongoing basis for monitoring and trend analysis.
Table 4 (below) shows that only the Annual Population Survey (APS) can meet this the full
set of criteria; allowing the possibility of sufficiently detailed coverage of factors such as
classification of activity by both SIC and SOC systems, local authority level data and the
potential to identify sole traders in a meaningful way. Business datasets such as TCR and
Yell/Experian can also provide strong coverage, but do not provide information by
occupation.
Table 4: Summary table for dataset coverage
Requirement
Mosaic
Identifies
creative
activity? (SIC)
Identifies
creative
activity? (SOC)
Consistent
across the UK?
Available at
required
geography?
Contains
appropriate
definition of
sole traders?
Suitable
frequency of
update?
Source: TBR 2009 (W1/S2)
Acorn
Census
ASBS
FSB
SME
Statistics
APS
ABI
IDBR
TCR
Yell/
Experian
10
4.1 The Annual Population Survey
The APS is a commonly used source of data on sole traders, with ‘self-employment’
regularly used as a proxy. Table 5 shows an example of the kind of analysis possible
through APS. It provides a breakdown of creative self-employment by sub-sector in
Leicester and other relevant geographies. Proportions were applied to the base data at 4
digit SIC level to make an accurate estimate of employment that is creative, as not all
activity in each SIC is relevant.14
The variables used were:
STATR
• This is ‘self-reported employment status’ and covers self employed, employed,
government worker and unpaid family worker. Only ‘self employed’ was selected.
SELF1
• Was used to filter STATR. This variable asks those declaring themselves to be self
employed who they are paid by, excluding receiving a salary or wage direct from an
employer.
o Responses included in the analysis were: sole director of own limited
business, running a business or professional practice, working for yourself,
a sub-contractor, doing freelance work.
o Responses excluded are: paid by an agency, a partner in a business and
those who did not respond.
The data shows that there are approximately 730 practitioners operating on a self-employed
basis in the creative sector in Leicester.
Table 5: Self-employment in the creative sector
Leicester
Leicestershire15
East
Midlands
UK
Advertising
160
*
790
14,210
Architecture
80
100
890
18,150
Art & Antiques
20
50
800
9,270
*
*
30
740
140
1,200
3,710
103,210
Publishing
*
*
1,120
26,930
Radio & TV
*
*
860
21,470
320
830
4,290
54,530
*
240
650
15,980
730
2,430
13,150
264,480
Sub-sector
Designer Fashion
Music & the Visual & Performing Arts
Software, Computer Games & Electronic Publishing
Video, Film & Photography
Creative Sector
Source: APS 2010 (TBR Ref: W2/S8) *Data suppressed
However, producing this analysis has identified some important limitations:
•
The data only enables the estimation of a number of self-employed workers.
Adding in adequate data on performance economic impact is complex.
14
The proportions used were those developed by the Department for Culture, Media and Sport for the Creative
Industries Economic Estimates and the Culture and Sport Evidence programme for Regional Insights.
15
Excluding Leicester
11
o
o
As a person based survey the APS does not contain data on business based
indicators such as gross value added (GVA) or turnover. Although there is a
variable in the APS for gross pay, this is often subject to high levels of
suppression in addition to having limited coverage at very small levels of
detail.
For investigating social objectives of sole traders, the APS contains a
variable for a persons work activity being in a ‘social enterprise’ which
relates to a business “that invests most of its profits into achieving its social
or environmental mission”. However, a test on sample data is needed to
establish whether this variable can be used with the self-employment
variable, by 4 digit SIC/SIOC and at a local level to give robust figures.
•
Although the data provides an adequate estimate of those who report themselves
to be self employed, further investigation demonstrates that in fact the available
variables covered by the APS are not explicit enough.
o The data in Table 5 may include self employed people who employ others,
who may not be considered ‘true’ sole traders. For example, it is highly
likely that a ‘sole director of own limited business’ or someone ‘running a
business or professional practice’ employs other staff.
•
In order to try to isolate individual sole traders it is possible to do further cross
analysis using another variable from the APS. For example:
o The APS variable SOLOR provides a breakdown of ‘self-employed with or
without employees’. The two categories by which data can be analysed
are: (1) On own, with partner(s) but no employees or (2) With employees.
