By cross-referencing recent labour force data from the Office for National Statistics and the Federation of Small Businesses, the insurer discovered that the majority of these businesses were based in the south, where a tenth of small firms were now run from the owner’s home.
The research also found that a record 27 per cent of the labour pool in Herefordshire operated their businesses from home and that men were twice as likely as women to manage their company this way.
Direct Line for Business said the results showed signs of an evolving UK workforce that had been forced to adapt during uncertain and challenging times.
It also added that more were responding to difficult work conditions by using an increasingly digital, mobile and flexible business landscape to set up businesses that stemmed from a hobby.
“Self-employment has been on the rise for several years and our research now shows that a great number of these people work for themselves from home,” said Jazz Gakhal, head of Direct Line for Business.
The insurer also found that beyond the typical sectors of e-commerce, travel, marketing, recruitment and legal, home businesses were now beginning to appear in industries such as catering, photography, hairdressing and arts and crafts.
After Herefordshire, which boasted the highest number of home business owners, Pembrokeshire came in second with 23 per cent and Eastbourne third, with 20 per cent of its population.
In London, the homeowner business community accounted for 9 per cent of the capital’s 4m workforce, with more than 356,000 small businesses in the City operating from home – the Wandsworth borough alone accounted for more than 32,800.
With the number of home-based small businesses increasing, the insurer has urged entrepreneurs to fully insure all their possessions.
“Once an individual has taken the decision to set up a home business, it is crucial he or she fully appreciates their responsibilities as a business owner and ensures that adequate protection is in place should anything happen to threaten what he or she has worked so hard to achieve,” Mr Gakhal said.
“The research showed that when asked about these home business owners prioritised key actions when they first became operational, sorting tax arrangements and organising insurance ranked sixth and eighth.”
According to the findings, the top-five priorities for home business owners were buying stock, setting sales targets, and devising business, expansion and marketing plans.
Tim Gormley, adviser of Loughborough-based TMG Financial Planning, said: “I have worked from home since 2007. It can get to the stage where you ask yourself if you need an office and administration staff and it is of course a lot cheaper if you don’t have to pay rent and rates. I think a lot of advisers are thinking this way and if there is just one or two of you, it definitely makes sense, provided you can handle it.”