These businesses already punch above their weight, accounting for and more than half of total business turnover. Yet while recent budgets have pushed up costs through higher employer national insurance (NI) contributions and minimum wage rises, little meaningful relief has been offered in return.
As a result, a recent found that 82% of businesses expect the NI hike to damage their business. More than half say it will affect recruitment plans, prices and day-to-day operations.
Working with small businesses, apprentices and local enterprise leaders, we have seen how government support schemes often fail to reach those who need them most. into informal work and legitimacy shows that many micro-businesses and sole traders operate in a space where regulatory demands feel misaligned with their economic reality.
Across the UK, many micro-businesses already operate on a thin margin. For some, formal compliance with tax, labour and reporting obligations is simply out of reach. This is not due to unwillingness, but rather to a lack of manpower and time. In short, it is not about criminality, but survival.
And when formality becomes unviable, the government loses out too through reduced tax receipts, lower NI contributions and missed opportunities for growth.
, we’ve found that formal and informal business owners don’t reject regulation outright. They reject complex systems that demand compliance without offering security. When the risks of being “seen” by the taxman outweigh the benefits, informality becomes a rational, even morally justifiable, choice.
Informality is a significant global issue. According to the 2025 report by the , even in high-income countries like the UK around one in ten workers are informally employed. And more than 60% of these people are working within formal enterprises, typically as undeclared workers.
Informal work is most common in and , and despite high education levels, .
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For the full article by Dr Danny Buckley visit .
ENDS