If we're all our own bosses, we might get stroppy with it

The rise in entrepreneurship is to be welcomed, and it may make us more demanding of our politicians
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The Independent Online

On Tuesday, we get the next set of gross domestic product figures, which will show growth running at an annual rate of around 3 per cent, maybe a bit more. We will in all probability be officially at the previous peak of output, though if you allow for the apparent increase in the "grey" or "cash in hand" economy over the past four years we are well past it. That is estimated by Morgan Stanley to have added between 4 and 5 per cent to output. This would square with the rise in employment and the fact that retail sales are 4 per cent up on their peak.

But though the economy is growing swiftly, we don't seem to feel much better about it. Companies are optimistic, particularly in London; people aren't, or at least say they aren't. Why? There seem to be two broad explanations.

One is that the rise in economic activity has been associated with less desirable features, such as rising inequality and insecurity. There must be some truth in this. The combination of very low interest rates and quantitative easing has re-ignited the housing boom, and there are suggestions that prices could rise by another 10 per cent in the coming year. The more expensive your house, the greater the increase in your wealth, and the greater the corresponding rise in inequality.

As for insecurity, there has been the growth of zero-hours contracts, now being targeted by Labour, and the rise in self-employment. Many who have recently become self-employed may well prefer their new status; a study for Resolution Trust found nearly three in four of such people did. But being self-employed feels less secure than having a job, even if it isn't. After all, working for the government or a bank used to be the most secure of jobs. Nowadays insecurity is everywhere.

Rising inequality and insecurity has been widely noted. Less noted is the second broad explanation, which is our reaction to it. In a nutshell, it is the feeling that insofar as we are doing better economically, it is due to our own adaptability and resilience, rather than competent management by the Government.

One way of getting a handle on this is to look at the labour market. Published wages have fallen in real terms but people have found other ways of making money. These include renting out rooms, taking a second job, working after retirement, starting a business and so on. Thus the Bank of England last week noted the apparent rise in entrepreneurship.

Technology makes this vastly easier. People can trade on eBay from their kitchen table. Many have a faster connection at home than in the office. Indeed while the communications technologies initially encouraged businesses to send work offshore, it is now enabling them to bring it back, because they can tap into a workforce that can be increased or cut with a few clicks of the mouse. It is becoming more efficient to have part-time teleworkers in the UK than full-time teleworkers in, for example, India, though the former are paid higher hourly rates.

There are other shifts in our economic structure associated with the sense of resilience. One is the rise of the small business, for the entry cost into many activities has fallen. There seems to be much more room for niche operations, particularly in London and the South-east, and mostly but not entirely in services. The surge of foreign money coming into London has driven an increase in personal services of all levels, from top-end legal advice to dog-walking. One of the non-service growth areas is food and drink: gourmet delivered food, craft distilleries and the like.

London is not alone in this. In the past few weeks I have visited seven provincial cities, and was heartened by the quality of service available. Small companies were doing detail well, and in some places – Worcester was an example – were positively supported by the authorities.

If this is right – that adversity is creating a more entrepreneurial nation – then it is very positive. But it also creates a challenge for the authorities. If it is also right that people feel government is irrelevant to their success, then politicians have a problem. There is quite a bit of anecdotal evidence that both central and local government is improving its quality of service, and it has long been relatively easy to start a business here compared with other countries. But when government is seen to be inefficient, or to be making bad investment decisions, an entrepreneurial nation will be more swift and aggressive in its attack. Politicians are in the front line. But that is what they are paid for, isn't it?