The New Enterprise Allowance (NEA) should be extended to encourage more budding entrepreneurs to use the scheme, according to the All Party Parliamentary Small Business Group (APPSBG).
Current rules allow jobless entrepreneurs to apply for funding of £1,274 plus access to a guaranteed loan of up to £1,000 – but only after they have been claiming Jobseekers Allowance (JSA) for six months.
The APPSBG is calling for the New Enterprise Allowance to be made available from day one of signing onto JSA and for funds to be available for a full year to provide £3,692, plus the guarantee of a loan of up to £2,000. The APPSBG believes that this would encourage more budding entrepreneurs to set up in business, in turn helping to boost the economy and stem high unemployment.
The APPSBG is concerned that the current funding is too low to enable budding entrepreneurs to get viable business ideas off the ground – a view supported by figures from the FSB, which show it costs 14 percent of small businesses between £2,500 and £5,000 to set up.
The report follows an Entrepreneurship Inquiry launched by Iain Duncan Smith MP, Secretary of State for Work and Pensions, to see how the barriers to self-employment can be removed and entrepreneurs can be supported in setting up their business in difficult economic times.
John Walker, National Chairman, Federation of Small Businesses, believes this report shows that breaking down the barriers to entrepreneurship is crucial for turning the economy around: “We all know that unemployment is worryingly high,” he says. “That is why it is even more important to make it more attractive to go it alone, and encourage those that have a great business idea to make it a reality. The current New Enterprise Allowance does not achieve this, but if the Government extends the scheme to make funds available and at a higher rate, more budding entrepreneurs will be encouraged to become self-employed.”