As per Table 6 below, this provides an estimate of 570 practitioners
operating on a self-employed basis in the creative sector in Leicester.
o However, this means that partnerships are still included and therefore
again, those working completely alone can not be specifically isolated.
Table 6: Creative self-employed, with no employees
Area
On own, with partner(s) but no employees
Leicester
Leicestershire16
East Midlands
UK
Source: APS 2010 (TBR Ref: W2/S8.3)
570
1,980
11,220
237,900
As such, using the APS definition of ‘self-employment’ as a proxy for sole trading may
considerably overstate the numbers of individuals who are ‘sole traders’ in the truest sense
of the term. It also does not provide the opportunity to understand their economic or social
impact in any useful detail.
The complexity of analysis required to gain the most accurate view possible of sole traders
in the APS also raises questions about the validity of any resulting analysis. Unfortunately,
the Office for National Statistics were unable to provide any view on the robustness of the
data obtained to produce Table 5 and Table 6. However, our assumption is that because
the requirement would be to undertake a cross analysis of 3 variables (to include SOLOR),
at a local geographic level and by 4 digit SIC and SOC, the data would be subject to
extensive suppression. Further, because this would only identify the number of sole traders
(and no information on impact) there may be limited value in pursuing this as a source of
evidence.
16
Excluding Leicester
12
4.2 Business datasets
Business datasets can be a useful source of data to support this kind of analysis. Data from
sources such as TCR and Yell/Experian, although not including occupational coverage by
SOC, can provide a good sample of sole trading businesses. The core requirement is that
the dataset allows for the identification of a firm by its legal status and also by the number
of employees.
For the purpose of comparison, TCR, TBR’s own data resource, has been used to analyse
the number of individual businesses employing only 1 person, in order to ascertain if a more
accurate figure can be provided for sole traders.
Using the same SIC definition for the creative sector, queries were run to select records
from TCR where the legal status was either sole proprietor, limited company (or
unclassified) and where employment for the whole company was 1. This ability to isolate
independent workers is an important step forward from the analysis possible through the
APS.
Table 7 shows that using this definition there are 310 creative practitioners working
independently across the sector in Leicester. This constitutes 31% of the total stock of
creative firms in Leicester.
Table 7: Sole trader data from TCR: Creative
Leicester
Leicestershire17
East
Midlands
UK
Advertising
30
55
300
5,490
Architecture
10
40
270
4,370
1,505
Sub-sector
Art & Antiques
5
15
105
Designer Fashion
10
25
145
2,545
Music & the Visual & Performing Arts
30
110
670
12,615
Publishing
10
25
175
4,040
Radio & TV
Software, Computer Games & Electronic Publishing
Video, Film & Photography
Total Sole Traders
Total Creative Businesses
% Sole Traders
Source: TCR 2010 (TBR Ref: W3/S2e)
0
5
30
1,125
190
520
3,030
57,360
25
45
335
6,970
310
835
5,055
96,015
1,010
2,650
16,330
310,505
31%
32%
31%
31%
Table 8 and Table 9 have been provided to give a comparison of the prevalence of sole
trader firms relative to the creative sector, for Construction and Financial Services.
The tables show that the proportion of all creative firms that are sole traders is much higher
than in the construction sector, for all the geographies shown. Interestingly, there is little
to no variation in the proportion of sole traders operating in the construction sector across
all geographies. However, in Leicestershire, the East Midlands and the UK, financial
services sole traders make up a much greater proportion of that sector’s total firms than
creative sole traders. The exception being Leicester itself, where creative sole traders make
up only one percentage point less of total creative firms, than financial sole traders do of
that sector respectively.
17
Excluding Leicester
13
Table 8: Sole trader data from TCR: Construction
Construction
Sole traders
All firms
% Sole traders
Source: TCR 2010 (TBR Ref: W3/S4)
Leicester
Leicestershire18
East
Midlands
UK
385
1,720
11,060
148,905
2,305
10,405
66,220
887,345
16.7%
16.5%
16.7%
16.8%
Table 9: Sole trader data from TCR: Financial Services
Leicester
Leicestershire19
East
Midlands
UK
Sole traders
255
945
5,730
82,710
All firms
800
1,910
12,205
193,875
32.1%
49.6%
47.0%
42.7%
Financial Services
% Sole traders
Source: TCR 2010 (TBR Ref: W3/S4)
A further insight available using TCR data is that sole traders are more commonly registered
as Private Limited Companies than as Sole Proprietors. Across the 310, 83% were
registered as PLCs. This trend was reflected across the other geographical comparators.
