A new survey shows that there are a large number of self employed people who need additional support from the Government in addition to the existing measures that it has announced.
Almost half (45%) of the self-employed fear they will not have enough money to cover basic costs like rent and bills during the Coronavirus crisis, despite the government support on offer, according to a new survey.
The survey by IPSE (the Association of Independent Professionals and the Self-Employed) found that two thirds (66%) also say they are worried they will burn through all their savings in the next three months.
Two in three (69%) say that the demand for their work has dropped and over half (53%) say it has decreased substantially.
There is now a range of support available for freelancers, but nearly two thirds (60%) say it is not enough to sustain their business and their income through the crisis.
Freelancers were asked about the government support on offer both before and after the Self-Employment Income Support Scheme was announced. Among sole trader freelancers – many of whom are eligible for the scheme – the proportion who felt government measures would not sustain their business during the crisis dropped from 60 per cent before the announcement to 43 per cent after it. Among freelancers working through limited companies – who are not eligible for the scheme – the percentage rose from 58 to 69 per cent.
Instead, freelancers fear they will need to use their savings over the coming months. On average, freelancers think that without work, their savings will last them 21 weeks. This is much lower for sole traders (13 weeks) compared to freelancers working through limited companies (27 weeks). One in 10 freelancers (11%) also said they have no savings and another fifth (19%) think their savings will only cover them for up to a month.
The report makes a number of recommendations for how Government could help the self employed. These include allowing dividend income to be taken into account in the Job Retention Scheme to help Limited Company Directors; temporarily relaxing the Universal Credit application criteria for self-employed people waiting for the Self-Employment Income Support Scheme [SEISS] grant in June; extending the SEISS scheme to the newly self-employed by letting them file an early tax return before the end of April; and introducing a taper above the £50,000 salary threshold for the SEISS.
Andy Chamberlain, Director of Policy at IPSE, said: “This research shows that it is not just a few self-employed people falling through the cracks in the government support: right across the sector, freelancers are facing dire financial damage because of the Coronavirus crisis.
“The Self-Employment Income Support Scheme offered generous support to many sole traders, but there are a lot of freelancers who will struggle in the interim before it can be implemented. Government should look at ways to open up access to temporary support before June.
“The lack of support for limited company directors in SEISS is not just a crack: it is a gaping hole in the package. The government must act quickly to fill it. We believe the best way would be to include dividend income – through which many limited company directors pay themselves – in the Job Retention Scheme.
“This would allow the self-employed who work through limited companies to furlough themselves and hold on to 80 per cent of their income. If not, we suggest a bespoke solution involving either a grant or a temporary tax break for this significant and under-supported group.”
The Federation of Small Businesses has also said that large numbers of self-employed workers in the UK have “fallen through the gaps” of government coronavirus support. It says the recently self-employed, those who work for themselves with annual earnings of more than £50,000 a year and directors of limited companies are among those being left “frightened and bewildered” about their financial situation.
Meanwhile, the Office for Budget Responsibility has published one scenario of the potential impact on employment if the lockdown lasts for three months followed by three months of partial lifting of restrictions. It says the UK could see real GDP fall by 35 per cent in the second quarter, but bounce back quickly; and unemployment rise by more than 2 million to 10 per cent in the second quarter, but then decline more slowly than GDP recovers.