Ethnic Minority Businesses In England

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  • 1. ETHNIC MINORITY BUSINESSES IN ENGLAND; REPORT ON THE ANNUAL SMALL BUSINESS SURVEY 2003 ETHNIC BOOST Emmy Whitehead, David Purdy and Stella Mascarenhas-Keyes Small Business Service March 2006 URN 06/958 1
  • 2. CONTENTS Page Executive Summary 6 1. Ethnic Minority Business ‘Booster’ Sample 12 1.1 Background 12 1.2 Annual Small Business Survey: Methodology 13 2. Ethnic Minorities in England: Policy and Historical Context 16 2.1 Geographical concentration of Ethnic minorities 16 2.2 Ethnic minority paid employment 16 2.3 EM self-employment / entrepreneurial activity: our previous understanding 16 2.4 Recent policy developments 18 3. Key Characteristics of businesses led by Ethnic Minority groups 20 3.1 Proportion of EM businesses in England 20 3.2 Size of Business 21 3.3 Age of business 22 3.4 Industry 23 3.5 Legal form 24 3.6 Financial turnover 25 3.7 Family business 26 3.8 Physical characteristics of main business location 28 3.9 Region 29 Summary 30 4. New Businesses and those without employees 31 4.1 New businesses 31 4.1.1 Rationales for business start-ups 32 4.1.2 Time taken to start trading 33 4.1.3 Advice about starting up 33 4.1.4 Obstacles to starting up the business 34 4.2 Businesses with no employees 35 4.2.1 Reasons for having no employees 35 Summary 36 5. Business operation 37 5.1 Whether or not business exports outside the UK 37 5.2 Innovation 38 5.3 ICT use 40 5.3.1 Level of ICT use in different sectors 43 5.3.2 Level of ICT use among businesses of different ages 44 5.3.3 Level of ICT use for different sized businesses 46 Summary 47 6. Financing the business 48 6.1 Seeking finance 48 6.2 Difficulty in obtaining finance 49 6.3 Impact of difficulties 51 6.4 Reasons for seeking finance 52 6.5 Type of finance sought 53 Summary 54 2
  • 3. 7. Business Support 55 7.1 Business advice and support 55 7.1.1 Seeking general business advice 55 7.1.2 Reasons for not using advice 56 7.1.3 Seeking advice about business regulations 58 7.2 Contact with / Use of government services 60 7.2.1 Contact with Government 60 7.2.2 Government responsiveness to business concerns 62 7.2.3 Public procurement 63 7.3 Small Businesses and youth 64 Summary 66 8. Experience and Perceptions 67 8.1 Business objectives and growth 67 8.1.1 Recent and anticipated employment growth 67 8.1.2 Intention to grow the business 68 8.1.3 Means of achieving growth 69 8.1.4 Rationales for growth 70 8.1.5 Rationales for not growing 72 8.1.6 Small business perspectives on growth 74 8.2 Barriers and Obstacles to achieving business objectives 75 8.2.1 Overall incidence of obstacles to business 75 8.2.2 Greatest obstacles to business 77 8.2.3 Effect of greatest obstacle on business 79 8.2.4 Regulations as an obstacle to business 81 8.3 Discrimination 83 8.3.1 Incidence of discrimination 84 8.3.2 Source of discrimination 84 8.3.3 Basis of discrimination 85 8.3.4 Impact of discrimination 86 8.4 Crime 87 8.4.1 Whether crime is a problem 87 8.4.2 Type of crime 88 8.4.3 Effect on business 89 8.5 Disability among business managers 90 Summary 91 9. Conclusion 92 Annexes 95 References 99 3
  • 4. List of Tables Page Table 1.1: Breakdown of EM businesses and sole traders. 13 Table 1.2: Breakdown of ASBS sample by Ethnic Group and employment status. 14 Table 1.3: Weighted breakdown of EM businesses by legal status 15 Table 1.4: Weighted breakdown of EM businesses by employment Status. 15 Table 3.1: Size of business by EM status. 21 Table 3.2: Size of business by ethnicity and gender. 21 Table 3.3: Age of business by ethnicity and gender. 22 Table 3.4: Industry by ethnic group. 23 Table 3.5: Legal form of the business by ethnicity. 24 Table 3.6: Financial turnover by ethnicity. 25 Table 3.7: Generation in control of the business, by ethnicity. 27 Table 3.8: Regional breakdown by ethnicity. 27 Table 4.1: Respondent’s status before new business started. 31 Table 4.2: Time taken to set up business and start trading .All businesses trading for less than 4 years. 33 Table 4.3: Main obstacles to starting up (or taking over) new businesses. All businesses trading less than 4 years. 34 Table 5.1: Whether the business sells outside the UK. 37 Table 5.2: Percentage of businesses selling outside the UK, by sector. 38 Table 5.3: Product and process innovation: proportion saying they had introduced in the past year. 38 Table 5.4: Percentage of businesses indicating importance of product / services innovation. 39 Table 5.5: Importance of product / services innovation. 39 Table 5.6: Importance of processes innovation. 41 Table 5.7: Uses of ICT, by ethnic group. 43 Table 5.9: Level of ICT use in different sectors, by ethnic group. 43 Table 5.10: Level of ICT use in certain industries, by ethnic group. 44 Table 5.11: Any ICT use by age of businesses. 45 Table 5.12: Level of ICT use by age of business, by ethnic group. 45 Table 5.13: Any ICT use by size of business, by ethnic group. 46 Table 5.14: Level of ICT use by size of business, by ethnic group. 46 Table 6.1: Whether finance was sought in the past 12 months. 49 Table 6.2: Difficulty in obtaining finance. 50 Table 6.3: Offered help by first source. 51 Table 6.5: Impact of difficulty raising finance. 51 Table 6.6: Reasons for seeking finance. 52 Table 6.7: Type of finance sought. 53 Table 6.8: Type of finance sought, by sector. 53 Table 7.1: Business advice and information used in past 12 months. 55 Table 7.2: Reasons for not using advice, by age of business. 57 Table 7.3: Sources of advice about regulations used in the past year. 59 Table 7.4: Areas of contact with Government. 61 Table 7.5: Awareness of organisations working with young people. 65 Table 8.1: Past and anticipated job growth. 68 Table 8.2: Intention to grow the business over next 2 to 3 years – percentage of employers saying “yes”. 69 Table 8.3: Means of achieving business growth, by ethnic group. 70 Table 8.4: Rationales for achieving business growth, by ethnic group. 71 Table 8.5: Top three reasons for not growing, for each ethnic group. 73 Table 8.6: Business perspectives on growth. 74 4
