Among its many impacts, the coronavirus outbreak demonstrated the importance of small businesses to British society – supporting local communities, keeping supply chains moving, helping the most vulnerable in society and meeting unprecedented challenges with ingenuity. In the subsequent recession, they will also prove their worth, bolstering the depleted economy.
According to a new FSB report, authored by the Centre for Research in Ethnic Minority Entrepreneurship (CREME) and Enterprise Research Centre (ERC), one segment of the SME community can make a significant mark in the post-Covid-19 landscape. Unlocking Opportunity: The Value of Ethnic Minority Firms to UK Economic Activity and Enterprise reveals that ethnic minority-run businesses (EMBs), of which there are around 250,000 in the UK, contribute £25 billion to the UK’s economy.
They are more likely to export than non-EMBs, and also more likely to innovate, with 30 per cent undertaking recent product or service innovation, compared to 19 per cent of non-EMBs.
With the UK now in a recession, businesses that are agile, flexible and alive to the needs of their customers, and embedded in their communities, are likely to have the best survival rate. EMBs are well positioned.
“The ethnic minority business population is more likely to engage in innovative activities, have a propensity to trade and a growth orientation,” says Professor Monder Ram of CREME.
“If we’re talking about post-Covid recovery strategies, those are the things we need to accentuate, the qualities we’ll be looking for in entrepreneurs.”
Those qualities will also be important to UK plc post-Brexit. “While we’re transitioning and leaving the EU, innovation is something the Government wants businesses doing,” says an FSB spokesperson. “Ethnic minority-led businesses are good at trade, which the Government should definitely be aware of in light of negotiating trade agreements.”
Added to this, the EMB community is extremely diverse, ranging from established, more traditional businesses – often family-run, and well represented in hospitality, clothing and private transport – to start-ups established by younger British-born entrepreneurs or recent immigrants, in sectors such as advanced manufacturing, electronics and pharmaceuticals. Often centred in urban areas, their combined economic and societal impact is substantial.
Unlocking Opportunity shows, during the last two decades, greater entrepreneurial activity among all main ethnic minority groups in the UK than
for the population as a whole. In other words, a disproportionate number of people from ethnic minority backgrounds have set up or run a new business.
This ambition needs to be fostered in the post-Covid economy, but it is also apparent that EMBs have been hit hardest by the effects of the pandemic, and could struggle to recover. EMBs are overrepresented in sectors that suffered during lockdown, including retail, taxi firms and restaurants.
EMBs face other challenges too, and while every ethnic minority
business owner’s experience is different, the report shows consistent issues emerging. Access to business support can be difficult for many
SMEs, but seems more elusive for EMB owners.
“When the Government is devising policies to help different groups of individuals, they look at the data and see how those individuals are performing within the labour market,” says the FSB spokesperson. “But the data on ethnic minority business owners is sparse and poorly collated.”
Consequently, targeted support is lacking. “The data shows ethnic minorities tend to lack good access to business support, which is incredibly important when you’re starting off on your own.”
“When I started my business, I didn’t know what I didn’t know,” recalls Taruna Chauhan, a business coach who mentors for the health and social care sector. “I had to find my way around everything. It was a learning curve, and that’s why I’m now a business coach, to help businesses avoid the mistakes I made.”
The report shows that, for some ethnic minority business owners, their network is limited in comparison to non-ethnic businesses.
“Although they do use networks, EMBs tend to use more informal ones,” points out Professor Ram. “That raises questions about the extent to which institutions providing business support are reaching out to this significant part of the SME population.”
That’s something Ms Chauhan can relate to. “When I first started in 2012 and went networking, more often than not I’d be the only Asian person there, and I thought, surely I can’t be the only Asian person running a business?” she recalls.
“I know I’m not. Where are all these other Asian businesses?”
Pauline Chambers, founder of recruitment consultancy Supply Care Solutions, couldn’t find a network that reflected her background. “Running a business can be very lonely, and although there are many sector groups in the recruitment industry, these are very under-represented by EMB owners, specifically black business owners,” she says.
“Other ethnic minority businesses such as Asian, Turkish or Greek firms often have networks of friends and family who have run businesses. In the black community, these opportunities are often less available.”
Access to finance can also be a hurdle.
