The decline began in 2020, when 700,000 freelancers gave up self-employment after the pandemic hit their incomes and caused average earnings to fall by close to a third. Until then, freelance numbers had risen steadily year on year, growing 40pc between 2008 and 2019.

Experts said the decline in entrepreneurial self-starters, who are thought to generate more than £300bn a year towards the national economy, threatens to stifle Britain’s recovery from the pandemic.

Derek Cribb of Ipse said more freelancers were fleeing back to the security of a nine-to-five jobs amid a cost of living crisis, saying the planned rise to National Insurance in April, spiralling inflation and soaring energy bills had “sown seeds of doubt and uncertainty” throughout the industry. 

In addition, recent changes to the tax rules that govern freelancers, known as “IR35”, have made big companies more reluctant to hire self-employed workers. 

Instead of dealing with the extra work, firms, notably banks, put a ban on working with contractors unless they became de facto employees and worked via umbrella companies, meaning workers paid higher rates of tax and have effectively taken large pay cuts.

“The sad truth is that the sector has started 2022 in a highly fragile state and if it is going to recover its pre-pandemic growth after omicron, then the Government needs to intervene and ensure that damaging and confusing legislation like IR35 is properly reviewed and that the conditions are right for recovery,” Mr Cribb said. 

“With the virus hopefully soon under control, the Government needs to turn its head towards self-employed workers. The planned increase in National Insurance as well as the cost-of-living crisis are set to further damage freelancers at a time when they are finally in a position to recover post-pandemic,” he added. 

Some of the sectors where self-employed numbers dropped the most were in “artistic, literary and media occupations”, with numbers falling 14pc to 258,000, the figures showed. In construction and building trades numbers dropped 10pc to 366,000. Meanwhile the number of “transport drivers” and those working in “agricultural and related trades” rose 6pc, as workers were called in to drive lorries and get food on shelves after supply chain issues struck towards the end of last year.

The Government has defended its support of the freelance sector, saying it paid out £30bn in self-employed income support scheme grants. It has also pointed to £4.2bn handed out to ease the cost of living crisis, including discounts on heating bills for lower earners.