Nearly four in ten (37%)
self-employed people surveyed expect it to take more than a year before their
income returns to pre-Covid levels, while a tenth don’t expect their income to
recover at all, according to new research from the Money Advice Trust.
The charity behind Business Debtline is calling for the Government
to introduce a Covid-19 ‘Self-Employment Recovery Strategy’ to secure the
financial and economic recovery of people who are self-employed – a workforce
of more than 5 million who contribute an estimated £305 billion to the economy.
The charity’s ‘Back to
business: Supporting people in self-employment to bounce back from Covid-19’ report,
based on Opinium polling of more than 2,500 self-employed people and insight
from its Business Debtline service, highlights the devastating impact of
Covid-19 on the financial and mental health of self-employed people, and the
long road to recovery that lies ahead for many.
Impact
of Covid-19
The report highlights how
particularly hard hit self-employed people have been by the Coronavirus
outbreak – from struggling to cover essential costs, losing sleep due to
financial worries, and in some cases ceasing to trade.
- Nearly a third (29%) of the people surveyed have fallen
behind on one or more bill or credit commitment as result of Covid-19.
- Personal finances are bearing the brunt – twice as
many have fallen behind with household bills than with business bills, as many
seek to prop up their business.
- More than half (55%) said Covid financial worries
had a negative impact on their mental health, with four in ten (43%) regularly losing
sleep.
Access
to support
Government support,
including the Self-Employment Income Support Scheme (SEISS) has been a lifeline
for those eligible, however many continue to struggle – and many others who
have not been eligible for support face particular challenges.
- Of those surveyed without access to the SEISS a
quarter (25%) had fallen behind on household bills – and of those who are
expecting to need debt advice in the next year, three quarters (77%) had not
received the SEISS.
- Many who were ineligible for the SEISS or other support
are struggling to get by on Universal Credit alone. Almost half (47%) of
self-employed people surveyed who were on Universal Credit were behind on at
least one household bill or credit commitment.
- Worryingly, three in ten (29%) who have taken out a
government-backed loan are not confident they would be able to repay it when
required.
Fears
for the future
With Coronavirus restrictions
still in place, many self-employed people are fearful for the future of their
business and personal finances. The report paints a worrying picture of growing
debt, the need for further support and overall, a long road to recovery for
many.
- Nearly four in ten (37%) people expect it to be
more than a year before their business income returns to pre-Covid levels –
while 9% don’t expect it to at all.
- Six in ten (61%) think it is likely they will
experience another drop in income, and 13% are anticipating needing debt advice
in the next year.
- Four in ten (38%) said they had experienced an
increase in late payments since the start of the outbreak – with almost three
quarters (72%) of those surveyed saying late payments were making their
financial problems worse.
The charity has written to
the Minister for Small Business, Paul Scully, to make the case for a dedicated
‘Covid-19 Self-employment Recovery Strategy’ to help people who are
self-employed recover from the impact of the outbreak.
Further proposals to
government include:
- Introducing a discretionary grant scheme
specifically to support the millions of self-employed people excluded from the
SEISS.
- Extending the suspension of the Minimum Income
Floor, which has given self-employed people fairer access to Universal Credit, with
a view to reform in the longer term – and extending the £20 a week uplift in
Universal Credit.
- Increasing the powers of the Small Business
Commissioner to act on late payments, including the power to impose penalties
for non-compliance with the Prompt Payment Code given the scale of this
problem.
Joanna Elson CBE, chief
executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said:
“Covid-19 has dealt a huge and sometimes devastating blow to the finances of self-employed
people across the country. Government
support has helped in the short-term, but any hope of a financial recovery
remains a long way off for many – and the millions excluded from support are
facing severe challenges.
“The impact of this crisis goes
far beyond the business, with personal and family finances taking the
brunt. Most worryingly, all of these
challenges are coming at a severe cost to the mental health of self-employed
people.
“The government must urgently set out a
Covid-19 Self-employment Recovery Strategy to provide a route out of this
situation. This needs to include a
dedicated grant fund for those so far excluded from support, improvements to
the support available through Universal Credit and stronger action on late payments.
“In the meantime our Business
Debtline advisers are doing all we can to support the thousands of
self-employed people we hear from day in, day out. With financial difficulty amongst the
self-employed set to soar, the scale of the challenge cannot be underestimated.”
Business
Debtline provides free, impartial debt advice to small business owners and
self-employed people at www.businessdebtline.org.