“If an individual doesn’t have much experience of banking applications,
or knowledge about financial products, they may struggle to get external finance,” says the FSB spokesperson.
Or it could be lack of understanding on the part of the lenders. Khaleelah Jones runs self-funded digital marketing agency Careful Feet, but when she sought finance to expand, she struggled. “My biggest challenge has been raising funds to grow the technology side of our business: we
are a profitable company but it has been very difficult finding funding,” she says.
“People recommend turning to friends and family, but I have no
rich aunties wanting to leave me several hundred thousand pounds! This is an issue many founders face, but is definitely more prevalent in minority communities.”
Three-quarters of EMBs have no employees, and are classed as self-employed or micro businesses, which can also prove a barrier to accessing support. Ms Chauhan found herself excluded from an SME initiative because she has no staff. “People think in order to grow you have to have employees.
I’m growing, but by outsourcing to people who have the right skills.”
The Enterprise Research Centre has found that many ethnic minority businesses have less resilience than the business population as a whole, suggesting they require structured support to achieve longevity.
“The first step is government and big stakeholders having an awareness of what’s happening among EMBs,” says the FSB spokesperson. This should help inform the Government’s small business strategy. Ms Jones also believes that a government-backed fund for ethnic minorities would help more EMBs get off the ground.
The onus isn’t all on the Government, however. “Banks and local authorities could do a lot more to help,” the FSB spokesperson says. “Many people, when they’re starting a business, aren’t looking to central government for direct support. They’re looking at what’s available within their local communities. It’s essential local base support is made available.”
Ms Jones agrees that targeted support is essential. “We need more networking events, accelerators and workspaces specifically catered to address the issues our community faces, and to show success stories and share experiences.”
Hadiza Adeyemi, who runs Blueberry Partners, which helps SMEs with strategy and innovation, wants to see opportunities for young entrepreneurs to experience EMB success stories. “Make available programmes designed for people of ethnic minority backgrounds where mentors take ambitious mentees under their wing, tutoring them, showing them the ropes and encouraging shadowing,” she suggests.
“Companies should also create high-quality apprenticeship programmes in conjunction with SME courses in universities, ensuring good representation of students from ethnic minority backgrounds.”
This kind of support from universities and corporations is growing. “A lot of the mainstream institutions are interested in the diversity element, banks are engaging with more minority businesses, and entrepreneurial universities are entering this space,” says Professor Ram. “But it’s also really important to ensure that EMBs are made aware that mainstream institutions are open for business for them.”
Initiatives to support EMBs
FSB is calling on the Government to target its business policies towards ethnic minority entrepreneurs:
1 Ensure the points-based immigration system works for the self-employed and small businesses
2 Recognise and promote the social impact of small businesses on their communities
3 Embed diversity and social value in the public procurement framework
4 Help the self-employed access new skills and training
5 Improve access to business support on a national and community level
6 Reach out to business owners in the UK’s diverse communities
7 Include EMBs in government campaigns to boost exporting
8 Introduce export vouchers to help SMEs utilise free trade agreements
9 Widen the definition of R&D to include small business development
More to be done
Jav Mohammed founded business improvement consultancy Arhine Solutions in 2013. His success is down to his passion for helping professionals develop their skills.
“People should be given the opportunity to unlock their potential, and organisations across the globe have not tapped into the hidden talent within their workforce,” he says.
Mr Mohammed is the sole employee of the business, which he financed with savings, and uses an associate model to handle bigger contracts. Despite his success, he feels he lacked appropriate assistance initially.
“The biggest challenge was accessing business and financial support which met my needs,” he says. “I was offered support through the Growth Hub, but did not find it as valuable as joining networking groups, where the people were so helpful and supportive. My networking groups, partnership working and FSB have helped me to keep growing the business.”
Looking forward, he plans to diversify his portfolio of services and expand into new territories. “I would like to tender for government and local authority contracts, but this has proved challenging, as I am only a small company,” he says.
Mr Mohammed doesn’t feel his background raised barriers, but believes more can be done to assist EMBs.
“The support needs to take into account the culture of the business owner and community they serve,” he says. “One size does not fit all. Sometimes business owners work the way they would in their homeland, which may not fit UK trading regulations. Don’t penalise them: support and educate them. Build trust and allow their voice to be heard.”