By Marieke Flament, CEO of Mettle
The passion economy movement gains momentum
Historically, the business banking system has underrepresented smaller businesses and self-employed customers. Yet, the ever-growing passion economy movement – consisting of the self-employed, gig economy workers, contractors and side hustlers – is the backbone of the UK economy.
Companies House data shows that new business formations increased by 230% in the first week of January 2021 compared to the same period the previous year, suggesting that COVID-19 has pushed more people to go it alone than ever before as a result of changing work or lifestyle commitments.
The movement now stands at five million – that’s a massive 15% of the entire British workforce. And on top of that, a quarter of all UK adults now consider themselves to have a ‘side hustle’, entailing the pursuit of their passions or complementing their existing income. This figure is predicted to rise to 50% by 2030.
At Mettle, we recently conducted research with YouGov which found that this segment will contribute an estimated £125 billion to the UK’s economic recovery in 2021. It also uncovered some interesting trends around why more people are choosing to start a business or side hustle in the current climate, with greater flexibility and freedom (57%), the desire to change their work/life balance (38%) and people wanting more meaning and purpose in their lives (24%) coming out on top.
But despite representing a significant and profitable opportunity, a lack of access to flexible and affordable banking solutions is limiting the potential of the smaller end of the SME market to thrive.
Providing the platform for the movement to thrive post-Covid
The smallest end of the SME market has previously been underserved in terms of business banking and financial support.
UK SMEs are more likely to be dissatisfied with traditional banking services in comparison to digital ones, according to Raconteur’s Future of FinTech report. Digital banking services offer a specialised range of features, access to services 24/7, much greater ease of access when setting up accounts and managing them, as well as offering lower rates.
While lack of confidence, fear of failure and intimidating financial processes are major barriers to becoming self-employed or starting a new venture, digital banking services have the key tools to support those taking the leap. There is a major opportunity for digital banks to support the growing self-employed and side hustler movement to streamline processes such as invoicing and paying taxes. At Mettle, we have integrated accounting tools such as FreeAgent (which we offer our customers for free , unlike other challenger services), Quickbooks and Xero to empower our customers with the ability to stay on top of tax repayments and bookkeeping.
Marieke Flament
Digital banks are agile and can quickly adapt their services to meet their unique needs, and we keep an open dialogue with our customers to understand the tools or services that they need to effectively run their business so Mettle can test and provide this support. By investing heavily in technology, product design and services that support growing customer segments, digital banks can bolster their ability to support this growing segment.
Interestingly, London-based self-employed workers are more likely to use challenger banks for business finances yet seem largely unaware of the benefits of doing so. And, as a quarter of London-based liquid workers are generating over £100,000, the importance of having a banking service that supports their needs and finances is imperative.
From tailoring products and integrating services, digital banks are well poised to support the passion economy movement, helping them to start, run and grow their ventures. In Mettle’s case, we specifically focus on this audience, continuously adapting to serve our customers’ growing needs.
Recognising the movement’s importance
In addition to their business banking needs, many self-employed and side hustlers have struggled with lack of Government support during the COVID-19 pandemic due to Self-Employment Income Support Scheme (SEISS) loans not being applicable to the audience, or unavailable for those who established their business or venture past the support cut-off date. While additional funding has been announced for this audience, many self-employed individuals do not feel that the grants have gone far enough to offer them support.
ONS has found that UK unemployment rose to 5.1% from October – December 2020, while the Federation of Small Businesses revealed that over 1 million of SMEs were left without financial support during the crisis. Those considering themselves to be self-employed also fell to 2013 levels due to the lack of financial support during the Covid crisis.
Over half (57%) of Mettle’s own customers are not looking to expand their business or venture due to economic or financial instability, while over half are unable to access government support, forcing many to turn to universal credit to see them through. Of those who had to adjust their business operations or cease trading during the pandemic, nearly two-thirds are unsure whether they’ll survive without further financial support for the self-employed and side hustler population to help them run,recover and thrive.
The country needs to get behind this growing self-employed and side hustler movement, which is estimated to contribute over £125bn to the UK economy this year. As the UK looks to rebound from the economic damage caused by COVID-19, it is absolutely vital that this segment has the support and services it needs. Self-employment is, after all, the largest employer in the UK.
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