Entrepreneurship in the UK is still not a level playing field, a new report shows; business owners from minority backgrounds continue to make less money than white entrepreneurs.
A new report from the British Business Bank and Oliver Wyman shows that black entrepreneurs report lower profit and turnover compared to white entrepreneurs, despite often having more qualifications than white business owners.
The disparity is even more marked for female entrepreneurs, with women from black, Asian and other minority backgrounds experiencing the lowest levels of business success overall.
Last year, black business owners reported an average turnover of £25,000 per year, compared to £35,000 for white business owners. 30% of black entrepreneurs said they met their financial aims last year, compared to 54% of white entrepreneurs.
The number of black business owners failing to make a profit was also higher — 28% compared to 16% for white business owners.
The report suggests several systemic factors behind the figures: access to finance, social capital, household income differences and the underrepresentation of certain groups amongst managers, directors and investors.
“Black people, and those from Asian and other ethnic minority backgrounds are struggling,” says Roianne Nedd from Oliver Wyman. “What should be a level playing field is littered with obstacles, many of which are products of a complex system of racial and gender disadvantage.”
The disparities are most pronounced for female entrepreneurs from minority backgrounds.
More than a third (37%) of black female business owners reported making no profit last year, and 36% of female business owners from Asian and other minority backgrounds reported the same, compared to just 15% for white female entrepreneurs.
Female business owners across all ethnicities reported significantly lower profit than male entrepreneurs last year — £15,000 on average, compared to £45,000.
The report suggests societal inequalities and established gender roles are partly to blame — with women typically taking on more caring duties in the home.
The report also found that, irrespective of race and gender, household income is crucial for 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% and 76% respectively).
Wealthier business owners were also much more likely to see higher profits. The average 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.
“There is hope,” says Nedd. “Our research not only highlights the barriers we must begin to tear down, but also the many factors that can positively shape an entrepreneur’s journey. It’s up to all of us to learn these lessons and act now to affect change.”
Access to finance needs to improve, the report finds — it’s the leading reason why entrepreneurs from minority backgrounds stop working on their business idea. Focused loans for individuals from these backgrounds are needed.
It’s also critical to make sure that VC firms seek out fund managers with diverse networks and with experience investing in a wider group of people.
And existing businesses also have a part to play too, Nedd says.
“Let’s open our networks to entrepreneurs who are different from us. Let’s design financial products that reach people most in need. Let’s take a more thoughtful approach to selecting diverse suppliers. And let’s build support programmes that equip the under represented with the practical tools necessary to transform their businesses from surviving to thriving.”
Freya Pratty covers news at Sifted. She has previously interned at Bloomberg and tweets from @FPratty