The main relevance of this is that is raises a question as to whether the terminology ‘sole
trader’ is something that practitioners engage with. In a sector where people tend to work
independently, but within a network of associates and freelancers, do they associated
themselves with this term?
As with the APS, producing this analysis has identified some limitations to using business
datasets:
18
19
•
In all databases of this kind the very smallest companies are the most difficult to
capture.
o TCR is compiled from Dun & Bradstreet (D&B) data. As with other
business data providers, D&B compile data from multiple sources.
Including, but not limited to, returns to Companies House and business
directories.
o D&B is constantly seeking to add further data to the database and has
grown the ‘sole proprietor’ element considerably over the last 10 years.
However, the very smallest companies are the most difficult to capture
and are most commonly added to the database through business
directories. Unfortunately, creative businesses are amongst the least
likely to register their services with directories. Therefore these figures
are likely to slightly underestimate the total figure.
•
Full financial returns are more common for larger companies.
o Small companies are not required to submit full accounts and therefore
obtaining data on their economic impact is very difficult. As such, it is
necessary to develop estimates to fill gaps in the data, by linking industry
averages of financial performance to the number of employees in a
business.
o This means that whilst it is possible to produce an estimated figure on the
economic contribution of a single worker in the sector, there is limited
Excluding Leicester
Excluding Leicester
14
scope to differentiate their economic impact across legal status, as any
gaps in data have been estimated from the same industry average.
Thus, conversely to the APS, using business datasets may slightly underestimate the
number of individuals who are sole traders. However, the advantage is certainty that each
is in fact a sole trader. Additionally, they do not provide any opportunity to understand
social impact and because of a paucity of data, are limited in the extent to which they can
make direct comparisons between the economic contribution of sole traders and larger
businesses.
4.2.1 Other agency approaches
Taking data challenges into account, a brief investigation into how other agencies have
approached the assessment of the economic and/or social impact of creative sole traders
was undertaken.
The review identified limited consistency in the approach, with agencies variously using the
APS, business datasets or a combination of the two. Some have approached the task by
constructing bespoke datasets, through the combination of business data and contact
databases held by the organisation conducting the research. For example, North Yorkshire
County Council undertook an economic impact study in 2006 and analysed self-employment
by constructing a bespoke dataset using data from Experian (national business database)
with a creative industries database from Yorkshire Forward and the Creative York database
held by Science City York. From this they developed weightings to apply to the ABI data.
The only study that used wholly publicly available data to analyse self-employment used
Census 2001 data to develop weightings which they then applied to ABI data.However, both
of the approaches are fundamentally flawed, as the ABI does not include sole traders in any
form. Applying a weighting that includes zero class or sole traders to data which does not
contain this type of business produces an inaccurate estimate of all business numbers, as it
‘dilutes’ the original data across all the size bands.
A further source not originally reviewed but used on occasion was Banksearch. This allows
users to analyse bank accounts opened by small businesses and contains variables such as
number of businesses by local authority, industry broad sector and legal status20. However,
limitations of this data source arise through:
• The inclusion of only certain high street banks and only firms who have opened a
new bank account from within a specific ‘small businesses banking product’ range.
• The fact that self-employed individuals are under no obligation to have a separate
bank account for their business21 and may either use an existing account that they
already have or open one that is not included in the range of business bank
accounts.
Overall, very little specific research has been undertaken to understand creative sole
trading, most instances, including those cited above, have focused on identifying selfemployment across all sectors. A small number of localised studies have been used to
identify creative self-employment, but the body of work has not yet reached a point of
critical mass where there is a clear consensus on the best approach or data source to
address research questions. Identifying employment and firm numbers that are accounted
for by creative self-employment has proven challenging for many agencies. Whilst
organisations have been able to develop data on the sector as a whole, very little evidence
exists at a local level to provide accurate estimates on economic impact for this specific
group.
20
21
Sole trader, limited company, partnership and not for profit.
You must have a separate business bank account if you run a limited company or partnership.
15
5. A localised survey: the solution?
A logical progression following the difficulties in estimating the economic or social impacts
of creative sole traders using existing data sources is to design a bespoke methodology for
eliciting this information directly from sole traders themselves.
