Unlocking Work, Ownership and Enterprise for a New British Economy
The original Enterprise Allowance Scheme was one of the most interesting economic interventions of the 1980s. It gave unemployed people a basic income to start a business. Participants received £40 per week for up to a year, and in return they moved off unemployment benefits and into enterprise. It was simple, practical and culturally powerful.
Its direct purpose was to reduce unemployment. But its longer-term impact was wider. It helped create the conditions for a generation of founders, artists, publishers, designers, musicians and entrepreneurs to take risks. Some built businesses. Some built cultural movements. Some failed. But the scheme gave people permission to try.
Britain now faces a different but equally serious economic moment. We are not only dealing with unemployment. We are dealing with economic inactivity, weak productivity, regional inequality, low business survival, youth disengagement and a growing sense that ownership is becoming concentrated rather than shared.
A 21st Century Enterprise Allowance Scheme should be designed for this new context. It should not simply be a welfare-to-work scheme. It should be a national programme to help people build, own and scale the next generation of British enterprise.
The Problem
The UK has a participation problem.
In early 2026, around 9.1 million people aged 16–64 were economically inactive, representing about 20.9% of the working-age population. This means millions of people are outside the labour market, not working and not actively seeking work.
Youth disconnection is also rising. Around 12.8% of 18–24-year-olds were not in education, employment or training by the end of 2025. Recent analysis warns that the number of young people classified as NEET could rise towards 1.25 million by the early 2030s without serious intervention.
This is not only a social problem. It is an economic problem. Every person locked out of work, enterprise or training represents lost income, lost tax revenue, lost confidence and lost future productivity.
The UK also has a productivity problem. Since the financial crisis, productivity growth has been historically weak. In Q1 2026, UK labour productivity was estimated to be only 0.4% higher than a year earlier. Over the longer term, the post-2008 productivity slowdown remains one of the central explanations for Britain’s weak wage growth, fragile public finances and poor living standards.
We also have a business dynamism problem. Business creation is recovering, but survival remains weak. Only 38.4% of UK businesses born in 2019 survived for five years. That means most new businesses still fail before they can become stable employers, exporters or wealth-generating institutions.
And we have an ownership problem. The modern economy increasingly rewards those who own assets: businesses, intellectual property, data, platforms, brands, property and equity. If more people are only able to sell their labour, while fewer people own the engines of future value, inequality will deepen.
Britain therefore needs a policy that is about more than jobs. It needs a policy about participation, ownership and enterprise.
The International Comparison
Other countries have understood that enterprise policy can be part of labour-market policy.
- Finland offers a start-up grant for new entrepreneurs, usually for six months and extendable up to twelve months. Its purpose is to secure personal income while someone starts a full-time business.
- France allows unemployed people creating or taking over a business to access part of their unemployment entitlement as start-up capital, with support such as ARCE and contribution relief through ACRE.
- Germany has used start-up subsidies for unemployed people through programmes such as the Gründungszuschuss, combining income support with enterprise formation.
- Canada has operated self-employment benefit programmes, helping unemployed people move into entrepreneurship through financial support, training and coaching.
These examples are not perfect. Some evidence shows that subsidised founders may create smaller or less innovative businesses than founders who start from stronger financial positions. But that is precisely the point: people starting from unemployment or inactivity often need more than money. They need networks, skills, confidence, patient support and access to markets.
The lesson for Britain is clear. A modern scheme should combine income security with business support, mentoring, technology access, local networks and a pathway to finance.
The Proposal
The UK should create a 21st Century Enterprise Allowance Scheme.
The scheme should provide 12–18 months of support for people who want to start or grow a business, social enterprise, creative practice, cooperative, community venture or self-employment pathway.
It should focus especially on:
- young people not in education, employment or training;
- economically inactive adults who want to re-enter productive life;
- people in places with weak labour markets;
- founders from lower-income backgrounds;
- carers and parents returning to work;
- disabled people who want flexible enterprise pathways;
- creative workers and freelancers;
- people with ideas linked to local economic renewal.
