Six degrees of separation is the theory that everyone and everything is six or fewer steps away, by way of introduction, from any other person in the world. This usually ends with a link to the most famous person you can think of, say Bobby Davro for example. By a similar, if somewhat tenuous, six-fold theory, every person in the world is also connected to a self-employed person – which by coincidence I can only assume that Davro is – and they don’t even have to have celebrity status.
The growth of the self-employed population within the UK is phenomenal. According to a recent Office for National Statistics’ (ONS) trends in self employment report, more than 4.6 million people in the UK, equating to 15% or roughly one in six, of the labour market, are now said to be self-employed. This represents an increase of 730,000 from 3.8 million in 2008. In addition, figures from the TUC suggest that almost nine in 10 new UK jobs created in the past three months were for people who were self-employed. And it’s not just the YouTube or Instagram generation who are bolstering these figures.
More than 40% of the UK’s self-employed population are said to be 50 and over. Of course not all of these self-employed positions are through choice. Many people are being forced onto contracts with fewer rights, less pay and no job security, a course of action which could also have potential repercussions on their earnings, lifestyle and in some cases borrowing capabilities.
This was further highlighted in a report earlier in the year from the Federation of Small Businesses, which found that one in five of respondents had experienced difficulties accessing a mortgage because they were self-employed. This number rose to 40% when considering only those respondents that had attempted to apply for a mortgage.
On paper these figures are not great and it’s fair to say that this area has long been underserved in the mortgage world. In some respects, this type of borrowing is still tarred with a complex brush when it doesn’t really have to be. This means that the industry has to work together to dispel some of the borrowing myths surrounding it, as well as evolving borrowing options, so that this community has access to sufficient choice.
However, things are slowly improving for the contracted and self-employed workforce. Options are available within the mainstream and specialist markets, criteria is gradually becoming more flexible and, dare I say, there is a little more common-sense lending emerging. Having said this, individual lenders will continue to assess self-employed borrowers in different ways, such as net profit, salary and dividends and the time in which a business has been trading. This underlines the importance of the advice process.
And with a good proportion of the intermediary community also falling under the self-employed category they should be perfectly placed to not only sympathise with these problems, but to also help this growing legion of workers find the right deals to match their borrowing needs.