Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Self employment – desperation or entrepreneurship?

In the UK 40% of the new jobs created in the last four years have been in self employment, an average of one in seven workers, putting the country well above the European average.
According to a report by the Institute of Public Policy Research (IPPR), quoted in an article in the New Statesman in January this year, only 17% of the UK’s self employed are likely to have employees, compared to 44% of them in Germany, statistics that we find frankly lacking in credibility.
The same article quotes IPPR research as having found that a typical self-employed worker in the UK earns just over half the amount a typical employee earns, compared with 2007 when the figure for self employed earnings was two thirds of typical employee earnings.
This has led some “experts” to argue that the new self employment is in fact disguised unemployment and the result of a weak jobs market.
Others, however, including the Bank of England (BoE) argue it is a sign of healthy entrepreneurship and a more flexible economy.
According to the BoE the self employment rate in the over-65s is at 39% while it is just 10.5% for those aged 25-34.
It is likely that at least some of these people have registered themselves as self employed as a result of the economic downturn with its resultant culling of jobs, particularly in the white collar professions.
It is also likely that a proportion of the older cohort, particularly, have either realised there is little hope as mature workers of finding another position or have had to turn to supplementing their income in what would have been retirement because early redundancy has prevented the maturity of occupational pensions, leaving them with insufficient pension income to live on.
But is that the whole story? As people are living longer and healthier lives is it possible that what was once a dream – of setting up one’s own business – is now a more realistic option? What do you think?

Finance General Rescue, Restructuring & Recovery Turnaround

The forgotten squeeze on incomes

We hear a lot from the unions about a squeeze on incomes for the blue collar workers they represent but there is another, large group of people who have suffered a much bigger drop in income.
Many middle management positions have gone altogether since the 2008 Great Recession began and older people, especially, who were made redundant from these positions have found it difficult to find other jobs.
According to research by the Resolution Foundation the loss of these middle management posts has contributed to a fall in real wages.
Many of these former managers have turned to self employment, setting up as consultants or outsourcing their skills to companies as needed and this has led to an estimated 20% reduction in their income although I believe the reduction is much greater.
The consequences of this are still to come.  While initially many have been cushioned by redundancy pay, reclaims from their bank due to mis-sold income protection and other insurance products, and low interest rates sooner or later the money will run out.
Having lost out on their occupational pensions, how many of these newly self employed are able to put money aside for their pensions?   How many will be able to repay their mortgages, let alone service them when interest rates rise?
Eventually we will face a serious Welfare payments crisis as more people reach retirement age without adequate provisions, not to mention that there will need to be a substantial correction to house prices, which are over-valued by up to 30% in our view.

Banks, Lenders & Investors Business Development & Marketing Finance General Turnaround

Self employment – are we sowing the seeds of a catastrophe?

Self employment accounts for almost two thirds of the new jobs created in the UK since the 2008 financial crisis according to the Office for National Statistics (ONS).
Effectively these are micro businesses and many of the 4.6 million people in this category, according to the ONS, are older people, often offering “white collar” consulting and skilled services.
This may be keeping people off the unemployment register and the Government, naturally, attributes it to entrepreneurial spirit and more people wanting to be their own boss. It is also hoping that many of these micro businesses will grow and be significant providers of future new jobs.
However, there is some evidence that most micro business owners are working longer hours than employed staff, for lower remuneration and that many will have to continue working well beyond retirement age.
This development raises two important concerns. Firstly, how are these businesses being funded while the statistics indicate that banks and other finance providers are not lending to micro and small businesses? Are they depleting personal savings or growing consumer debt? And how will they fund retirement?
Secondly, if the earnings from self employment are lower than they for those in direct employment, notwithstanding the impact on the economy due to a reduction in spending, is this change in employment patterns sowing the seeds of a yet unforeseen catastrophe?