The core offer should include five elements.
1. A Basic Enterprise Allowance
Participants should receive a monthly allowance for 12–18 months. This should be enough to create stability, but not so high that it removes the incentive to trade, earn and grow. A sensible model could be between £800 and £1,200 per month, depending on age, circumstances and local cost of living.
At £1,000 per month, the direct allowance cost would be £12,000 per participant per year. A pilot supporting 50,000 people would therefore cost around £600 million per year in direct allowance payments. Adding coaching, administration, training, digital tools and evaluation might bring the full programme cost to around £750 million to £1 billion per year. A larger national scheme supporting 100,000 people annually might cost around £1.5 billion to £2 billion per year.
This is significant, but not excessive when compared with the scale of welfare spending, lost tax revenue, economic inactivity and low productivity. The original Enterprise Allowance Scheme was also partly offset by reduced benefit payments. A modern version should be designed in the same way: where participants are already receiving certain out-of-work benefits, part of the cost would substitute for existing spending rather than sit entirely on top of it.
2. A Business Builder Programme
Money alone is not enough. Each participant should enter a structured business builder programme, including: business planning; financial literacy; sales and marketing; digital skills; AI tools; legal basics; tax and accounting; customer discovery; pitching; procurement readiness; and resilience and wellbeing.
The scheme should not treat all enterprise as venture capital-style technology startups. Britain needs high-growth firms, but it also needs sole traders, community businesses, local service firms, creative enterprises, social enterprises and cooperatives. A successful local bakery, childcare provider, AI consultancy, care platform, design studio, repair business, music label, local energy cooperative or health-tech startup can all contribute to national renewal.
3. Mentors, Networks and Markets
The strongest entrepreneurs rarely succeed alone. They benefit from advice, contacts, credibility and early customers. A modern scheme should therefore connect participants with: experienced entrepreneurs; local employers; universities and colleges; chambers of commerce; investors; accountants and lawyers; public-sector buyers; social investors; and technology partners.
Government should also use procurement as a market-making tool. Participants who reach certain quality thresholds should be helped to access local public procurement, anchor institutions, housing associations, NHS supply chains, councils, universities and corporate supply chains. This turns the scheme from a grant programme into a demand-creation programme.
4. Place-Based Enterprise Missions
The scheme should not be run as a generic national programme from Whitehall. It should be delivered through local enterprise missions.
Each place should identify the sectors where it has real assets and future opportunity. For example: green energy and retrofit; health and care innovation; creative industries; AI and digital services; advanced manufacturing; food systems; tourism and culture; community infrastructure; logistics; and local high street renewal.
The UK has some of the widest regional productivity gaps in the OECD. London and the South East continue to outperform much of the country. A modern enterprise scheme should therefore be a tool for regional economic development, not simply individual self-employment. The aim should be to create local clusters of enterprise, ownership and capability.
5. A Route to Ownership and Scale
The scheme should help more people start businesses, but it should also help more people retain ownership. Too often, the UK creates ideas that are commercialised, scaled or owned elsewhere. A modern enterprise strategy should help British founders build companies that can sell globally while keeping meaningful ownership, intellectual property and wealth creation in the UK.
This means connecting the scheme to: the British Business Bank; community development finance institutions; angel investors; social investment; regional growth funds; university commercialisation; Innovate UK; pension fund investment; and mission-driven public procurement.
The goal should not simply be “start a business”. The goal should be to build a broader ownership economy.
Costs and Benefits
A 21st Century Enterprise Allowance Scheme should be judged over 10–15 years, not only through one-year Treasury scoring. The potential benefits include:
- Reduced economic inactivity. If the programme helped even a modest proportion of participants move into work, self-employment or business ownership, it would reduce benefit dependency and increase tax receipts.
- Higher business formation and survival. The UK does not only need more startups. It needs better-supported startups. If structured support improved survival rates, the long-term returns could be substantial.
