Direct Selling Industry

Tuesday 13th January 2015 Westminster Hall

16:43

[Chris Heaton-Harris (Daventry) (Con)]

It is a pleasure to serve under your chairmanship, Mr Crausby. As you know, my constituency takes the name of Daventry, but it also has a couple of nicknames. Some call it logistics central because of the number of jobs in the logistics sector there; others call it direct selling central, which is extremely relevant to the debate.

My constituency is a hub for the direct selling industry. On my southern doorstep is Avon. Its former boss, Paul Southworth OBE, is one of the most active people in Northamptonshire business politics I have ever met, and until recently he was chairman of the Northamptonshire enterprise partnership. Andy Smith, a constituent of mine, also happens to be the general manager of Amway UK and Ireland, and there a number of big direct selling businesses just down the road in Corby. For example, Cambridge Weight Plan has more than 100 jobs and exports to more than 25 other countries, and Herbalife UK is based in Middlesex, along with dozens of other companies.

I therefore try to keep a watchful eye on what is happening in the direct selling industry. I wanted to take this opportunity to remind the Minister how important the direct selling industry is to the British economy. The industry has an association—the appropriately named Direct Selling Association—and its member companies contribute about £1.6 billion a year to UK GDP. Some 400,000 people work in the industry, making it one of the largest providers of part-time working opportunities nationwide.

The industry is open to everyone. There are absolutely no barriers to entry, which is why so many mums coming back into the jobs market choose to do so by setting up their own direct selling businesses. In fact, stay-at-home mums account for 29% of direct sellers—many are attracted by the flexibility and social aspects of direct selling—and for a 20% increase in numbers between 2012-2013 and now.

If hon. Members will forgive me for being slightly political for one moment, the Opposition regularly talk down part-time job opportunities as not being proper jobs. I see things very differently. I view every part-time job provided as a massive positive. For many, the flexibility of part-time work allows them the opportunity to earn some extra money when it suits them. For some, it facilitates re-entry into the jobs market. As I said before, there are no barriers to entry in direct selling. It does not matter what age or gender people are or what culture they are from; pretty much everyone can succeed in the industry if they put their mind to it.

One need only look at the recent survey by the Direct Selling Association of its 60 member companies, which discovered that 38% of direct sellers are over 50 years old, yet the number of those under 25 entering the market has increased by 29%. It highlights the breadth of people to whom direct selling reaches out and whom it enables to work. The industry has gone from strength to strength: revenue in the sector last year increased by 7%.

That makes the direct selling industry invaluable to UK plc. Think about it: when the Opposition had some issues with how they ran the economy, jobs in some parts of the country were few and far between. Which industry was still recruiting new blood in those areas? The direct selling industry was. Female unemployment rose more than male joblessness after the recession. Given that 79% of direct sellers are women, the continued growth of the industry has been invaluable in aiding women back on to the employment ladder, thus helping our economic recovery. I am sure that the Chancellor would not forgive me if I did not add that such entrepreneurship is key to our long-term economic plan.

In my constituency, the unemployment claimant rate has fallen to just 1.1%, with just 600 people claiming. Youth unemployment has fallen more than 40% since 2010, and long-term unemployment has fallen by nearly half as well. That is all excellent local news for Daventry, but I am aware that not every part of the country is as fortunate as my constituency. However, I do know the direct selling industry is giving those who are harder to place in employment the chance to start their own business, no matter where they are based. Direct selling is like the Heineken of industries, operating in every part of the country no matter what the economic circumstances or social demographic. It is a phenomenal industry that, in my opinion, does not get the credit it deserves from Government or in our national press, which is why I thought this debate was needed.

In the time remaining, I will say a bit about the benefits of self-employment, and specifically about the opportunities in direct selling, including opportunities for female entrepreneurship. With the help and sponsorship of Amway, one of the biggest direct sellers, I have hosted a lunch and an afternoon tea in Parliament on the subject with some of the great and good of politics from the House of Lords, the House of Commons and local government, and business representatives and some amazing female entrepreneurs and their advocates.

Amway is the world’s No. 1 direct selling company, established in 1959, and Amway business owners operate in more than 100 markets around the world. There are more than 40,000 Amway business owners in the UK alone, selling products across a wide range of industries including skin care, cosmetics, hair care and so on. One good example of an Amway business owner is Brenda Wills. She and her daughter Sally Brinner have been working as distributors for Amway for more than 30 years. Sally was introduced to the business by her parents, who started their Amway business together in the mid-80s, and they have worked together in the industry ever since.

