The self-employed sector is facing a 'long-term but avoidable decline', the Association of Independent Professionals and the Self-Employed (IPSE) has cautioned.
The warning comes after the Office for National Statistics (ONS) reported that the number of self-employed individuals in the UK dropped by 174,000 between April and June and July and September 2020.
This leaves the sector at 4.53 million self-employed individuals, down from 5.1 million at the end of 2019.
In addition, a report from the London School of Economics found that a fifth of the UK's self-employed workers are planning to change occupation after seeing their work hit by the coronavirus (COVID-19) pandemic.
Derek Cribb, CEO of IPSE, said: 'The continuing drop in the number of self-employed in the UK shows that the glaring gaps in support are leading to a long-term, avoidable decline in the sector. This is deeply concerning not only for the self-employed themselves, but also for the UK's prospects in the coming recession.
'After the 2008 financial crisis, it was rising self-employed numbers that kept unemployment comparatively low, as uncertain employers looked for more flexible expertise instead of permanent employees. Now, this does not appear to be happening and the self-employed sector is in precipitous decline. Some self-employed are finding their way into full-time roles, but many others are joining the record flow into unemployment.'