Is Public Policy Failing the Self-Employed? | Blog | Foundation East

Is Public Policy Failing the Self-Employed?

23rd October 2016 By Katy Ford in Current Affairs

In the last month, the UK’s governing political party has claimed to be committed to building an economy that works for everyone; political think tank, The Resolution Foundation, has revealed that, while the UK's self-employed workforce has grown by 45% since 2001-02, its weekly earnings have fallen by £60; and the press have brought attention to companies, such as Uber and Deliveroo, who are taking advantage of self-employed staff. Is 21st century public policy failing the self-employed? We think so. Yet, we are hopeful for change …

Self-employment in the UK is booming. In fact, research published last week showed that we are becoming the work-for-yourself capital of Western Europe. Indeed, more people are their own boss here than in France, Germany or any of the Nordic or Baltic states. Yet, self-employed workers in the UK are earning less today than they were in 1995. Whilst there are many propositions regarding the ‘part-time by choice’ and ‘life-style business’ nature of 21st Century work-for-yourselfers, I believe, as do The Resolution Foundation, that too little is known about this social trend and not enough is being done at a policy level to improve the earning potential of those who are self-employed by necessity, rather than choice (subsistence entrepreneurs in economic parlance).

Our experience informs us that public investment in access to finance and advisory and mentoring support for this group of entrepreneurs leads to improvements in their income and life style. With the government’s decisions this year to close the Business Growth Service and to stop funding the Responsible Finance sector through the Regional Growth Fund (RGF) programme though, their future looks bleak. This latter decision, especially, came as a shock to us, following our very successful delivery of a RGF programme in the East of England delivering a ‘cost per job created’ of £3,500 (compared to £35,000 for the nearest other deliverer of that programme).

Instead of the RGF, The British Business Bank has decided to invest further into its start up lending programme. Unfortunately, this requires delivery partners to lend in a way that conflicts with the values and mission of Foundation East. We, therefore, decided to withdraw from offering that product to our customers.  And, with many branch closures of mainstream banks in our region, most of which signposted clients to us, it is unclear where subsistence entrepreneurs will turn to for finance – pay day lenders perhaps?

What is clear is that there is a growing need for services such as ours’, providing access to finance and business advice/ mentoring to people with viable business plans that do not meet the lending criteria of High Street Banks. For, in spite of the bleak economic outlook, the Brexit Blues and our hesitation to promote our services until future funding streams have been secured, we made a record number of loans this year, loans which created and saved 281 jobs.

As the East of England’s only Responsible Finance company specialising in business loans to people who have been turned away from mainstream finance we have enabled the creation of almost 1000 jobs since 2012. We have delivered to our region’s public purse the associated positive social and economic impacts of decreasing benefit claims and increasing tax revenue. In fact, our services have been proven to provide £15.68 of social and economic value for every £1 we invest in delivery.  

Perhaps policy advisors and politicians who are so suddenly and unsurprisingly keen to court this growing and insecure part of the workforce could learn from our experience and that of our customers? Yes, we’ve seen changes to their taxes, and, yes, we may see more in the Autumn Statement.  Yes, there is the ongoing significant review of employment practices led by Matthew Taylor too, which could be an important step forward on this agenda. Is it enough? We suspect not.

According to a short straw poll of our clients, reduction in business rates and NI contributions and increases in support packages built around training, access to finance, mentoring and networking opportunities would be a nod in the right direction.

We agree. And we strongly encourage politicians and policy makers to stop talking about improving livelihoods and reducing poverty and to actually start doing it.

Whilst we commend them for promoting cutting edge innovation growth, and developing interventions to support the vocational and transformative entrepreneurs who will flourish and thrive, thanks to such initiatives, we urge them to think beyond this form of entrepreneurship.

Such interventions are of no use to the UK’s growing legions of subsistence entrepreneurs, those who are becoming self- employed through necessity, rather than choice; those who are seeing their wages decline whilst their operating and living costs are heading in the opposite direction.  These people (and they live on a street near you somewhere) are struggling to exist, let alone thrive.

Is 21st Century Policy failing the self-employed? Yes. Although, I trust that important research such as this, and the powerful media coverage that it is fuelling, will lead to a period of reflecting, refocusing and reforming. As such, I am truly hopeful that public policy will catch up to meet these workers needs.

If you, like us, are passionate about creating a fairer banking system where people with good business ideas who don’t tick the boxes of mainstream providers are able to gain support and loans, why not join our Mutual Society?

Know someone with a good business idea who has been turned away by the banks? Tell them to get in touch. If we can help, we will…


  • About the Author
    Katy Ford

    Katy Ford

    Katy’s knowledge of community finance is extensive, having worked for Foundation East since its inception in 2004. She is recognised locally as an influential business leader by the Suffolk 100 and nationally, as a founding member of AskIf, an online network of community-based lenders. Previous to moving across to community finance, Katy was the treasury manager for a large insurance company. She also has experience as a SME owner, having run a small hotel.

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