  • 5. Table 8.7: Obstacles to the success of business. 76 Table 8.8: Greatest 5 obstacles to the success of the business. 78 Table 8.9: Effect of the greatest obstacle on business. 80 Table 8.10: Which regulations are obstacles to business. 82 Table 8.11: Sources of discrimination. 85 Table 8.12: Basis for discrimination, by all respondents experiencing discrimination. 86 Table 8.13: Disability among small business owners. 90 List of Figures Figure 2.1 Breakdown of adult population and self-employed population for ethnic minority groups, males and females, England and Wales, 2001 17 Figure 2.1 Breakdown of adult population and self-employed population for ethnic minority groups, males and females, England and Wales, 2001 18 Figure 3.1: Percentage of Family business by ethnicity. Businesses with employees only 28 Figure 4.1: Rationales for business start-ups p33 Figure 4.2: Sources of advice about starting up the business. Percentage in each category of all businesses trading for less than 4 years 34 Figure 4.3: Reasons for employing no staff at time of survey. Percentage in each category. Businesses without employees. 36 Figure 7.1: Reasons given for not using external information. Percentage in each category. Employers not using external sources of advice 57 Figure 7.2: Percentage of businesses that expressed interest in public sector work. Businesses with employees only. 65 Figure 8.1: Percentage Incidence of discrimination by ethnicity. Employers in deprived wards 86 Figure 8.2: Proportion saying discrimination was an obstacle to the success of their business: Employers in deprived wards who had experienced discrimination 88 Figure 8.3: Percentage saying crime is a very / fairly big problem. Businesses with employees only 89 Figure 8.4: Percentage of types of crime reported by small business employers 90 Figure 8.5: Impact of crime reported by employers who had experienced crime in the past year. Percentage in each category 91 5
  • 6. EXECUTIVE SUMMARY Background The government’s main objective in encouraging more enterprise in disadvantaged communities and under-represented groups is to increase the overall rate of entrepreneurial interest, business start-up and growth. Despite sustained economic growth, marked differences in levels of enterprise between and within UK regions have persisted. There are also substantial variations in levels of entrepreneurial activity between different minority groups. The Annual Small Business Survey (ASBS) 2003/04 included a booster sample of ethnic minority-led businesses. The ASBS (conducted in 2003 and early 2004) included a boost of ethnic minority businesses in deprived wards. This led to a sample of responses from ethnic minority businesses of about 1,600. This made it the first survey of its type to allow for a detailed analysis of different ethnic minority (EM) businesses in England. Prior to this, ethnic minority businesses had often been grouped together as a homogenous group1 , considered to be sharing many of the same issues and concerns. By allowing more robust analysis of ethnic minority sub-groups, the booster survey should enable better targeting of policy and support. The Small Business Survey (originally the Omnibus Survey) was first conducted in 2001. The 2003 Survey was the first to use the Small Business Service (SBS) seven strategic themes as its basis. The primary aim of the ASBS is to gauge the needs of small businesses (those with fewer than 250 employees), and to look at their concerns and the barriers they face. It also provides a basis for measuring some SBS targets. Key findings The characteristics of all small Ethnic Minority businesses2 Ethnic minority (EM) businesses account for almost one in ten (9.8%) small businesses with employees in England (section 3.1). Over two-thirds of small businesses in England have no employees. Ethnic Minority (EM) businesses, however, are more likely than non-EM businesses to employ people (43.2% compared with 29.2%). Among businesses that do employ people, EM businesses are more likely to be micros than non-EM businesses (90.2% compared with 83.0%) (section 3.2). Among businesses with employees, EM businesses tend to have been trading for less time than non-EM businesses. Black businesses with employees tend to own the youngest businesses with two in five (41.2%) trading for three years or less, compared to 14.6 per cent for all businesses with employees or 20.0 per cent for all EM businesses with employees (section 3.3). 1 Where clear EM / non-EM differences exist, this survey allows us to be more confident in these results. 2 The survey asks about 'owners, partners or directors' and we describe businesses with 51+% as women-led and those with 50+% ethnic minority as ethnic minority-led. 6