Sally’s parents were drawn to the prospect of owning a business that offered independence, flexibility and a chance to earn a living on their own terms. Some 30 years later, Brenda is still working from home and enjoying an income aged 81, and Sally and her own 27-year-old daughter Victoria, who has been an Amway business-owner since the age of 18, are now driving the business forward. That means three generations of the same family are part of this entrepreneurial industry, which sells products globally.

The Direct Selling Association has had a close relationship with my local university, the university of Northampton, for a number of years. Indeed, DSA representatives regularly visit the university to give talks to students about the direct selling industry, including on how to start up their own business. The DSA provides advice on how students can combine a direct selling business with their studies. One benefit of such a business is that it provides students with something concrete and interesting to put on their CV for life after university; it shows that they have held a position of responsibility and gained some experience in a number of areas by running their own business. Of course, it also encourages something that is almost impossible to teach—the wish, or urge, to be an entrepreneur and run a business. That is the direct selling industry’s strongest suit. Direct selling is the first and easiest of all steps on the ladder to becoming an entrepreneur.

The DSA’s experience is that many young people want to run their own business but do not know how to go about it. The direct selling industry provides a safe environment for them to take their first steps as an entrepreneur. Some stay in the industry, while others use it as a stepping stone. When I was researching material for this speech, I asked how many younger direct sellers there are in the UK and was told that there are around 75,000 direct sellers under the age of 25, 75% of whom are women. That is an amazing statistic.

As a Conservative who has set up and run businesses of my own, I hope I know how important self-employment is, but just in case the Government do not get it, let me read out part of an interview conducted last summer with the Minister for Employment, my right hon. Friend the Member for Wirral West (Esther McVey). The headline was: “‘Young people should think about starting their own business instead of university,’ says employment minister.” She said that, for many teenagers, being their own boss would be better than embarking on a career with a large firm, and she wanted to encourage people who had the “seed” of an idea to pursue it, instead of feeling pressured to follow friends or family into taking a degree. She said that the choices made by people to become apprentices or self-employed are

“equal and good and worthwhile”

when compared with those made by people who go to university. I wholeheartedly agree.

As I am sure my hon. Friend the Minister knows, the direct selling industry can help to deliver the opportunities for people to do exactly what our right hon. Friend the Minister for Employment was talking about. As I have already said, one of the industry’s biggest players is Amway and it regularly commissions a study on how different countries view entrepreneurship. The findings of the latest study were fascinating. Denmark is considered to be one of the top countries within the EU for having the most positive attitude towards entrepreneurship. Perhaps an explanation for that is that the Danish Government encourage the teaching of enterprise skills at school from the age of 16. Whether or not that is a good idea is a discussion for another day. However, the study also highlighted that fear of failure was one of the main reasons given by women, young people and pretty much everyone in the UK for not setting up their own businesses. The direct selling industry contains many excellent people who help people such as that—we know from the statistics I mentioned earlier that this group especially includes women—over the hurdles that help to perpetuate that fear.

In conclusion, I wanted this debate to ensure that the direct selling industry is not forgotten by the Minister or his Department when they are deciding policies in future. I also wanted to explain that the industry provides fertile training ground for entrepreneurs, from people who want to provide a little extra for their families to those who aim big and want to employ others themselves. It gives people the chance to make their lives better, to build self-confidence and business confidence, and to succeed. Thus, I would like to receive one simple assurance from the Minister today: that he and his Department recognise and understand the importance of that industry, and will continue to work with it in future to ensure that it continues to play such a positive part in our country’s economic development.

16:54

[The Minister for Skills and Equalities (Nick Boles)]

It is a pleasure to serve under your chairmanship, Mr Crausby. I congratulate my hon. Friend the Member for Daventry (Chris Heaton-Harris) on securing this debate on an industry that is not only important to his constituency—although, as he rightly pointed out, it could easily claim to be the centre of direct selling in the UK—but to communities across the whole country.

We in our profession should have a particular affinity with anyone in the direct selling industry, because what are we politicians ourselves other than direct sellers, going—particularly in the next few months—from door to door and trying to persuade people to buy a product from us? We do not do so for profit, but we often have to use many of the same skills and methods as those who succeed in the direct selling industry. We all know that, simple though it sounds, summoning up the persuasive powers and reserves of charm necessary to persuade a sceptical person on the doorstep that they should give us a little time so that they can listen to our message and understand what we are proposing is not the easiest thing in the world.

It is a huge credit to the people engaged in direct selling that they are as successful as they are and that they are able to build sustainable incomes for their families. My hon. Friend told the wonderful story of Brenda, Sally and Victoria, three generations of one family, all of whom—including Brenda, who is now 81 but still active—are direct sellers; I believe it is for Amway, which is obviously the most famous direct selling company in the world.

