Finance · 5 November 2018

Report finds debt levels soaring among the UK’s self-employed

Business Debtline says that both business and personal debts are common among the individuals it serves

Debt is a pressing concern among the UK’s self-employed, who now make up 15% of the country’s total employed population.

Small business owners and self-employed people are increasingly grappling with high levels of debt, according to new research from SME advice service Business Debtline.

Findings show that 49% of the 36,000 people who contacted the service last year had debt totalling £10,000 or more. Nearly one quarter (23%) owed more than £30,000. The report identified issues such as low and variable incomes, late payments and a lack of business management skills as some of the key financial sticking points for SMEs.

Business Debtline says that both business and personal debts are common among the individuals it serves, and the two are frequently combined. More than six in 10 callers surveyed (61%) said they had used personal credit at some point to pay for business costs in the past two years.

The report’s conclusions are based on data collected via Business Debtline’s advisers and surveys, as well as analysis from Experian. Overall, it found that callers are overrepresented in households that tend to be younger, with lower household incomes and high uses of credit. In addition, these individuals often have limited financial resilience in terms of pensions and savings.

“Many of the people behind these businesses are in need of advice and information at an earlier stage of their journey,” says Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs Business Debtline. “There is support out there but the government needs to do more to proactively champion these opportunities to ensure that these businesses receive the help they need to succeed.”

What can be done?

In response to the challenges facing the UK’s self-employed people and small business owners, the Money Advice Trust has issued a number of recommendations for government and creditors. These include calls for:

  • Creditors to extend their work on supporting personal customers in vulnerable circumstances to their small business customers.
  • The government’s new Single Financial Guidance Body to ensure that self-employed people are well served across its debt advice, money guidance and pension guidance services.
  • More powers for the Small Business Commissioner, including the power to fine persistent late payers and an expanded remit to cover the public sector.

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ABOUT THE EXPERT

Jennifer is a reporter for Business Advice.

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