  • 7. Nine in ten EM businesses with employees are in the services sector. This compares to approximately seven in ten non-EM businesses (section 3.4). Financial turnover tends to be lower for EM businesses with employees, which may reflect the younger age of the business or possibly the sector (section 3.6). Among businesses with employees, perhaps surprisingly, a slightly lower proportion of EM businesses are family-owned (63.1%) than non-EM businesses (67.7%). Chinese businesses are the most likely to be family owned (75%) and Black businesses are the least likely (39.9%) (section 3.7). Among businesses with employees, two in five (40.0%) EM businesses are based in the 15 per cent most deprived wards. This compares with just under a quarter (24%) of non-EM businesses. Pakistani-led businesses are the most likely to be situated in these wards (55.8%) and Chinese-led businesses the least (31.4%) (section 3.8). As people from EM communities are disproportionately represented in inner city areas, providing the right conditions for the sustained growth of ethnic minority businesses may be a driver for economic regeneration within these areas. Less than one in ten (9.0%) of all EM businesses in England are located, or have their main location, in a rural area. This compares to 41.5% of non-EM businesses (section 3.8) Starting up in business For businesses trading for less than 4 years, there is little difference between EM and non-EM businesses in terms of what they were doing prior to start-up, with the majority coming from full-time employment (58.9% and 62.2% respectively) (section 4.1). Given that unemployment is higher among many EM groups, it is worth noting that higher proportions do not make that transition. The most common reason for business start-up is a wish to be independent and to be one’s own boss. However, a lower proportion of EM businesses cite this (22.3%) than non-EM businesses (30.5%). A higher proportion of EM businesses cited difficulties in finding either the right job or any job as a reason for going into business than non- EM businesses (15.9% compared with 9.3%). This implies a slight tendency away from opportunity entrepreneurship towards need (section 4.1.1). In terms of length taken to start trading, EM businesses tend to take longer. Over one in ten (11.4%) take over one year, compared with one in twenty (5.4%) non-EM businesses (section 4.1.2). On starting up or taking over a business, EM businesses are generally less likely to seek advice than non-EM businesses, with almost half (49.5%) seeking none. This compares to approximately a third (34.1%) of non-EM businesses. Where EM businesses do seek advice, informal sources are more commonly used than banks, accountants or solicitors (section 4.1.3). Almost a third (32.4%) of new EM businesses said that they had not faced any real obstacles in starting up, compared with about a quarter (24.8%) of non-EM businesses. For those who do identify barriers, access to finance, recruiting staff and competition are more likely to be mentioned by EM businesses than non-EM businesses (section 4.1.4). 7
  • 8. The main report discusses a number of issues / concerns / business operations which are very similar among all businesses, irrespective of whether they are EM-led or not. It also goes into detail about those aspects for which EM businesses as a whole differ from non-EM businesses. This is particularly the case where, due to smaller sample sizes for some questions, we can be more confident in reporting on all ethnic minorities rather than separating out responses for different EM groups. The focus of the remainder of this summary will be on some of the key differences evident among different EM businesses. Business operation In terms of exporting, among businesses with employees, Black-led businesses are more likely than other EM businesses to sell outside the UK and are almost as likely as non-EM businesses to be exporters (19.4% and 21.9% respectively) (section 5.1). In terms of ICT use, among businesses with employees, Black-led businesses are generally more likely to use ICT than other EM businesses (section 5.3). Financing the business Findings from the survey suggest that among businesses with employees, Black-led businesses are generally more likely to have difficulties with accessing finance, and Indian-led and Chinese-led businesses the least likely to experience these difficulties (section 6.2) Among businesses with employees, 15.5 per cent of EM businesses tried to obtain finance on one occasion and 7.6 per cent more than once. Almost two in five (37.1%) Black-led businesses attempted to obtain finance, compared with only one in ten (10.2%) of Chinese-led businesses. Multiple attempts also varied across groups, with over a fifth (22.1%) of Other Asian-led businesses (not Indian and Pakistani) attempting once, but only a further 3.5 per cent on more than one occasion. Black-led businesses were the most likely to have attempted to obtain finance on more than one occasion (17.6%) (section 6.1). Business support Among businesses with employees, under half (45.9%) of EM businesses compared to 51% of non-EM businesses sought general business advice. Other Asian (including Bangladeshi) businesses were the least likely to have sought advice (27.8%), followed by Chinese-led businesses (39.1%). A far higher proportion of EM female-led businesses with employees (53.9%) sought advice than EM male-led businesses (39.3%) (section 7.1.1). Among businesses with employees, over half (53.6%) of EM businesses compared to 39.2% of non-EM businesses had not sought any advice about regulations over the last 12 months. This was highest among Pakistani-led and Other Asian-led businesses (61% and 60.5% respectively). Almost one in five (19.7%) Chinese-led businesses sought advice from accountants. This is substantially higher than the EM average of 9.4 per cent (section 7.1.3). Among businesses with employees, over the last year 58.6 per cent of EM businesses compared to 63.8% of non-EM businesses had contact with the Government. For over one in ten (13.3%) contact was related to employee matters. This was highest among Other Asian-led businesses at over a fifth (23.3%). EM male-led businesses tended to 8
