Helping Unemployed People Into Work is a Social and Economic Good
Marc Cowling and Ondřej Dvouletý reflect on their article, “UK government-backed start-up loans: Tackling disadvantage and credit rationing of new entrepreneurs,” which was published by the International Small Business Journal. Their reflection appears below their abstract.
In the light of the impending global economic recession we set out to assess the potential value of the flagship UK Start-Up Loan (SUL) scheme as a means of supporting individuals to make the transition into self-employment through removing capital barriers. A particular point of focus was on outcomes for those entering the start-up process from unemployment. Since 2012 a total of 25,605 unemployed individuals have successfully transitioned into self-employment via an SUL-supported start-up. Of these individuals, 18.1 percent did not survive and typically exited within the first three years. However, during this period, they were likely to have gained valuable work skills and established networks relevant to future employment opportunities.
Further, they saved the UK government a non-trivial amount in welfare transfers. Our overall assessment is that on a narrow loan portfolio basis, the SUL scheme works. When we add in the net welfare savings and the ongoing contribution of the continuing businesses, the overall assessment of the scheme’s efficacy is even more positive. In short, the UK Start-Up Loan scheme has been successful in helping unemployed people to make a stable transition into self-employment.
But the SUL scheme is shown to be even more effective for older people who have built up useful life skills and competencies and this is important as for many over-50s there is a very low probability of finding waged employment.
