Two new surveys reveal the concerns that are stopping would-be entrepreneurs from starting their own enterprise as the cost of doing business soars.
New research conducted by the cloud accounting software company FreeAgent has found that as many as 70% of Brits say they are reluctant to start their own business in the current economic climate. Just 8% say they plan to start their own business in the next year; however, 55% of UK entrepreneurs say they still dream of setting up a business in the future.
The results also show that 56% of Brits say they have been disheartened from starting a business by the impact of COVID, including a lack of available staff and difficulty finding business loans. When asked about their worries about starting a business, the respondents were also acutely aware of current challenges, including ongoing economic uncertainty and rising costs. The top concerns are:
- The financial burden of setting up (50%);
- Confidence (35%);
- Managing business finances (31%);
- Dealing with tax (31%);
- Complying with regulations (26%);
- Lack of government support for freelancers/small businesses (26%);
- Finding available staff (18%);
- Dealing with technology (10%).
When asked in 2021 what motivated them to start a business, working Brits cited the ability to choose what work they do (42%) and the ability to earn more money (36%). However, the findings show that motivations have shifted. At the beginning of 2022, the top reason was "creating a better work-life balance" and that remains the case this summer.
The research also shows that the government's strategy to digitise tax for UK businesses has not gathered enough traction among would-be entrepreneurs. Only 19% of respondents know about Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) - which comes into effect in 2024 - which means a staggering 81% of Brits are still unaware of MTD for ITSA.
Roan Lavery, ceo and co-founder of FreeAgent, said: "Our last research from January 2022 showed that, despite major economic challenges such as COVID and Brexit, entrepreneurial sentiment in the UK was fairly positive. However, it's clear that this positivity has been whittled away over the past six months, due to rising inflation, the cost of living crisis, political instability and the removal of government support for small businesses suffering from the impact of COVID."
Another new survey on the barriers to starting a business, conducted by BPI Auctions, has found that psychological factors are almost as daunting as practical considerations for would-be business owners. The findings show that fear of failure and lack of confidence - as well as worries about finance and attracting customers - are key reasons for holding back.
According to the BPI research, the ten biggest fears are:
- Not attracting customers (49%);
- Finances (39%);
- "What if everything goes wrong?" (36%);
- Not earning enough to recover an investment (32%);
- Not knowing where to start (17%);
- Failing the family (14%);
- Not being an expert (14%);
- Not being believed in (11%);
- Being considered "crazy" (5%);
- Being incapable of handling success (4%).
Written by Rachel Miller.