national work
Self-employed and micro-entrepreneurs
Getting by, or getting ahead? Small businesses on a road to formalisation.
Small cash-in-hand businesses could revitalise the economy in London’s most deprived communities if they were not penalised and instead encouraged to grow. Typically it takes two years to move a new small-business out of the informal and into the formal economy.
This report, ‘Self-employed and Micro-entrepreneurs: informal trading and the journeys towards formalisation’, strengthens our understanding of the UK’s informal economy through its examination of the experiences and attitudes of self-employed traders. Insights into how real people start-up and run small businesses in some of the most deprived parts of London, the report reveal how attitudes and perceptions, cultural differences and expectations impact on encouraging informal economic activity and prohibiting formal participation in the ‘mainstream’ economy. The report categorises people who are either ‘getting by’ - engaged in economic informal activities but do not, or cannot expand their activity beyond finding ‘just enough’ work - and those who are ‘getting ahead’ - engaged in economic informal activities and taking active steps towards making the transition towards the formal economy. The findings of the report confirm that formalisation is a process, not an event, including moving from claiming benefits to paying tax. The journey along this path is not straightforward and there are no standardised routes. This is in line with recommendations made in the 2004 Community Links report, ‘Self-employed people in the informal economy: Cheats or Contributors?’, challenging the current formal registration process and calling for a new formalisation plan.
Recommendations made in the new report include: harnessing the informal economy by embedding it within local and regional economic development strategies; increasing targeted marketing and advertising by government agencies; adjusting tax and benefit rules; and establishing formalisation business support and advice programmes, delivered by local organisations.
Dr Marlen Llanes, co-author and linksUK Researcher said, “Until government starts to roll up its sleeves and understand how real people run micro- and small-businesses, then informal economic activity will continue in many parts of the UK, including some deprived areas in London. We need to further our understanding of why and how these businesses trade informally and develop effective ways of supporting them along the road to formalisation. This will help to reduce current barriers, unlock the potential in many local businesses, and help to invigorate local economies.”