British Business Bank uncovers disadvantages for business owners from minority ethnic groups
Black business owners and those from Asian and other ethnic minority backgrounds face systemic disadvantages in the corporate world, the British Business Bank has revealed.
The ‘Alone together: Entrepreneurship and Diversity in the UK’ report, published by the British Business Bank and Oliver Wyman, showed how business outcomes are affected by ethnicity, gender and location. The research will feed into the government’s commission on race and ethnic disparities.
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).
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More than a quarter, 28 per cent, of black business owners fail to make a profit, compared with 16 per cent for white business owners.
Furthermore, entrepreneurs from Asian and other ethnic minority backgrounds have a significantly lower success rate than white business owners, making up around 3.5 per cent of business owners but more than eight per cent of those who wanted to start a business but did not succeed.
These differences persist despite black, and Asian and other ethnic minority entrepreneurs investing more time and money when developing their business ideas and typically having a higher level of educational attainment compared to those from a white British background.
The report said differences in business outcomes can therefore only be explained by interconnected and systemic factors such as differences in access to finance, social capital, deprivation and household income.
It also said that under-representation of certain ethnic groups among managers, directors and officials in the workplace, plays a part and reduces the opportunity to develop business-relevant skills, knowledge and networks.
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“As the UK’s economic development bank, we aim to improve access to finance for entrepreneurs so that more people may achieve their business goals and contribute to the country’s economic prosperity in doing so,” said Catherine Lewis La Torre, chief executive of the British Business Bank.
“This research provides us with a clear evidence base to help us understand the scale of the barriers faced by black, Asian and other ethnic minority entrepreneurs, as well as other under-represented groups when starting and scaling their businesses.
“This research will help inform the commission on race and ethnic disparities, which we hope will galvanise action across both the public and private sectors to address inequalities which lead to different business outcomes.”
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In addition, the research found that female entrepreneurs from ethnic minority backgrounds experience the biggest disparities.
More than a third (37 per cent) of black female business owners and 36 per cent of female business owners from Asian and other ethnic minority backgrounds reported making no profit last year, compared to 15 per cent of white female business owners.
The report said that societal inequalities and established gender roles, such as having primary caring duties for children and elderly relatives, are believed to contribute to these differences in outcomes.
London was found to be the toughest place in the UK to be an entrepreneur, with just 71 per cent of London business owners reporting a profit last year.
The research said that these differences could be down to the capital having a higher density of start-ups, tougher market competition, higher costs of living and operating and a greater disparity between poorer and wealthier neighbourhoods.