  • 9. have more contact than EM female-led businesses (60.2% compared with 53.5%) (section 7.2.1). In terms of public procurement, among businesses with employees, a similar proportion of EM and non-EM (18%) businesses had expressed an interest in public sector work. Just over a fifth (22.6%) of Black-led businesses expressed an interest compared with 13.8 per cent of Pakistani-led businesses and only 5.6 per cent of Chinese-led businesses. This is heavily sector related. Of those who had expressed an interest in this work, over 80 per cent had done some business for the public sector in the past 12 months (section 7.2.3). Growth: experience and expectations Among businesses with employees a fifth (20.6%) of EM businesses compared to 18.4% of non-EM businesses had increased their employment in the last year. This was higher among EM female-led businesses (29.1%) than male-led (20.2%) (section8.1.1). Among businesses with employees, Black-led businesses are significantly more likely than other businesses to have increased employment in the last year and also expect to grow again in the next. About a third (32.4%) of Black-led businesses had not grown in the last year compared with 61.2 per cent of all EM businesses, two-thirds (66.9%) of Indian-led businesses and three-quarters (75.6%) of Chinese-led businesses (section 8.1.1). Among businesses with employees, over six in ten (62.4%) EM businesses intended to grow their business in some form over the next two to three years. This was substantially higher among Black-led businesses (92.4%) and lowest among Chinese- led businesses (44.8%). This is likely to reflect a higher level of confidence among Black-led businesses, but also can be related to growth in different sectors (section 8.1.2). The most common means of securing anticipated growth was to increase turnover or sales. Among all employers who intended to grow, property expansion was particularly high for Pakistani-led businesses at 38 per cent (compared with 28.2% for all EM businesses). Approximately a quarter of Pakistani-led businesses (24.6%) and Black-led businesses (27.3%) looked to grow by entering new markets. Taking on more staff was mentioned by a fifth (20.9%) of Black-led businesses compared to about a tenth (11.3%) for all EM businesses (section 8.1.3). Growth: limits and barriers Among EM businesses with employees not looking to grow, approximately a quarter (26.7%) compared to a third (33.2%) of non-ME businesses, said this was because they were content with their present size. This was the reason for 36.8 per cent of Chinese-led businesses that were not looking to grow. Pakistani-led businesses were significantly more likely to say that they had not considered growing (16.9%) than the EM average (5.5%) or non-EM business average (1.4%) (section 8.1.5). Among EM businesses with employees, around one in ten (8.9%) EM businesses cite non-market factors, which may in some way be preventing them from growing. This was particularly marked, at 18.4 per cent, for Chinese-led businesses (section 8.1.6). 9
  • 10. In terms of obstacles to growth, among businesses with employees, Black-led businesses were more likely to have mentioned most obstacles than any other ethnic groups. However, they were the least likely to cite competition (42.4% compared to a EM average of 53.6%). Seven in ten (71.4%) Chinese-led businesses felt that competition was an obstacle (section 8.2.1). It should be noted that Chinese-led businesses are the most sectorally concentrated. The most cited obstacle amongst Black-led businesses was obtaining finance (21.7%) (section 8. 2.2). Among businesses with employees, the main impact of the greatest obstacle was to reduce sales. This was substantially greater among Chinese-led businesses (50.0%) and lower among Black-led businesses (18.4%) compared to the average for EM businesses of 36%. Black-led businesses were, however, more likely to say that they could not get cash for investment (13.1%) compared to all EM businesses (6.5% on average) (section 8.2.3). Approximately a third (34.1%) of EM businesses with employees thought that regulations presented obstacles to their business’ success. Just less than one in ten (9.0%) EM businesses mentioned tax-related regulations. However, this was cited more often among Pakistani-led (17.1%), Black-led (15.4%) and businesses equally led by men and women (16.6%) businesses. The cost of compliance was an obstacle particularly cited by Pakistani-led businesses (44.6% compared to 31.7% of all EM businesses) (section 8.2.4). Business owners in the 15 per cent most deprived wards were asked whether they felt they had suffered any form of discrimination. EM businesses were slightly more likely (14%) than non-EM businesses (11.7%) to say that they had experienced discrimination. Among businesses with employees, Black-led businesses (16.9%) were the most likely to feel they had suffered and Chinese-led and Other Asian-led businesses the least (10.9% and 10.8% respectively). Not all the discrimination reported was on the basis of race although a lot of it was (section 8.3.1). Conclusions Almost one in ten employing businesses in England are majority led by people from ethnic minority groups. Their size and significance is considerable, and growing3 . However, up to now, our knowledge of EM businesses has been relatively limited, with much evidence considering EM businesses as a single, homogeneous group. The Annual Small Business Survey 2003 ethnic boost takes us forward in terms of what we now know about businesses led by people of Indian, Pakistani, Other Asian, Chinese, Black African and Black Caribbean descent. It should not be forgotten that whatever the ethnicity of a business owner there are a number of issues which are consistent across all small and medium enterprises. Key to this report, however, has been the identification of issues where there are differences among ethnic minority-led businesses that appear to relate to ethnicity. 3 Throughout the UK, there are more than a quarter of a million ethnic minority Small and Medium Enterprises which contribute over £15 billion to the UK economy per year. Source: SBS Statistics Team estimates based on SBS's SME Statistics for the UK 2004, the SBS Annual Small Business Survey 2003, and the ONS Annual Business Inquiry 2003. 10
