New Enterprise Allowance

Introduced in April 2011, The New Enterprise Allowance (NEA) structure is intended to provide support to unemployed individuals in the UK who aspire to begin their own venture or business. NEA is accessible to UK citizens who are entitled for Employment and Support Allowance (ESA), Jobseeker’s Allowance (JSA), and all those who get income support in case they are sick, a single parent, or disabled. NEA may also be applicable for few Universal Credit claimants. Individuals who are interested and also meet the criteria are referred.

Interested and eligible individuals are referred to a contracted provider establishment by Jobcentre Plus. The contracted provider organisation then matches the respective individual to a volunteer business mentor. Post the mapping, the mentor provides support and guidance to the individual by helping him/her draw up a business plan – once the business plan is drafted it is then evaluated by the provider organisation. If the plan is appropriate and receives approval from the provider organisation, an individual can seek financial support –this is only possible once an individual discontinues to claim benefits. The financial aid might encompass:

• Allowance worth £1,274 over 26 weeks – this is paid as a weekly allowance of £65.0 per week for a period of 13 weeks and then £33 for the subsequent 13 weeks (£65x13 + £33x13 = £845 + £429 = £1,274)
• In case an applicant needs assistance with start-up costs, they might be eligible for a loan of up to £2,500 – this is only applicable for applicants who entered the scheme from October 2013.

How New Enterprise Allowance Scheme Works?

NEA provides assistance to unemployed people who desire to establish their own business. Participants receive support from a volunteer business mentor and can access financial support once they start their business. Jobcentre Plus identifies those who are eligible and interested in setting up a business. They are then referred to a provider organisation in the local area which evaluates the individual’s business proposition. If the assessment is as per the defined criteria, the individual will be put in touch with a business mentor selected by the provider organisation (which is required to find these volunteer mentors and ensure there are enough of them to work with people on the scheme). The business mentor helps the individual to draw up a business plan.

In Budget-2016, the Government declared that they wished to extend the mentoring provision accessible on NEA scheme to self-employed Universal Credit claimants. Damian Green, the Secretary of State for Work and Pension, announced this in a Parliamentary Question in February 2017, and the new phase of the NEA initiated in April 2017.

New Enterprise Allowance Key Stats

• As of 31st March 2017: 199,100 starts to NEA scheme by 188,140 individuals; 105,500 businesses have been set-up through the NEA scheme by 104,130 individuals; 69% of individuals who began a business are in the age group of 25-49 year (over a third of these participating in NEA are women).
• Around 1 in 3 of these individuals starting NEA, in March 2017, were on a non-JSA benefit.
• Over the period from April 2016 to March 2017), there have been 28,610 starts to NEA – there has been a decrease of 18.8% from the previous 12 month period, and this is due to a falling JSA caseload over this time.

Characteristics of those on New Enterprise Allowance

• Out of the people who opted for NEA, 71,950 are women (38% of all starts) and 40,930 amongst them (40% of all business starts) have progressed to set up a business.
• This can be matched or compared to average JSA caseload figures covering the period between January 2013 and March 2017; 63% for males and 37% for females.
• Men and women are likewise to run a business when starting NEA (i.e. ~54% of men vs. around 57% of women). The largest number of those on NEA is in the 25-49 year old age range, with 130,250 individuals starting NEA in this age group.

Almost 72,000 of those starting on NEA are women

Percentage, by gender

Role of the Provider

• Jobcentre Plus will inform those eligible about the NEA Mentoring Scheme
• The JCP Adviser will make a referral which will create a referral in the Provider referrals and payment (PRaP) System. The provider then can accept or reject the referral
• Providers conduct an initial assessment within 10 days of referral date in order to assess if participant has a viable business plan with a reasonable chance of success. Providers notify Job Centre Plus via the PRaP system within 2 days of the outcome
• Providers assign a business mentor which assists the participant to develop a business plan. For the participant with actively seeking work in their conditionality, this is replaced with participants must make full commitment to the NEA mentoring scheme

Summary

• New Enterprise Allowance (NEA) is accessible across Great Britain and was primarily rolled-out in phases spread across 17 target districts from the period of April 2011 and July 2011. The remaining 20 districts were covered by the end of August 2011
• The scheme was rolled out for individuals in the UK who were 18 years and above, and were claiming Jobseeker’s Allowance (JSA) for 26 weeks or more – Starting October 2012, individuals claiming JSA could apply for NEA from day one of their claim
• At the start of NEA, participants are granted access to a business mentor who is responsible for providing them with supervision and guidance as they draft their business plan
• Once an applicant has a Business Plan that is viable and is valid from a business’ sustainability prospective, the applicant or claimant can access financial aid together with the business mentor continuing to offer guidance and support over the initial six months of business activities or trading. This phase is stated as a business start
• The financial aid comprises of a grant worth £1,274 spread over 26 weeks – £65 per week for the initial 13 weeks and post that £33 per week for another 13 weeks. If required, applicants or participants can also access a start-up loan up-to £2,500
• Starting January 2015, NEA is supported by contracted providers and appropriateness criteria extends to: Universal Credit (UC), Employment and Support Allowance (ESA), Income Support (IS) and Incapacity Benefit (IB) groups
• Starting April 2017, the scheme is accessible to a wider audience and new contracts for delivery are in place

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.