Barriers to becoming self-employed are holding back thousands of people who would love to work for themselves, according to a new report.
Fewer than half of those who aspire to be self-employed are able to achieve their goal, according to Citizens Advice – 40% of working people would like to work for themselves but only 15% of the UK workforce is currently self-employed.
The charity’s report, Going Solo, warns that a dire shortage of financial resources, a lack of available help with skills, such as budgeting or business planning, and a lack of practical support with tasks, such as completing tax returns, risk creating a barrier to people fulfilling their ambition of working for themselves.
It claims that potentially viable businesses are failing unnecessarily for the want of guidance in the early stages. “For some people self-employment can be a good way to manage their work life balance or a necessary step for work in their industry,” said the chief executive of Citizens Advice, Gillian Guy. “But too many are unable to access the help they need to go it alone with confidence.”
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Earnings are also falling for the self-employed. Since 2008, the average has fallen from £233 to £207 per week, compared with regular employees where median income has risen from £388 to £425 per week. On average it takes three years for a business to develop before a self-employed person earns the equivalent of the national minimum wage.
At the same time those working for themselves can find it a struggle to get access to working tax credits, while the government has been accused of leaving them behind in workplace pension changes. Only one in 10 are paying into a pension fund, down from four in 10 a decade ago.
Single parents are disproportionally affected as they are more likely to be self-employed than the rest of the working population – 18% compared to 15% – said Fiona Weir, chief executive of the charity Gingerbread.
“As universal credit is phased in, there’s a real concern that the new rules will make it harder to sustain self-employment,” she said. “We want to see the government undertake a rapid review of self employment for those on low incomes to ensure that its support takes into consideration those who need to balance work and childcare.”
Since 2011 the proportion of people turning to local Citizens Advice for help who are in work and self-employed has increased by 50%. “Self-employment is increasingly a mainstream career option but it can be complicated, particularly when you’re first starting out,” said Guy.
“Ensuring the right support is on hand for newly self-employed people will go a long towards helping them make a success out of their new businesses.”
The charity is calling for specialist staff to be available at jobcentres to help with skills including financial planning and understanding the tax system. It also calls for more understanding of when a business has been given sufficient time to develop before cutting down tax credits.
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