The financial impact of the Covid-19 pandemic will be potentially long lasting for the self-employed, as many are still struggling to rebuild back their business to where it was pre-pandemic, according to new research from Aldermore bank.
51% of those self-employed in the UK think their financial situation has become worse over the past year, with 34% applying for government support and one quarter of self-employed home owners requesting a mortgage holiday period during the past 12 months to get by.
Additionally, many do not see conditions changing any time soon with 59% saying their monthly earnings have decreased since the pandemic began and 41% anticipate they will not get back to their pre-Covid earnings anytime soon.
This has led to 23% self-employed workers in the UK saying conditions have gotten so difficult that they are considering stopping being self-employed altogether.
While economic conditions remain difficult, the research also shows a great sense of resilience and ingenuity within the self-employed sector, with 46% of the self-employed in the UK saying they have adapted their business to help them stay afloat, while 13% have utilised this time to completely change their business model.
This was particularly true of the younger generation (18 to 35 year olds) with 23% of this age group completely changing their business model. Furthermore, within this age group, 34% were more confident about the future of their business and 23% said they were personally financially better off than a year ago.
With further uncertainty likely ahead, many of the self-employed in the UK remain vulnerable to future shocks. 33% say they do not have enough savings to last three months if they find themselves out of work. Non-Covid related financial issues remain a concern also with 29% believing Brexit will have a negative effect on their business, with 10% believing it will have a positive effect.
Furthermore, fulfilling dreams such as buying a home continues to hold barriers with only 14% having a consistent income month-to-month making it difficult to secure mortgages with high street lenders.
Jon Cooper, head of mortgage distribution at Aldermore, said: “The self-employed sector make up a significant proportion of the workforce and is a breeding ground for innovation and advancement in many industries, so they will play an important part in the UK’s economic recovery post-Covid. The self-employed are often fulfilling a life’s dream in creating their business, and some of the biggest companies in the world like Amazon and Facebook started as small start-ups, so it is crucial this entrepreneurial spirit is supported by government and lenders through these tough times and for whatever future life plans they have.
“For the self-employed that may feel pessimistic about their future home buying prospects after this difficult period, there are options available to help. It’s important to seek advice from a broker who can provide whole of market experience and to explore specialist lenders options, as they function to dig into the detail of an applicant that may have complicated income streams lifting traditional barriers to getting on the housing ladder.”