  • 11. This research has confirmed and detailed some clear differences in attitude and approach across businesses led by different ethnic minority communities. It will be important to continue to research EM businesses in terms of specific groupings as generational effects lead to changes to the dominant sectors and ways of working. 11
  • 12. 12 1. Minority Ethnic Business ‘Booster’ Sample 1.1 Background The Annual Small Business Survey (ASBS) 2003/04 included a booster sample of ethnic minority-led businesses. This made it the first survey of its type to allow for a detailed analysis of different ethnic minority (EM) led businesses in England. Prior to this, EM businesses had often been grouped together as a homogenous group, considered to be sharing many of the same issues and concerns. By allowing more robust analysis of EM sub-groups, the booster survey should enable better targeting of policy and support. The Small Business Survey (originally the Omnibus Survey) was first conducted in 2001. The 2003 Survey was the first to use the Small Business Service (SBS) seven strategic themes as its basis. The primary aim of the ASBS is to gauge the needs of small businesses (those with fewer than 250 employees), and to look at their concerns and the barriers they face. It also provides a basis for measuring some SBS targets. The 2003 ASBS used the Small Business Service (SBS) key delivery themes as its basis. The ASBS (conducted in 2003 and early 2004) included a boost of ethnic minority businesses in deprived wards. This led to a sample of responses from EM businesses in England in excess of 1,600. This report covers the analysis of that sample’s responses to questions around: • The characteristics of small businesses • The structure and location of their business • Whether they employ staff • How their business operates o Whether they export o Whether they innovate o Whether they use ICT • Whether and how additional financing has been sought o Seeking and securing debt or equity finance • Their experiences of business support o Their use of business advice and support o Their contact with government departments or agencies o Small businesses and youth • Their experience and perceptions on a whole range of issues, including o Optimism about the future for their business o Barriers and obstacles to achieving their business objectives o Discrimination o Crime o Disability issues. As well as highlighting differences and similarities across ethnic groups, this report will also highlight some of the key differences between male-led and female-led EM businesses.
  • 13. 13 1.2 The Annual Small Business Survey: Methodology Data build, on behalf of the Small Business Service, conducted the Annual Small Business Survey. The main survey and most of the boost was carried out during the latter few months of 2003, and the remainder of the boost during Spring 2004. Sampling The Dun and Bradstreet database of enterprises in England was used to randomly select a sample of businesses for the main survey. The businesses included in the survey were randomly selected from this sample. The respondent would normally be the person in control of the business. In businesses with more than one owner/partner/director, any of these could be interviewed4 . On top of the main survey, the sample of EM-led businesses was boosted by surveying two additional groups: • Ethnic minority-led businesses that had taken part in the Omnibus survey and had expressed a willingness to undertake further research • A random sample of businesses in the top 15 per cent of deprived wards (according to the Index of Deprivation 20005 ) was constructed. A screening process took place to identify the businesses that were considered to be ethnic minority group-led – where 50 per cent or more of the owners/partners/directors were from ethnic minorities. The sample for this extra analysis comprises approximately 260 from the main survey, 210 followed up from the Omnibus and 1140 from the screening process in deprived wards. For the boost interviews, non-owners were sometimes interviewed if they did not have adequate English to take part in the research. Table 1.1 shows the numbers of Ethnic Minority (EM) sole proprietors, companies and partnerships that were interviewed in the survey – this includes the main and the boosted sample. Table 1.1: Breakdown of Ethnic Minority businesses sample by legal status EM sole proprietor EM partnerships / companies All EM businesses Indian Pakistani Other Asian Black African Black Caribbean Other Black Chinese Other 226 131 62 24 27 4 60 67 492 160 82 53 36 11 86 156 718 291 144 77 63 15 146 223 Total 601 1076 1677 Note: Approximately 40 EM partnerships have been double counted (i.e. there is more than one ethnic minority represented in the EM business). 4 The survey asks about 'owners, partners or directors' and we describe businesses with 51+% as women-led and those with 50+% ethnic minority as ethnic minority-led. 5 www.odpm.gov.uk/indices
