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Aim: Many young people at ultra‐high risk (UHR) of developing psychosis exhibit marked and persistent impairments in social and occupational functioning. We aimed to explore UHR patients' subjective experiences of these difficulties and their causes. Methods: We conducted semi‐structured interviews with 20 UHR individuals recruited from Early Detection and Intervention Teams in Northwest England. Topics covered included how participants spent their time, their interpersonal relationships, academic and occupational performance, premorbid functioning and clinical treatment. Thematic analysis was used to examine the prevailing themes. Results: The sample included individuals with varying degrees of functional impairment, ranging from mild to severe difficulties in functioning. Analysis of the qualitative data elicited themes around 2 topics: breadth of functional difficulties and subjective reasons for poor functioning. Participants reported a range of impairments in their social and occupational functioning which they attributed to a combination of clinical, cognitive and psychological factors. These included variables previously identified in the quantitative literature such as psychiatric symptoms, adverse life experiences and cognitive deficits. However, our findings also included other factors which have received comparably little attention such as self‐stigmatizing attitudes and dysfunctional metacognitive beliefs. Conclusions: We propose a model that attempts to explain how these variables interact to drive and sustain functional impairment in the UHR population. This will assist in the development of clinical interventions aimed at promoting functional recovery among UHR individuals. [ABSTRACT FROM AUTHOR]