BUSINESSES are failing to put enough cash into savings to cover unforeseen events, research claims.
Analysis by Aldermore, released on Wednesday, found the self-employed and small businesses are holding inadequate amounts of savings, leaving them unprepared for times where they may not be able to work such as through illness.
One fifth of businesses said they have no cash savings, while four in 10 hold less than £1,000.
Fewer than one in 10 of those firms with a turnover of less than £10,000 held more than £1,000 in savings, Aldermore said.
Despite the low level of savings, more than half, 54 per cent, said they have had periods where they have been unable to earn money because of ill-health.
“Starting a new business is a significant life decision,” Ewan Edwards, head of savings for Aldermore, said.
“While many self-employed people relish greater flexibility and control, the first few years can often bring long hours, additional stress and relatively small financial rewards. Quite often, issues that can affect the ability to earn, such as ill-health or childcare mean that many businesses are failing to prepare financially.”
Aldermore has been calling for the establishment of an entrepreneur ISA that could follow a similar model to the help-to-buy ISA (HISA) but rather than allowing money to be put aside tax free for a property deposit, it could be used to launch a business.
Similar to the HISA, the government would pay a 25 per cent matched bonus on contributions worth up to £3,000.
Aldermore is also calling for a small business savings allowance that would let sole traders, limited companies and partnerships earn up to £4,000 of income from savings, tax-free per year.