To this end, TBR undertook a survey of creative sole traders using contacts from a mailing
list held by Creative Leicestershire. The aims of the exercise were twofold:
1. To understand what information could be gathered from these individuals, both in
terms of economic and social impacts.
2. If they were not able and/or were unwilling to provide such information, what are
the barriers perceived?
The survey was sent to 149 creative sole traders. Of this number, 36 people completed the
survey in full, 22 provided partial responses (which had to be discounted) and 17 people
read the survey introduction but did not respond to any questions.
The full response rate to the survey was relatively low and so the data generated cannot be
held as a statistically robust sample. However, we present the broad findings here in order
to provide insight and inform future potential research.
•
Slightly more than 70% of respondents (26 of the 36 completed responses)
attempted to provide at least one piece of financial information for their business
and of those who did not provide financial information, just under half said that
they had the information but it was currently not accessible.
o This pattern was consistent for most of the questions requesting financial
information (such as total payroll, turnover etc).
o Those refusing to disclose information (for privacy reasons) were
consistently in the minority of respondents, and tended to be fewer in
number than those willing to provide information but did hot have it
accessible at the time.
Table 10: Response rates to financial questions
Information
provided:
Finance questions
Provided an estimation of 'payroll'
outgoings i.e. salary, N.I.
What was your total taxable profit for
the last financial year?
Information given on whether any
assets are written off?
Provided an estimation of turnover.
If not, why?
Do not
know this
information
Information
is not
accessible
No reason
given
Yes
No
Prefer not
to disclose
17
19
6
2
8
3
21
15
6
1
7
1
26
10
2
1
4
3
21
15
4
2
6
3
Source: TBR 2010 (TBR Ref: WB1/S1)
•
This indicates that in general (bearing in mind the small sample), creative sole
traders are likely to be willing to provide financial information of the type that would
enable economic impact to be estimated.
o For example, 21 respondents (58%) gave an estimated figure for their
turnover and 6 further respondents said the information was known to
them but not to hand (17%) – only 4 stated that they refused to disclose
the data (11%).
o Therefore it is possible that there is willingness amongst creative sole
traders on the whole to provide financial information, and that with a
16
o
o
•
robust sample, economic impact could be assessed well enough to draw up
a distribution that could be applied to firms not willing to provide data.
This information would be collected most effectively through a telephone
survey, where respondents can arrange a time for the interviewer to call
them back, if information is not to hand. Online respondents are much
more likely to ‘drop out’ of the survey in such situations.
Some data on turnover, value of payroll, total taxable profit, and
depreciation was obtained through the survey, indicating that with a fuller
dataset, GVA could be calculated and that sufficient numbers of people
would be able and willing to provide the data required.
An interesting finding of the survey was that respondents were approximately as
likely to answer questions about the social impact of their business as they were the
financial questions. This is despite the fact that financial data is often seen to be
more sensitive and open to greater concerns about privacy.
The results show that those who did not answer the financial questions also tended not to
respond to questions about the possible social impacts of the firm. This could suggest that
concerns over privacy of financial data are not necessarily a significant barrier to
information sharing and that the driving factor in generating data on creative sole traders is
more to do with having a large enough sample of people willing to answer survey questions
‘in general’.
•
It would also be interesting to see what effect positioning questions on social
impact before questions on financial impact in the survey may have. It is also
possible individuals were deterred from completing the survey fully because they
were ‘put off’ after reading the financial questions.
5.1 Social impacts
The social impacts indicated through the survey were varied:
Table 11: Response rates to social impact questions
If not, why?
Information
provided:
Social impact questions
Provided an indication of impact on
tourism
Whether education or training provided as
part of the business
Information provided on whether business
activities improve health
Estimation provided of number of
participants where health may have been
improved
Yes
No
Do not know
this
information
13
23
1
1
21
12
24
4
0
20
26
12
0
0
12
28
8
0
0
8
Information is
not to hand
No reason
given
Source: TBR 2010 (TBR Ref: WB1/S8)
•
Of the 36 complete survey responses, 12 stated that they provide education or
training as part of their business (one third). These individuals were then asked
what the audience of this education or training was and how many people would
have received it in the past year (multiple responses were permitted).
o The most common response was children in primary education where over
1,500 were said to have benefited, secondary education was the second
most common at over 700. Informal adult education was third most
common.
