UK entrepreneurs put their livelihoods at risk

Research from the Scottish Widows Business Protection Report has revealed that 2.6 million sole traders in the UK are leaving their businesses vulnerable by not protecting the owner/key person should the worst happen.  With small firms contributing more than 50% of the UK's turnover, taking every step possible to ensure survival in the current environment and to protect their businesses going forward is vital. 

With sole traders reliant on one or two people to run the business, four in five (86%) believe that their business has at least one person whose loss through death, critical illness or serious accident would severely impact the profitability and survival of the business.  But over four in five (81%) sole traders do not have "key person" insurance to protect against the drop in profit which could occur as a result or to cover the cost of filling a vacancy.

Clive Allison, Protection Market Director at Scottish Widows comments:  "Thinking about personal health and the manner in which they wish to leave their hard earned legacy may be the furthest thought from a small business owners mind but it is a vital consideration to protect the future of any business. Sole traders are the engine of the UK economy but are often reliant on one or two key people to keep themselves afloat.  Our research highlights that without suitable protection in place, a serious illness, disability or death could be the last straw for these vital grass root businesses.  It has never been more important for small businesses to plan ahead to protect themselves from unforeseen circumstances."

The current climate reinforces the importance of planning ahead as many businesses are struggling to stay afloat, yet nearly three quarters (73%) of sole traders stated that they do not have a business exit strategy in place because they have not thought about it or because they don't plan to intentionally leave the business in the foreseeable future.

As well as sole traders leaving themselves exposed by having no key person insurance (81%), and no exit strategy (73%), nearly a quarter (23%) of sole traders simply have no business protection insurance in place whatsoever. For those sole traders who have no business protection insurance in place (i.e. not taken out life, critical illness or key person protection) over forty percent (42%) don't see the value in such cover, 26% haven't thought about it and 18% think that it would be too expensive. Just 5% of sole traders have ‘loss of their key people cover' in case of death or critical illness, compared to 15% who have insurance in place for office equipment.

Stephen Alambritis, Head of Public Affairs with the Federation of Small Businesses welcomed the findings and comments:   "The swine flu outbreak has been a stark reminder to many small businesses about the importance of planning ahead to protect your business from such threats.  It is vital to consider how, if something like serious illness did strike, your business would continue to function; how you would meet your contractual obligations to clients and suppliers.  It's always better to have detailed plans in place now, rather than worrying about what to do when it's already too late."

Moreover, the research has also highlighted sole traders' lack of awareness around what state benefits they would be entitled to in the event of sickness or death. Nearly half (48%) of sole traders do not know what state benefits they and their family would be entitled to if they suffered a critical illness or became incapacitated. And nearly three quarters (73%) do not know what state benefits they and their family would be entitled to if they died.

Clive Allison, Protection Market Director at Scottish Widows continues: "Unfortunately some sole traders may discover they are entitled to far less in state benefits then they might have expected, with their only real protection being whatever they have put in place themselves.  It is vital that sole traders should be aware of all the help they can get and use this information when considering their protection needs."