Those three formidable ladies provide particular lessons for us. The first lesson is that the income is sustainable. Direct selling is not just something that people do perhaps for a year or two at the start of their careers, although it could be that. It can provide a sustainable income and be a business that provides a livelihood for a family—not just for decades, but across generations.

The second lesson is that, as my hon. Friend pointed out, this is an area of business and entrepreneurial activity that is perhaps particularly attractive to young women, especially those trying to combine work and enterprise with bringing up children. That is because it has a key, innate flexibility. A direct selling business is one that they can run from home, devoting whatever hours in whatever days of the week suit them. What matters is their results, not how they achieve them.

That is why it has been so important that the Government have been focused, and remain focused, on making it easier for people to set up and run businesses from their homes. Of course, not all businesses run from homes are direct selling businesses, but a great number of them are. Previously, there were some pettifogging bureaucratic rules that made it harder for people to set up and run businesses from home—rules on tenancy agreements, meaning that people required a specific change to them, with the agreement of their landlord, before they could set up a business to run from home. We have changed the law so that landlords can agree to home business use without in any way affecting or undermining their residential tenancy agreement.

In addition, there were rules relating to business rates and planning conditions that also militated against people setting up businesses to run from home. Consequently, we have made sure that, in the majority of circumstances, home-based businesses will not attract business rates. We have published revised business rates guidance to clarify that point. That is important, because if someone is setting up a home business they probably do not have a great deal of capital to set it up; perhaps one of the attractions of the direct selling industry is that it does not require a huge amount of start-up capital. However, if they face the prospect of being charged business rates instead of council tax, that could be very off-putting. The change that we have made will help to make the prospect of setting up a home-based business more attractive to people.

Finally, we have published a guide for anyone who wants to set up a home-based business, so that they can find in one place all the information they need to ensure that they are acting properly within the law and to understand what support they get from Government as start-up businesses, as well as what opportunities there are for start-up loans and other financial support from the British Business Bank.

We believe, as a Government, that we have a good record of supporting anybody who wants to set up a business—particularly a business from home. I am sure that that record has played a role in the substantial increase in home-based businesses. The number of home businesses has increased to 2.9 million, a 500,000 increase since 2010. That increase is enabling people who previously either did not have any work or had a job that was not satisfying to them and was incompatible with their other responsibilities to take charge of their lives and provide for their families in a way that suits them.

My hon. Friend made an important point in saying that this way of working enables people to have independence and to run their lives in a way that suits them and their families. It can also suit their broader responsibilities, providing them with an opportunity to develop a business and earn an income that is flexible and fits with the pattern of their lives. I am happy to give my hon. Friend an assurance that we will continue to take into account home-based businesses—particularly direct selling businesses—in the formulation of policy.

My hon. Friend mentioned an interesting study of attitudes towards home-based businesses and direct selling businesses in different countries. He singled out Denmark as a place where attitudes were most positive. He conjectured that that might be a result of the fact that Denmark requires every young person to be offered enterprise education from the age of 16.

I hope that my hon. Friend welcomes—I am sure that he does—the work by the noble Lord Young, who has held a central and distinguished position in a series of Conservative Governments going back over many decades and who is passionate about enterprise education. Lord Young recently produced a report for the Prime Minister called “Enterprise for all”. He proposes specifically to establish a network of enterprise advisers—current or former executives with local businesses—attached to schools, whose job it would be to co-ordinate bringing people into schools who could inspire young people with the possibilities of enterprise and of setting up their own businesses.

That policy is welcome and has now been given over to the new careers company that Christine Hodgson is setting up and leading, to which the Government are committing £20 million. We hope that within a couple of years we will have a network of enterprise advisers across the country and that every school will have somebody with real business experience, embedded and implanted in the local business community, who can bring into schools speakers, programmes and work experience offers that will enable young people who think they might be interested in setting up a business to get some experience and talk to people who have done it.

I say to my hon. Friend’s constituents who are senior executives in the direct selling businesses, and to individuals running direct selling businesses and members of the Direct Selling Association, that they could make contact with their old school, go back as alumni and talk to young people about what direct selling and setting up their own business from home has done for their lives. They could say how it has enabled them to fulfil their dreams and establish financial independence for their families. That would be as powerful a message as any.

I thank my hon. Friend for bringing this subject to the attention of the House. It is certainly one that the Department for Business, Innovation and Skills is focused on.

Question put and agreed to.

17:04

Sitting adjourned.