Budding female entrepreneurs are unable to go it alone because they feel “trapped” by a benefits system that requires a radical overhaul, a new report has claimed.

In its submission to a government review into self-employment among women, Prowess, a female business networking body, said that many women felt the benefits system was a major disincentive to starting up a company.

Prowess said that many women who want to work have the care of children or relatives to consider, involving variable hours and uncertain income.

The organisation claimed that the “rigidities” of the benefits system meant that women were discouraged from starting up a business, for fear of losing income.

Prowess said that allowable earnings on benefits was too low to consider going it alone, while the limit on working hours, the difficulty in finding childcare and the perception that self-employment is just for men were major barriers to budding female entrepreneurs.

Key recommendations in the Prowess submission include:

  • An increase in the earnings disregard in line with inflation – maximum level of earnings on benefit has not increased for 25 years for individuals and only marginally for lone parents.
  • ‘Join up’ and simplify the benefits system to enable the transition from unemployment to self-employment.
  • Overhaul the New Deal 25 self-employment option to enable more women to access it and to offer a realistic test-trading period.

Although the number of female entrepreneurs has risen in recent years, the UK still lags behind the USA in terms of women startups, with studies showing that significant barriers still exist for women wanting to go it alone.

Erika Watson, executive director of Prowess, said that the government urgently needs to review the benefits system if it wants to achieve its stated goal of getting women into business.

“I hope that this review takes a long hard look at how the benefits system and government programmes really help women into business.

“Too many women are missing the chance to fulfil their potential and that is a cost to them, their families and communities and to the economy as a whole.

“Our research makes several recommendations which we will contribute as part of this consultation process,” she said.