Government urged to support new entrepreneurs

The government is being urged to create a better system to encourage people to start up their own businesses.

There are calls for the government to set a target of supporting and encouraging 500,000 more small businesses to exist by January 2028.

According to the Federation of Small Businesses (FSB), this would take the SME community back to its pre-pandemic size of six million.

The FSB’s new analysis suggests a package of targeted measures to achieve this, which would not only stimulate economic growth and jobs but also improve equality of opportunities and social mobility.

This includes changes to the benefits system to increase the number of people moving from unemployment to self-employment, in turn reducing the benefits bill longer-term.

Some of its recommendations include:

• A ‘New Traders Allowance’ for jobseekers as a more effective and ambitious replacement for the New Enterprise Allowance (NEA).
• Encouraging up-skilling by expanding the areas in which the self-employed can claim tax relief for training.
• Supporting side-hustles by doubling the trading allowance, from £1,000 or trading income to £2,000.

FSB’s Policy Chair, Tina McKenzie, said, “Entrepreneurship provides many with a path to financial freedom and independence. For some, it’s a long-held dream; for others, it comes after an unexpected career shift or change in life circumstances.

“As our new research shows, the main motivation for wanting to be your own boss is often not primarily about making money beyond a liveable income; it’s about the freedom it gives in terms of fitting in with life, health or family circumstances – and provides a fantastic way to unlock opportunity and talent, and improve lives.

“Replenishing the small business community to its pre-pandemic size of six million is also a no-brainer for the economy, which is why the Government should commit to a target of 500,000 more small businesses existing by 2028 – and follow our evidence-based recommendations to achieve that. This would not only be good for growth overall, but also crucial for local economies, communities and individuals in all parts of the UK.

“In committing to growing the number of self-employed, the Government would also be helping itself to achieve its aims of reducing economic inactivity and cutting the benefits bill.

“It seems absurd that the benefits system currently works in a way which can financially suffocate those who’ve taken the bold step of trying to start a business, just as that business is beginning to get off the ground. Building a successful business from scratch takes more than 12 months, and it’s high time Universal Credit rules were changed to take account of that, and back those striving to move from unemployment to self-employment.

“The system should also recognise that self-employed income fluctuates and therefore income should be assessed quarterly rather than monthly to better reflect the reality of running a new business.”

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