Less than half of people with aspirations of becoming self-employed are achieving their ambitions, according to new research.
Figures published by the Citizens Advice Bureau (CAB) show that whilst 40 per cent of the UK workforce would like to become self-employed, only 15 per cent work for themselves.
Barriers to self-employment are particularly prevalent among the younger generation. Around 48 per cent of adults under 35 years of age say they would like to become self-employed, but only 7 per cent are currently doing so.
The research has identified a number of problems faced by people with aspirations of self employment; ranging from insufficient financial resources to a lack of practical support, such as advice on how to complete tax returns.
These barriers create difficult challenges for anyone with aspirations of working for themselves, the report ‘Going Solo’ warns. People with potentially viable businesses are failing to get the idea of the ground because of poor support in the early stages.
A growing number of people, including carers, are choosing self-employment as a way to better manage work life balance and caring responsibilities.
However, self-employed people typically earn a lot less than other workers. The average weekly earnings of a self-employed person have fallen £27 to £208 in the last seven years, compared to other workers who have seen their incomes rise from £388 to £425 per week.
It typically takes around three years for a new business to grow to the point where self-employed people can pay themselves the equivalent of the national minimum wage. Despite of this, those interviewed for the research say they are willing to accept a lower wage as a trade off for a better work life balance.
Citizens Advice has seen a 50 per cent increase in the number of self-employed people turning to the charity for help and advice. More than half (56 per cent) earn below the national minimum wage, and most have debt issues and experience problems navigating the benefits system.
The charity has identified ways to give self-employed people better financial security and help with developing their fledgling businesses. This includes:
- Agencies such as Jobcentre Plus or local Chamber of Commerce help people develop the necessary skills for starting out as self-employed including financial planning and understanding the tax system.
- Jobcentre Plus staff with specialist skills for helping self-employed people, who can decide when a business has been given sufficient time to develop before cutting down tax credit or Universal Credit support.
Chief Executive of Citizens Advice Gillian Guy said: “A lack of support is thwarting people’s ambition to be self-employed.
“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. But too many are unable to access the help they need to go it alone with confidence.
“Self-employment is increasingly a mainstream career option but it can be complicated, particularly when you’re first starting out. 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.”