Who are Business Owners and What Are They Doing? (ESCoE DP 2019-12)


Who are Business Owners and What Are They Doing? (ESCoE DP 2019-12)

By Jonathan Cribb, Helen Miller, Thomas Pope

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Business owners have been the fastest-growing part of the UK labour force since at least 2000. Between 2000–01 and 2015–16, the number of employees grew by 15%, while self-employment (including those operating as a sole trader or as a partner in a partnership) grew by 25% and the number of directors of companies with at most two directors more than doubled. The number of new businesses created in the UK between 2007–08 and 2015–16 was higher than in any other OECD country.

This is an important labour market trend and is often hailed as a success because small businesses and start-ups are commonly viewed as the engines of growth. This is questionable in light of evidence that the UK has a long tail of low-productivity firms. However, to date, our understanding of business owners has been limited because they are not well captured in traditional survey data sources. Learning more about this group is crucial for understanding labour market trends better and informing public policy as it relates to business owners.

In this report, we use the universe of business owners’ administrative tax records provided by HM Revenue and Customs (HMRC) to learn more about business owners and their businesses than has previously been possible using survey data. Specifically, using these data, this report documents the numbers, characteristics, incomes and business activities of business owner-managers in the UK. We track the same business owners over time – something that has not been possible before – and use this to analyse patterns of business start-up and closure and to explain substantial falls in sole trader incomes since 2008.