4m people have started own business after redundancy
Of the 4 million workers who have become their own boss, 2.2 million (57 per cent) started working for themselves as a freelancer or consultant, 1.8 million (48 per cent) started a business, and 445,000 (12 per cent) invested in another business and started working there.
Direct Line for Business has dubbed these workers “redundant-preneurs”.
According to the insurer’s research, those who have chosen to set up their own business have collectively spent £34bn doing so – about £8,700 per person. This cost can be covered by the average £9,000 redundancy package received.
Set up costs
The cost of set up can vary substantially depending on size and scale of the business, reflected by the 15 per cent who spent between £10,000 and £20,000 and the same proportion who spent more than £20,000.
Interestingly, younger people (aged 18 to 34) spent the most of any age group when setting up their business, shelling out an average of £12,113 per person. This is 41 per cent (£3,527) more than those aged 35 to 54 (£8,586).
The key reasons for people choosing to work for themselves after being made redundant are wanting to try something different (37 per cent), and liking the idea of being their own boss (34 per cent). More than a quarter (28 per cent) thought they could earn more money while working for themselves. For others, redundancy provided the ideal opportunity to do something they had always wanted to but never had the required lump sum investment (25 per cent) or the time (24 per cent).
Type of work
The majority (68 per cent) of entrepreneurs set up a business in something related to their previous job, whether it’s the same type of work (48 per cent) or in a similar role but a different industry (20 per cent). However, a third (32 per cent) used redundancy as an opportunity to change paths completely, setting up a business in a different industry and choosing a different role to their previous career.
The industries most people choose following redundancy are education (18 per cent) and retail (17 per cent). One in nine (11 per cent) choose to start their own business or management consultancy, while similar numbers have set up their own IT or web design business (nine per cent) or engineering firm (eight per cent).
How many workers are made redundant?
Almost 13 million (38 per cent) working adults have been made redundant at some point in their careers, with men more likely to be made redundant than women (44 vs 34 per cent). Despite being a stressful situation, many workers have seen redundancy as an opportunity, choosing to study for academic or professional qualifications (23 per cent), take a career break (25 per cent), retrain for a different career (19 per cent), or do charity or volunteering work (16 per cent).
Karneet Chowdhury, business manager at Direct Line for Business, said: “Being made redundant can be one of the most stressful and unsettling periods of anyone’s working life. But it can also be a catalyst for change and force people to take a step back and think about what they want in their future career.
“It’s great to see so many people have turned redundancy into a positive experience by starting their own business and working for themselves. This entrepreneurial spirit is why there are so many small businesses across the UK providing numerous products and services.”