17
•
When considering the potential impact of creative sole traders on tourism or
attracting inward investment, 13 of the 36 valid responses (36%) to the survey
confirmed that they believed that their activities contributed to marketing for, or
added to the aesthetic value of, Leicester/shire or Rutland.
o Of these, responses were most likely to come from creative sole traders
working in the Performing Arts, followed by Music; 4 of the 13 responses
thought that their work contributed to all four factors (31% of the 13
responses).
•
Just over one third (14 respondents) stated that they contributed to community
activities in the area in at least one way.
o Working with young people was the most common (13 of these 14 sole
traders) by numbers of participants. Respondents estimated that they had
worked with a total of over 2,000 young people in the past year.
o More sole traders said they had worked with disadvantaged people in the
past year (9 sole traders) than those providing activities aimed at reducing
criminal behaviour (3 sole traders), but more individuals were thought to
have participated in the latter activity type (over 1,000) than in activities
specifically aimed at disadvantage people (300 people).
•
Health improvements were stated as being either a direct (stated aim of the
activity) or indirect result of the sole trader’s activities by 16 respondents to the
survey, of these, 11 thought that health or wellbeing improvements were an
indirect result of their activities.
o Improvements to mental health or wellbeing were more commonly reported
than improvements to physical health, although more people were thought
to have participated in activities that contributed to physical health.
This suggests that the social impact of the creative sole traders is significant and given the
focus upon the ‘Big Society’ by the Coalition Government, this provides a number of
important points to consider:
•
•
Whilst sole traders have primarily economic incentive, the social benefit of their
work cannot be ignored. It is the ambition for the big society to “draw on the skills
and expertise of people across the country” to “respond to the social, political and
economic challenges Britain faces”22.
Creative sole traders have an opportunity to contribute to a number of elements of
the government’s emphasis on the ‘Big Society’ including;
o Giving communities more powers.
o Encouraging people to take an active role in their communities.
o Supporting co-ops, mutuals, charities and social enterprises,
22
Building the Big Society (2010):
http://www.cabinetoffice.gov.uk/media/407789/building-big-society.pdf
18
6. Appendix
6.1 Further detail on data sources reviewed
Datasource: Mosaic
Owner: Experian
Description: Classifications based upon various data sources (440 in total) which are computed to
provide the consumer demographic information on UK adults.
Link: http://www.experian.co.uk/business-strategies/mosaic-uk-2009.html
Contact: 0115 968 5005
Datasource: ACORN
Owner: CACI
Description: Classifications based upon a number of data sources which are drawn together to
demographic and lifestyle information on people in the UK.
Link: http://www.caci.co.uk/acorn-classification.aspx
Contact: 020 7602 6000
Datasource: Census
Owner: Office for National Statistics (ONS)
Description: The census is a count of all people and households in the country. It provides
population statistics from a national to neighbourhood level for government, local authorities, business
and communities. It covers a wide variety of variables, including economic activity and occupations.
Link: http://www.ons.gov.uk/census/index.html
Contact: 01329 444972
Datasource: Annual Small Business Survey (ASBS)
Owner: Department for Business, Innovation and Skills (BIS)
Description: The Annual Small Business Survey is a telephone survey of several thousand small and
medium-sized businesses in the UK, carried out on an annual basis since 2003. The main purpose of
the survey is to gauge the needs and concerns of small businesses and identify the barriers that
prevent them from fulfilling their potential.
Link: http://www.bis.gov.uk/policies/enterprise-and-business-support/analytical-unit/research-andevaluation/cross-cutting-research
Contact: [email protected]
Datasource: Federation of Small Businesses research
Owner: Federation of Small Businesses (FSB)
Description: The FSB undertakes various pieces of research into the economic activity of small
businesses.
Link: http://www.fsb.org.uk/policy/Publications
Contact: 01253 336000
Datasource: Small and Medium Enterprise (SME) statistics
Owner: Department for Business, Innovation and Skills (BIS)
Description: These show the number of businesses, employment and turnover in all the businesses
in the UK, not just those on official registers. Data are split by legal status; country; region; 1, 2 and 3
digit Standard Industrial Classification; and number of employees.
