A new study suggests that sole traders may have been disproportionately impacted by Covid restrictions
A survey by small business lender iwoca has found that 58% of sole traders (defined as those who are the exclusive owners of their businesses) are trading less than pre-Covid, compared to 43% of limited companies.
Worryingly, the results show that sole traders are twice as likely not to be trading at all, with 14% in this position compared to 7% of limited companies.
Other key findings of the poll show that:
The research has also revealed that nearly half of business owners with sole trader status (46%) were concerned they’d struggle to afford their own wages in the next six months, compared to 37% of other small firms.
The study shows that time off work seems to have become a luxury that small business owners can’t afford. Again, it is sole traders who are most affected, with 24% not even planning to take one day off in the next 12 months, compared to 13% of those in limited companies. The majority – 59% – plan to take fewer than 10 days off in the next year.
However, the Bank of England’s Financial Stability Report, published in July, suggests that there may be hard times ahead for some of the UK’s smallest businesses. It has warned that the SME sector is especially vulnerable as the economy emerges from Covid-19 restrictions and predicts that the end of VAT and rent deferrals could be ‘a catalyst for business distress’.
Among the SME sectors most in distress are accommodation/food and transport/storage. The Bank of England report concludes that: ‘As the economy recovers and government support unwinds as planned, some businesses may face additional pressure on their cash flow and insolvencies could increase … Additionally, the end of the temporary ban on winding up petitions in September 2021 is likely to lead to an increase in insolvencies over the next twelve months.’
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