Gender and ethnic disparities affect business outcomes

BAME women business owners face the biggest barriers to success, with systemic disadvantage playing a key role, according to a new report.

The report Alone together: Entrepreneurship and Diversity in the UK, published by the British Business Bank and Oliver Wyman, examines the effects ethnic and economic background, gender and geography have on business outcomes. The research will feed into the Commission on Race and Ethnic Disparities established by the Prime Minister.

It finds that, after starting a business, Black business owners report a median turnover of £25,000 per annum, more than a third less than White business owners (£35,000). Many more Black business owners fail to make a profit (28% compared to 16% for White business owners), and fewer meet their business aspirations. Just 30% of Black entrepreneurs say they met their financial aims and only half (49%) met their non-financial aims. This compares unfavourably to White business owners, where more than half (54%) say they met financial aims and 69% met non-financial aims.

The success rate for starting up a business for Black entrepreneurs is in line with the UK average. However, entrepreneurs from Asian and Other Ethnic Minority backgrounds have a significantly lower success rate, making up around 3.5% of business owners but more than 8% of those who wanted to start a business but did not succeed.

The report finds that these disparities persist despite Black, and Asian and Other Ethnic Minority entrepreneurs investing more time and money when developing their business ideas. Entrepreneurs in these groups also typically have higher level of educational attainment compared to those from a White British background.

The report blames a range of interconnected and systemic factors,  including differences in access to finance, social capital, deprivation and household income, as well as the under-representation of certain ethnic groups among managers, directors and officials in the workplace, which reduces the opportunity to develop business-relevant skills, knowledge and networks.

The situation is worse for women, says the report. More than a third (37%) of Black female business owners and 36% of female business owners from Asian and Other Ethnic Minority backgrounds report making no profit last year, compared to 15% of White female business owners. Female business owners of all ethnicities experience significantly lower median turnover than male entrepreneurs (£15,000 vs £45,000 per annum), and fewer say they met their financial aims.

While caring roles contribute to these outcomes, the report says, even when these are accounted for, BAME female entrepreneurs still experience less success as a result of systemic issues.

The report also investigates the impact of location, finding London to be the toughest place in the UK to be an entrepreneur, with just 71% of London business owners reporting a profit in 2019.

In addition, the report finds that irrespective of ethnicity and gender, household income is crucial to entrepreneurial success. Business owners with an income of £75,000 or more were most likely to report profit last year compared to those on an average annual income of less than £20,000 (87% versus 76% respectively).

Wealthier business owners were nearly twice as likely to see their business grow by at least 20% last year. The median turnover of business owners with an income of £75,000 or more is 12 times that of business owners with an income of less than £20,000. Many more of those with higher household incomes report meeting their financial and non-financial aims.

The British Business Bank runs the Start-Up Loans programme to help entrepreneurs from under-represented backgrounds start up a business. Of those who received a loan, almost 40% were women, more than a third (36.5%) were unemployed when they applied for the loan and 20% came from Black, Asian and Other Ethnic Minority backgrounds. Of those, almost 10% of recipients are Black, almost 5% are Asian and more than 5% are Mixed and Other Ethnicity.

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