Members of the UK200Group have dismissed the government’s New Enterprise Allowance Scheme, with one member describing it as a "New Year fantasy".
The new proposals include offering grants and loans to unemployed people with a viable proposal who want to start up their own businesses.
The government says the new scheme will create up to 40,000 new businesses by providing financial and mentoring support to unemployed people.
David Ingall, partner at JWPCreers and a member of UK200Group, said: “I have to say this seems like a New Year fantasy, coming at the same time that HMRC has announced it is to target 50,000 businesses a year over the next three years to see whether their accounting records are adequate or accurate.
“The estimate from HMRC is that they are going to raise millions in penalties from those businesses, so on the one hand the government is offering to help businesses and on the other they are looking to punish them.”
Ingall concluded: “I can see the only beneficiaries will be those offering to write business plans for the applicants, who probably will not understand what is being put forward in their name. I am sad that such a hare-brained scheme is being proposed by the government.”
The NEA will be launched in Merseyside later this month and rolled out across the country in the Autumn with around £50m available.
Daniel Shear, corporate finance partner at Berg Kaprow Lewis, added: “Whilst any government initiative to encourage entrepreneurism and help launch new businesses must surely be welcome, I am concerned that the New Enterprise Allowance may be more a headline-grabbing proposal that may not actually make an awful lot of difference.
“Firstly, I don’t fully understand the logic of restricting the allowance to the unemployed – certainly the unemployed need all the help they can get to return to work, but there are plenty of other viable business ideas out there from employed people that don’t manage to get off the ground due to a lack of funds and other resources. Further, the scheme is relatively small, seeking to support 40,000 enterprises over two years.
“The scheme provides allowances of £1,275 over six months and a £1,000 loan to cover start-up costs. Whilst welcome, the quantum of the allowance/loan is small compared to the cost of launching most new enterprises, meaning the proposals may make little discernable difference to potential entrepreneurs.”