  • 14. 14 Table 1.2 Breakdown of ASBS sample by Ethnic Group and Employment Status. Ethnic group With employees Without employees Indian 606 112 Pakistani 249 42 Other Asian 129 15 Black African 67 10 Black Caribbean 43 23 Other Black 14 1 Chinese 129 17 Other 190 33 Total Ethnic Minority 1427 250 Total non-Ethnic Minority 7428 1465 Response rate The response rate for the main survey was 86 per cent. A number of strategies were used to maximise the response rate: • Businesses were made aware that their views could have an effect on government policy relating to business. • An appointment was made to call back at a later date if the business was too busy at the time of the initial call. • Evening interviews were made available to businesses that were too busy to take part during the day. • Those businesses that seemed reluctant to take part were sent a letter from SBS that set out the importance of participation in the survey. Research approach / methodology Interviews were conducted by telephone using Computer Aided Telephone Interviewing (CATI) systems. The main survey interviews and most of the boost interviews were carried out during the period between September and December 2003. The last 200 boost interviews were conducted between March and April 2004. The average length of interview was 20 minutes. Questionnaire The questionnaire was developed to investigate and monitor some SBS key and supporting measures. Some additional questions were asked in Wales, Scotland and Northern Ireland. However, this report only focuses on the respondents in England. Most questions were asked to all respondents, but some questions were asked to just a random sub-set of the sample in England. Weighting The results of the survey were weighted to reflect the business population of the UK. All records in England were given a weight depending on their size (no employees, 1- 9 employees, 10-49 employees, 50-249 employees), location (deprived ward or not deprived ward) and ownership (EM or not EM), giving sixteen different weights. Each weight was equal to our estimate of the England business population in this category divided by the sample size in this category. The estimate of the England business population started with SBS SME Statistics size band data; these were then
  • 15. 15 combined with the proportion of businesses of the relevant size in England in deprived wards, and the proportion of businesses of the relevant size in England that are EM-led, obtained in the main ASBS survey. By weighting the data in such a way, the findings presented throughout this report are representative of EM businesses as a whole. Table 1.3 Weighted breakdown of EM businesses by legal status Ethnic Group Sole proprietor Partnerships/companies All Indian 40,563 49,956 90,518 Pakistani 18,279 13,248 31,527 Other Asian 7,463 7,426 14,889 Black African 3,070 12,349 15,419 Black Caribbean 7,427 7,112 14,539 Other Black 337 1,332 1,669 Chinese 7,320 10,063 17,383 Other 10,985 22,577 33,562 Total 95,443 124,063 219,506 Table 1.4 Weighted breakdown of EM businesses by legal status Ethnic group With employees Without employees All Indian 38,458 52,061 90,518 Pakistani 14,227 17,300 31,527 Other Asian 8,069 6,820 14,889 Black African 4,902 10,517 15,419 Black Caribbean 4,025 10,513 14,539 Other Black 824 845 1,669 Chinese 11,002 6,381 17,383 Other 13,713 19,849 33,562 Total 95,220 124,286 219,506
  • 16. 16 2. Ethnic Minorities in England – Policy and Historical Context This section sets out the background to policy interest in Ethnic minority (EM) entrepreneurs and established EM-led business. It starts by covering historical developments that have shaped both the labour market position of EM groups and the nature of the EM business population. For the purposes of brevity, for the remainder of this report where we mean businesses led by Black African, Black Caribbean or Other Black, these have been shortened to “Black businesses”. This is the same for each of the different ethnicities of the business e.g. Chinese businesses refer to those businesses led by Chinese people. 2.1 Geographical concentration of ethnic Minorities Seventy per cent of all ethnic minorities in England are concentrated in just five areas: London, West Midlands Metropolitan County, West Yorkshire Metropolitan County, Greater Manchester Metropolitan County and Leicester Unitary Authority. London alone accounts for almost half of the England’s ethnic minority population, with over 2 million people from ethnic minority groups – equivalent to 29 per cent of its population (Source: ONS Census 2001, Table KS06). 2.2 Ethnic minority paid employment Minority ethnic groups tend to be underrepresented in the labour market. This is the case in both the public and private sector relative to their share of the total population of working age. The proportion of people in employment that are from ethnic minority groups is 7 per cent, whereas their share of the total population of working age is 9 per cent (LFS Autumn 2004). The difference in employment rates between Whites and ethnic minorities is approximately 17 percentage points with some groups showing far greater differences. The differences between different ethnic groups can be as large as those between the ethnic minority average and the White average. It is therefore important to look at separate minority groups wherever possible. Labour market disadvantages are higher among some ethnic groups than others, notably Bangladeshis and Pakistanis. Their employment rates are particularly low, at 42 per cent and 45 per cent respectively (LFS Autumn 2004). Reports such as the Ethnic Minorities and the Labour Market have suggested an element of discrimination to account for some labour market differences. Research using the LFS and other large surveys shows that, having controlled for a large number of socio-economic characteristics including age, educational attainment and place of residence, differences in labour market outcomes remain. Even when ethnic minorities are employed, in general their occupational attainment and earnings are lower than their White counterparts. Again, disadvantage is higher among some groups than others. 2.3 EM Self-employment / entrepreneurial activity: our previous understanding In later sections, this report provides valuable new information on EM businesses. However, the research does not start from scratch. There is a range of information that has shaped our understanding before now.
