Almost two million small business owners say their mental health has suffered due to the pandemic.

Covid lockdowns, restrictions and a worsening late payment culture have all taken their toll on entrepreneurs according to new research by the Federation of Small Businesses (FSB).

It said the current workplace health support offered by the government is not working and it must do more to tackle the problem. 

The  latest survey by the FSB showed a third of the 1,000 respondents felt their mental wellbeing declined over the course of the pandemic. Government figures show that there are 5.5m small businesses across the UK, indicating that 1.8m have suffered a mental wellbeing hit due to Covid.   

Across all respondents, one in four (24 per cent) said they have a mental health condition such as anxiety, depression or post-traumatic stress. Among disabled entrepreneurs, the figure rises to almost half (43 per cent). 

One in seven (16 per cent) small business owners have a mild mental health condition, six per cent  have a moderate condition as defined by NICE and two per cent a severe condition.

The cost to the average small employer of having staff away from work due to physical or mental health conditions surpassed £3,500 last year, translating to a £5billion cost to the community as a whole.

The FSB, which is the UK's largest business support group, has called on the government to do more to coincide with Mental Health Awareness Week.

Tina McKenzie, FSB policy and advocacy chair, said: “Whether it’s the migrant entrepreneur suffering post-traumatic stress, the aspiring start-up creator wrestling with depression as they struggle to find work, or the thousands of business owners who feel isolated and hopeless because of late payment, policymakers should reflect on the challenges faced by entrepreneurs during this week.”

The study showed the government’s Access to Work Scheme, aimed at providing targeted workplace help for both business owners and employees, had only been accessed by one in ten disabled business owners or business owners with a health condition. More than a third had not heard of the scheme and a quarter were not aware that sole traders are eligible to access it.

It also showed 62 per cent of small business owners were subject to late or non-payment after Covid hit. A quarter said that dealing with poor payment impacted their mental wellbeing during the pandemic.

A recent study by Xero’s Small Business Insights estimated small firms are owed £140billion in unpaid invoices. The FSB’s Small Business Index indicates 400,000 small businesses are under threat because of poor payment practice.   

The theme for this year's Mental Health Awareness Week is loneliness and the FSB said more must be done to prevent the isolating late payment culture.

Ms McKenzie said: “Over the years, we’ve seen how a worsening late payment culture – which sees corporates use suppliers as free credit lines – has sucked the joy out of running a small business for millions, leaving many feeling completely alone, and forcing thousands to close.

“The cost of having staff away from the workplace, including finding cover, ran into the billions for small firms last year at a time when cash reserves were stretched and the spectre of trading restrictions was ever present.

“They urgently need more support to go on doing right by their staff. We hope to see the government take forward our joint proposal with the TUC for a targeted statutory sick pay rebate.”

In light of the findings, the FSB has called on the government to:

• Improve Access To Work take-up by ensuring health professionals point patients towards the scheme when writing fit notes.  
• Launch a new, ambitious alternative to the New Enterprise Allowance to help those with mental health conditions who are out of work to create start-ups.   
• Make Audit Committees directly responsibility for supply chain practice, elevating the importance of prompt payment within corporate environmental, social and governance (ESG) programmes, and place ending the UK’s late payment culture at the heart of BEIS’s forthcoming enterprise strategy.     
• Develop “Pathways to Entrepreneurship” strategies aimed at dismantling the unique barriers faced by different entrepreneurs, including those with mental health conditions.  
• Take forward FSB and TUC’s joint proposal for a small business statutory sick pay rebate, to help firms recover the cost of the millions of days lost to sickness absence each year.