Government urged to introduce a tailored strategy to help the self-employed recover from the pandemic

The charity behind Business Debtline, Money Advice Trust, has written to the Small Business Minister, Paul Scully, to make the case for a COVID-19 self-employment recovery strategy. This strategy would be dedicated to identifying and delivering long-term measures to help the self-employed sector as a whole, when the UK emerges from the pandemic.

The recommendation comes as part of a new report published by the charity, titled Back to Business: Supporting people in self-employment to bounce back from Covid-19. 

It highlights the devastating impact the pandemic has had on self-employed businesses, whether it’s people struggling to cover essential costs, their mental wellbeing or in some cases, ceasing to trade.

According to the report, nearly a third (29%) of those surveyed have fallen behind on one or more bills or credit commitment directly as a result of Coronavirus. And the self-employed’s personal finances are bearing the biggest brunt, with twice as many falling behind with household bills than business overheads, as they try to keep their firms afloat.

Universal Credit alone is not enough

One of the biggest reasons the self-employed are struggling is due to the gaps in the government’s Coronavirus support. Analysis by the Institute of Fiscal Studies estimated that two million were ineligible for the Self-employment Income Support Scheme (SEISS). Meanwhile, a further two million individuals, as directors of limited companies, do not qualify for significant support through the Coronavirus Job Retention Scheme (CJRS).

The Money Advice Trust’s report shows that those ineligible for the SEISS or other support are struggling to get by on Universal Credit alone. Nearly half (47%) of the self-employed surveyed on Universal Credit said they were behind on household bills. And three in ten who have taken out a government-backed loan are not confident they will be able to repay it.

The self-employed contribute an estimated £305 billion to the economy and are essential to the UK’s recovery, which is why Money Advice Trust is calling for a clear recovery strategy.

In its report, it states the strategy should consider the “role of training, and the provision of accessible business and financial advice, as well as financial support.” 

Discretionary grants for those excluded

The report also recommends introducing a discretionary grant specifically for those who have been excluded from SEISS. It suggests delivering this through “utilising existing infrastructure within HMRC” and states that “concerns about fraud could be combatted by each applicant being required to provide evidence of their eligibility.”

Other recommendations include extending the Minimum Income Floor in order to give the self-employed fairer access to Universal Credit, with a view to reforming it in the long-term. Increasing the powers of the Small Business Commissioner to impose penalties for late-payment and those who don’t comply with the Prompt Payment Code was also put forward as an idea. 

Additionally, Money Advice Trust has urged the Treasury and British Business Bank to work with lenders to “ensure there is a fair and affordable approach to recovering” bounce back loans and “any implications for businesses defaulting on loans is proportionate.”

‘Impact of this crisis goes far beyond the business’

These suggestions come amid figures from the report showing that four in ten self-employed people expect it to take more than a year for their income to return to pre-COVID levels. One in ten do not expect a return to the same levels at all.

Joanna Elson CBE, chief executive of the Money Advice Trust, 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.”