Original post : 6 Sep 2013

Are you an 'informal' business?

I have been catching up with some magazine reading this week.  You know that pile of tomes that lurks in the corner and which you always mean to get round to reading but you never quite do?  In my pile were a couple of issues of the Royal Society of Arts magazine.  I can seriously recommend it for its thought leadership and downright interesting articles. In an issue from last year I found coverage of a new (well it was in September 2012) piece of research that the RSA had commissioned from YouGov called "Untapped Enterprise".

The research explores something now called the ‘informal economy’ which McKinsey called the 'grey economy'.  It's when workers get paid cash-in-hand or when you pay the plumber with cash – undeclared income or payments.  The interesting thing about this report is that it says the informal economy represents huge entrepreneurial opportunities for the UK and should be supported on its journey to join the ‘formal economy’. Whereas at the moment our government is far too focussed on punishing people who don't pay their taxes.

Let me give you some of the facts.  HMRC estimate that £200billion is spent each year in the UK on undeclared work - that’s 10% of our GDP (the report points out this doesn't include drug dealing or prostitution!).  This represents £4billion in uncollected taxes in 2010 alone.  When you think the Heritage Craft industry that we are part of turns over £10billion each year, this gives you an idea of the scale of the problem or maybe we should start to call it an issue.

Of the 595 small business respondents to the YouGov survey, 1 in 5 had been part of the informal economy and 40% of those said it was because they needed the time to understand how to formalise their business.  So while the informal economy may be vilified by government, with HMRC employing 600 agents to detect those not paying taxes, it is actually more complicated than that.  The amount of red tape and regulations involved in setting up or running a small business doesn’t make it easy to conform.  The RSA maintains that while government is focussed on detection and punishment, this huge resource, which could be such a benefit to our economy, remains untapped. 

I wholeheartedly agree with the RSA and while we in no way condone companies or people not paying their taxes,  there is a lack of  vision from government to find a way forward from the impasse that currently exists.

In the current economic climate many people who have lost their jobs, have taken the decision to set up their own business.  This means we are not losing talented individuals to the ranks of the unemployed but these hidden entrepreneurs are finding a way to explore their talents – a valuable resource for the UK.  In the last 2 years, the report says that 5.9 million small businesses have been started. How many are part of the formal or informal economy we can’t be sure but the aim must surely be to HELP these hidden businesses to formalise the way they trade.

The RSA wants to help and encourage micro entrepreneurs which is what most of us are to move away from the informal economy.  They believe that government could do a lot to help with stepping stones of support, such as

  • incubation periods to help businesses get going,
  • simplifying the tax and benefits system,
  • helping with business advice - they highlight organisations like Start Up Britain
  • investment funds.

 Well, Planet Handmade is here to help you with the business advice and as we develop our knowledge base we want to help you nurture your business. After all as entrepreneurs you are a vital part of this country's assets and we want to help you thrive.  Let us know what information you need and we will find it.


sorry , I should have said , a worry not to do the papers, a worry not to do them….
Comment by Jill Peer - 16 Nov 2013 20:36
I admire what you say. i am a therapist and artist and in addition now an author and possibly soon a musicia!

Well this can be scorned by many especially and particularly my family . Especially as i am now 64 coming 65 years old and though i am disabled( like a good many craft people i know) I have vigour and enthusiasm for my craft and therapy that few people can out do.

I have ' done my tax papers' for about 20 years. always in the hope that one day i could be earning some thing to make the effort worth it. My husband hates it because without his help i cannot do it at all. The end of year paper filling I mean.

It is a worry not to do the papers , it is a worry not to do them.. yes we should really all be allowed to have a relax over this matter. as each year that passes I realise that it is never going to happen- that i should actually ever earn a living from any of my work , no matter how i try. the cost always out does the earning. no matter what I do.
Others must be in the same position and /or be in a worried state because they have never owned u p to being
'self employed'. apparently now that i am a registered tax form filler - I will have to do it till I die . what a horrid thing to carry with me forever...…
Comment by Jill peer - 16 Nov 2013 20:33
 more information

(HTML markup not supported)
Access code : 2523

† required fields