  • 17. Attitudes: Findings from the UK GEM 2003 survey show that both Blacks and Indian sub-continent Asians have more positive attitudes towards entrepreneurship. The SBS Household Survey, however, shows that many people who are considering entrepreneurship do not actually follow this through. This is particularly the case for Black businesses. Total Entrepreneurial Activity: The findings from the UK GEM 2003 survey show that Indian, Other Asian and Black communities are more entrepreneurial than any other groups in the UK. They are three times more likely to be involved with some form of informal investment activity than their White counterparts, and their levels of Total Entrepreneurial Activity (TEA) are nearly twice as high. It should be noted that the GEM measure of TEA also includes those people who said they were actively involved in creating a new business. Self-employment: In terms of self-employment, ethnic minorities as a whole have a very similar rate to the White population (11%) (LFS, England and Wales). The current gap between the self-employment rate of ethnic minorities and the working age population is 1.6 percentage points. There is, however, some variation between different minority groups. The rate of self-employment is far higher among Asian or Asian British groups (14%) than Black or Black British (7%). The Pakistani population currently has the highest self-employment rate of all ethnic groups despite having one of the lowest employment rates. Figure 2.1 Breakdown of adult population and self-employed population for ethnic minority groups, males and females, England and Wales, 2001 0% 1% 2% Mixed Indian Pakistani Bangladeshi OtherAsian Black Caribbean Black African Otherblack Chinese Otherethnic group Males as % of all adult males Males as % of all male self-employed Females as % of all adult females Females as % of all female self-employed Source: Office for National Statistics, Census 2001, England and Wales only Gender: When comparing the proportion of ethnic groups in self-employment to their representation in the population as a whole, there are also important differences. For example, Chinese and Indian men and women are relatively over-represented in self- employment (Figure 2.1). Sector: Half of the self-employed people born outside the UK and from ethnic minority communities are active in the Distribution, Hotel and Restaurant sector, compared to one in six in the UK-born self-employed people. Some researchers have 17
  • 18. 18 concluded that the problems that ethnic minority businesses face may be more sector- related as opposed to being products of ethnic grouping (Rutherfoord and Blackburn, 2000). Earlier research indicates that as well as being concentrated in particular sectors such as transport, catering and retail, EM businesses generally have different needs relating to finance, networking, markets, motivation, and training and therefore have different support needs. Networks and generations Earlier research studies suggest that many EM businesses rely heavily or completely on co-EM markets i.e. they supply and trade with businesses led by people from the same ethnic group. This can lead to a strong informal network of support. This finding was re-iterated in recent SBS research around ICT usage and ethnic minority businesses6 . This showed that EM businesses base their assessment of the potential of ICT on the views and experiences of those within their EM-based network. Although subsequent generations of business owners in EM communities have tended to follow in the same line of business as their parents, a number of studies have referred to the increasing likelihood for many later generation ethnic entrepreneurs to set up in businesses in sectors that are different to their parents. One example of this is in the Asian communities where second-generation entrepreneurs are seen to be moving away from traditional clothes and retail sectors into the services and professions. The National Employment Panel7 found that there is also a generational difference in the motivation behind EM business start-ups, with many first-generation businesses being established out of necessity. Today EM businesses are more likely to start up in order to take advantage of a market opportunity. 2.4 Recent policy developments EM enterprise is still a relatively young area of public policy. Ethnic minority groups make a significant contribution to the UK economy. Through influencing and joint working, the Government has a wide reaching, and potentially major, role in affecting the employability (including self-employment) of ethnic minorities as well as employers’ interest in locating in the areas they predominantly live. The 2002 Cross Cutting Review of Government Services for Small Business aimed to ensure that the services provided by Government to small businesses were delivered to provide maximum benefit to the economy and society. Leading on from this, the Small Business Service developed the Government Action Plan for small business. The plan is structured around seven strategic themes – each one of which has an associated range of actions and initiatives aimed at achieving the Government’s objectives for small and medium sized enterprises. 6 Ethnic Minority Businesses and ICT. Focus Group Research, 2004. http://www.sbs.gov.uk/content/analytical/EMB_and_ICT.pdf 7 “Enterprising People Enterprising Places: Measures to increase Ethnic Minority Employment and Business Growth” (May 2005), National Employment Panel
  • 19. 19 The Acton Plan identifies the need for greater “sector-consciousness” in business support to reflect both the sectors in which EM businesses are currently concentrated (clothing, retail, catering) and those in which they are emerging (IT, arts and cultural industries). The Public Service Agreement targets relevant to enterprise in under-represented groups: ‘Help build an enterprise society in which small businesses of all kinds thrive and achieve their potential, with an increase in the number of people considering going into business, an improvement in the overall productivity of small business, and more enterprise in disadvantaged communities”. The SBS administers the Ethnic Minority Business Forum (EMBF). The EMBF was set up in 2000 to advise government on the right help and advice required by EM businesses in order to grow and succeed. In their annual report, a number of recommendations are made (and updated) in the areas of business support, access to finance, ICT and e-commerce, procurement and regeneration. All of these have significant crosscutting implications for other government departments. To give just one example, the Office of the Deputy Prime Minister is particularly interested in regeneration and local authority procurement. The EMBF, in liaison with SBS, is considering the unique role EM businesses play in regeneration programmes. The aim will be to move towards a strategic statement or framework that will address the pivotal role of ethnic minority business in regeneration programmes. Other government departments also play a role in this agenda. One significant example would be the Department for Work and Pension’s Welfare to Work agenda. DWP also plays a key role in delivering the recommendations from the above- mentioned Cross Cutting Review and the SBS comprehensive review of business start-ups.