Link: http://www.berr.gov.uk/policies/enterprise-and-business-support/analytical-unit/statistics
Contact: [email protected]
Datasource: Annual Population Survey (APS)
Owner: Office for National Statistics (ONS)
Description: The Annual Population Survey (APS) is a combined survey of households in Great
Britain. Its purpose is to provide information on key social and socio-economic variables between the
ten-yearly censuses, with particular emphasis on providing information relating to small geographical
areas. The APS comprises the Quarterly Labour Force Survey (LFS) (waves one and five for the UK
funded by the Office for National Statistics), plus data from the Annual Local (Area) Labour Force
Survey (LLFS) Boosts for England, Scotland and Wales (funded by DWP, DfES, NAW and the
ScotExec).
19
Link: https://www.nomisweb.co.uk/Default.asp
Contact: [email protected]
Datasource: Annual Business Inquiry (ABI)
Owner: Office for National Statistics (ONS)
Description: The Annual Business Inquiry (ABI) is the Office for National Statistics (ONS) integrated
survey of employment and financial information. This inquiry samples UK Businesses, and other
related establishments, according to their employment size and industry sector.
Link: https://www.nomisweb.co.uk/Default.asp
Contact: 01633 456903
Datasource: Inter Departmental Business Register (IDBR)
Owner: Office for National Statistics (ONS)
Description: The Inter-Departmental Business Register (IDBR) is a list of UK businesses maintained
by the Office for National Statistics (ONS). The IDBR covers businesses in all parts of the economy,
missing some very small businesses operating without VAT or PAYE schemes (self employed and those
with low turnover and without employees) and some non-profit organisations, representing nearly 99
per cent of UK economic activity.
Link: http://www.statistics.gov.uk/idbr/idbr.asp
Contact: 01633 455200
Datasource: Trends Central Resource (TCR)
Owner: Trends Business Research (TBR)
Description: TCR is a longitudinal data resource composed of over 7 million businesses, past and
present. Data includes ownership structure, classification of economic activity and financial
performance, and can be joined to other data to model things such as future requirement for business
land.
Link: http://www.tbr.co.uk/
Contact: 0191 279 0900
Datasource: Yell/Experian
Owner: Experian
Description: The National Business Database covers financial accounts, on more than 5 million UK
limited and non-limited businesses. It can be used to identify ownership structure, assess financial
stability, conduct competitive intelligence and analyse precisely defined markets, geographic areas and
segments.
Link: http://www.experian.co.uk/business-services/strategic-insight-research.html
Contact: 0844 481 5636
Datasource: Interactive Database (IADB)
Owner: BankSearch Information Consultancy Ltd.
Description: The IADB contains information on new businesses, including number of businesses by
local authority, industry broad sector and legal status (sole trader, limited company, partnership and
not for profit). It provides a proxy for new businesses, although is not comprehensive as it only covers
businesses opening a new business account from a specified range at certain banks (Barclays, CoOperative Bank, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Santander). The data
exclude businesses operating through personal accounts, those without banking relationships or those
banking with other institutions. A small business is defined as having, or expected to have, annual
debit turnover (i.e. outward payments from their accounts) of up to £1m per annum.
Link: http://www.banksearch-consultancy.com/
Contact: 01788 338321
20
6.2 Bibliography
This document presents a summary of a broader literature review conducted as part of the
research. The following documents were reviewed as part of the broader exercise and may
be of interest in this area of research:
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CGCF Higher Education Partnership and the Institute for Employment Studies, Creative
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Creative Industries: Technology Strategy 2009-2012, Technology Strategy Board, 2009.
Creative Value: The Economic Significance of the Creative Industries in Cornwall, Cornwall
Arts Marketing, 2003.
Florida, R. (2002). The rise of the creative class. New York: Basic Books.
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Henley A., Job creation by the self-employed: the roles of entrepreneurial and financial
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21
Higgs, P. et al. (2008), Beyond the Creative Industries – Mapping the creative Economy in
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Howard J., Between a hard rock and a soft space: design, creative practice and innovation,
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Myerscough J., The economic importance of the arts in Glasgow, London: Policy Studies
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NESTA (National Endowment for Science, Technology and the Arts), Creating growth: how
the UK can develop world class creative businesses, London, 2006a.
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International Journal of Cultural Policy,
Reeves M., Measuring the economic and social impact of the arts: a review, Arts Council
England, 2002.
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Economics, 13(1): 27-55, 1999.
22