4 in 10 self-employed expect Covid income shock to last more than a year

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.”