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New research looks at the cost of being self-employed

Self-employment powering the UK’s economic recovery – but at a cost

Tens of thousands of small business owners are paying a high personal cost as they take risks to support the economic recovery, according to new research from Business Debtline, the free debt advice service run by national charity the Money Advice Trust. 
A third of struggling small business owners interviewed by the charity draw less than £100 income from their business each month, leading to a constant struggle to stay on top of their personal, as well as business, finances.
As the number of self-employed people in the UK rapidly approaches the five million mark, Business Debtline experts are warning that many are falling into severe financial difficulty.  More than 40,000 sole traders and other small business owners contacted Business Debtline for advice on dealing with problem debt last year, with 54 percent being able to continue trading as a result.  However the service – the UK’s only dedicated provider of free business debt advice – predicts that a vastly greater number are suffering in silence.
Struggling to cope
• More than one in three small business owners interviewed drew less than £100 income from their business each month, leaving them in a constant struggle to stay on top of their personal, as well as business, finances
• More than three quarters (76 percent) reported cutting down on household spending, with more than a third (36 percent) of these reducing spending on gas/electricity and a worrying 71 percent paring back on food
• Almost seven in 10 (69 percent) of those who had taken out a personal loan were using it to prop up their business, leading to a blurring of business and personal finances
High personal cost
• Business difficulties have had a significant knock-on effect on other areas of small business owners’ lives, with more than eight in 10 (82 percent) affected by stress, anxiety or depression
• Around half (54 percent) of small business owners interviewed said they were suffering sleep loss as a result of problems with their business finances
• Almost a quarter (24 percent) reported problems in their relationships as a result of their business debts
No safety net to fall back on
• The findings also reveal a worrying lack of financial resilience, with 91 percent of Business Debtline clients interviewed having no savings – almost three times higher than the wider UK population
• 80 percent of small business owners reporting having no pension provision, comparing unfavourably to the 53 percent of the wider UK population reported to be saving adequately
• The charity is concerned that a lack of any form of financial safety net is storing up significant personal financial problems in the future
In a report published today (Wednesday), ‘The Cost of Doing Business’, the Money Advice Trust calls for better access to support and information for small businesses, further action on late payments and the development of a new Basic Business Account to make it easier for the self-employed to separate their personal and business finances.
Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs Business Debtline, said:
“New small businesses are powering the current economic recovery, creating new jobs and growth for the UK.  Many go from strength to strength, and you never know which of today’s new small businesses will be tomorrow’s Virgin or Body Shop.
“Nevertheless, tens of thousands of small business owners are paying a high personal price for the risk they have taken for the economy – and we have to do more as a society to give them the best possible chance of succeeding.
“Advice and information is available but we believe the government could do more to make sure the self-employed and other small business owners can access the expert support that can often make the difference between triumph and disaster.  Banks and building societies could also do more to help by providing a new Basic Business Bank Account to help the self-employed separate their personal and business finances.
“More generally, we have to get the message across to any self-employed person who is struggling to cope that the worst possible thing they can do is to suffer in silence.  Small businesses are the backbone of our economy – and we have a duty to give them the support they need.”
All figures, unless otherwise stated, are from the Money Advice Trust’s interviews with 104 Business Debtline clients contacting the charity in October 2014.
Business Debtline offers free, independent and confidential advice 24 hours a day online at and on 0800 197 6026, Monday to Friday.
© Money Advice Trust Charity Number 1099506
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