- Increased tax revenue. Successful participants would generate income tax, national insurance, corporation tax, VAT and business rates. Even small firms can generate meaningful fiscal returns over time.
- Job creation. Most participants may begin as sole traders or microbusinesses. But a minority will employ others. Over time, this could generate a second-order employment effect.
- Reduced youth disconnection. Youth Futures Foundation has estimated that if the UK achieved the lowest NEET rate in the OECD, the long-term economic benefit could be around £86 billion. A new Enterprise Allowance Scheme would not deliver that alone, but it could be a major part of a broader national youth participation strategy.
- Improved regional growth. If the scheme is targeted at places with weak labour markets and low productivity, it could help build local economic capacity and reduce pressure on centralised redistribution.
- Cultural renewal. The original scheme helped shape British cultural life as well as business life. A modern version could support new creative industries, local media, digital creators, music, design, fashion, gaming, film, food and community enterprise. This cultural benefit is hard to measure, but it matters.
A Conservative Fiscal Case
A pilot could start with 50,000 participants. Assume:
- £12,000 annual allowance per participant;
- £3,000–£5,000 per participant for coaching, training, tools and administration;
- total cost of around £750 million to £850 million per year.
If 50% of participants move into sustainable self-employment, employment or business ownership, that would mean 25,000 people moving into productive activity. If each successful participant generates only £10,000 per year in combined tax contribution and reduced benefit spending, that produces £250 million per year in fiscal benefit from that cohort. If some participants create businesses that employ others, generate VAT, grow profits or raise investment, the returns rise further.
The fiscal break-even point may take several years. But the broader economic and social case is stronger than the narrow annual accounting suggests. The UK already spends vast sums managing failure: unemployment, inactivity, ill health, low skills, poor productivity and regional underperformance. A modern enterprise scheme would shift part of that spending towards prevention, agency and wealth creation.
Design Principles
To succeed, the scheme must avoid the mistakes of past programmes. It should be:
- Selective, but not elitist. Applicants should have to show commitment, a basic idea and willingness to participate in support. But the scheme should not only back polished middle-class founders who already know how to speak the language of entrepreneurship.
- Practical, not bureaucratic. The application process must be simple. The support must be useful. The scheme should help people trade, test and learn quickly.
- Locally rooted, nationally backed. Central government should fund and set standards. Local partnerships should shape delivery.
- Open to different forms of enterprise. The scheme should support commercial businesses, social enterprises, creative ventures, cooperatives and community businesses.
- Measured properly. Success should be measured through business survival; participant earnings; employment outcomes; tax receipts; reduced benefit dependency; jobs created; regional distribution; founder diversity; wellbeing and confidence; and ownership retained in the UK.
- Connected to technology. AI should be embedded throughout the scheme. Participants should learn how to use AI to reduce costs, build products, reach customers, manage accounts, produce content and improve productivity.
Why Now
Britain is at risk of becoming a country where too many people are outside the economy, too few people own productive assets, and too many good ideas fail to scale. The answer cannot simply be more welfare conditionality or more rhetoric about growth. We need institutions that help people build.
The 21st Century Enterprise Allowance Scheme would be a practical expression of a bigger national idea: that economic renewal requires participation, ownership and confidence. It would say to people across the country:
If you have an idea, we will help you test it.
If you want to build, we will back you.
If you are outside the labour market but want to contribute, we will create a route back in.
If you want to create value in your community, we will give you the tools, support and confidence to start.
Conclusion
The original Enterprise Allowance Scheme was a product of its time. A modern version should be a product of ours. It should respond to economic inactivity, youth disconnection, low productivity, regional inequality and the changing nature of work. But it should also be about something bigger: restoring belief that people can build, own and shape the future.
Britain does not only need more jobs. It needs more owners, builders, creators and founders. A 21st Century Enterprise Allowance Scheme could become one of the defining economic and social policies of the next decade.
Stephen Bediako OBE