  • 20. 20 3. Key Characteristics of businesses led by different ethnic minority communities Prior to the ethnic minority boost of the Annual Small Business Survey, research told us that: • Sector based differences are apparent when looking at business needs. • Ethnic minority businesses face different needs in terms of accessing finance, business support and training. • Ethnic minority businesses tend to be concentrated in particular sectors. • Self-employment rates among ethnic minorities as a whole are very similar to the White population, but there is some variation between different minority ethnic communities. The boost of ethnic minority businesses carried out as an extension of the 2003 ASBS allow us to explore some of these issues further, and to look, for the first time, at specific EM groups, rather than treating them in a homogenous way. For the purposes of this report, Ethnic minority (EM) businesses have been categorised as those with at least 50 per cent of owners/partners/directors from an EM group, as defined by the census categories. Businesses without such a majority or those that could not be classified have been coded as non-EM businesses. In most cases of EM businesses, control lies with one ethnic group. However, in about 40 cases more than one ethnic group was involved e.g. Pakistani and Indian. As sample sizes of these businesses are too small to report on separately, they have been counted as both a Pakistani and Indian business8 . Where sample sizes allow, the breakdowns of findings among individual ethnic groupings will be shown. However, for some analysis, it is only possible to show the differences between EM businesses, and non-EM businesses. Some of the analyses are carried out on all business, and others on those with employees. This is highlighted in tables and texts as appropriate. The report focuses only on businesses in England. For full UK results, refer to the main report of the Annual Small Business Survey 20049 . 3.1 Proportion of EM businesses in England EM businesses make up 6.8% of all Small and Medium Enterprises (SMEs) in England. Turning to businesses with employees, EM businesses make up 9.8 per cent of SMEs in England. EM women-led businesses account for 1.0 per cent of all businesses with employees (or 9.9% of EM businesses). EM women are equal owners in 2.5 per cent of all businesses (25.4% of EM businesses) and EM male-led businesses account for 6.3 per cent of all businesses (or 64.7% of EM businesses). 8 This will be indicated where appropriate beneath the tables in this report to explain apparent discrepancies in unweighted sample sizes 9 www.sbs.gov.uk/analytical/publicationsbytheme.php
  • 21. 21 3.2 Size of business Of all EM businesses in England, 56.8 per cent have no employees, 39.0 per cent have between 1-9 employees (micro businesses), 3.7 per cent have between 10-49 employees (small) and less than one per cent (0.5%) has between 50-250 employees (medium). Table 3.1: Percentage of businesses in each employment size band by ethnicity and gender. All Businesses Zero 1-9 (micros) 10-49 (small) 50-250 (medium) Unweighted n Total (EM) Men Women Equal 56.8 52.1 64.9 62.6 39.0 43.4 31.4 33.3 3.7 3.9 3.6 3.5 0.5 0.6 0.1 0.5 1607 1092 163 352 Total (non-EM) 70.8 24.0 4.5 0.7 5071 Total (All) 69.9 25.0 4.4 0.7 6678 England weighted data. n=6678 • A higher proportion of EM (43.2%) businesses have employees than non-EM businesses (29.2%). • Female-led (64.9%) and equal male/female-led (62.6%) EM businesses are more likely to have no employees than male-led EM businesses (52.1%). For each of the subsequent tables within this report, EM male-led, female-led and equal-led businesses will be separated out. This will help identify whether female EM business have different needs, and should help to further inform policy thinking. We know from analysis of self-employment data that there can be considerable differences between genders in the same EM group. Where sample sizes allow, a breakdown of responses will also be shown for different ethnic groups. Table 3.2: Percentage of businesses in each employment size band by ethnicity and gender. Businesses with employees only 1-9 (micros) 10-49 (small) 50-250 (medium) Unweighted n Indian 87.3 11.2 1.5 594 Pakistani 94.5 4.6 0.9 241 Other Asian (incl. Bangladeshi) 87.7 10.6 1.8 126 Black 90.2 8.3 1.5 117 Chinese 95.4 4.1 0.6 122 Other 89.4 8.6 2.0 172 Total (EM) Men Women Equal 90.2 90.7 89.5 89.1 8.7 8.1 10.1 9.5 1.2 1.2 0.4 1.4 *1358 940 132 286 Total (non-EM) 82.2 15.3 2.6 4224 Total (All) 83.0 14.6 2.4 5582 England weighted data. n=5582 Note: * n=1372 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community
  • 22. 22 Among businesses with employees: • EM businesses are more likely to be micros than non-EM businesses (90.2% compared with 82.2%). • Almost all of Chinese (95.4%) and Pakistani (94.5%) businesses with employees are micros (often employing family members). • Approximately one in ten Indian (11.2%), Other Asian (10.6%) are small businesses, compared with Black (8.3%) and less than five per cent of Pakistani (4.6%) and Chinese (4.1%) businesses. 3.3 Age of business Table 3.3 shows among businesses with employees, the number of years that firms had been trading. Table 3.3: Percentage of business of different ages by ethnicity and gender. Businesses with employees only. 3 years or less 4-10 years More than 10 years Unweighted n Indian 12.5 33.2 54.3 594 Pakistani 20.5 35.9 43.6 241 Other Asian (incl. Bangladeshi) 20.9 32.6 46.5 126 Black 41.2 38.4 20.4 117 Chinese 31.1 25.8 43.0 122 Other 18.0 30.7 51.3 172 Total (EM) Men Women Equal 20.0 19.6 29.3 17.5 32.6 32.8 30.5 33.1 47.3 47.6 40.3 49.4 *1358 940 132 286 Total (non-EM) 14.1 17.6 68.3 4224 Total (All) 14.6 19.1 66.3 5582 England weighted data. n=5582 Note: * n=1372 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community. For businesses with employees • A fifth (20.0%) of EM businesses had been trading for less than four years, compared with 14.1 per cent of non-EM businesses. • EM female-led businesses are, on average, younger than EM male-led businesses, with almost one in three (29.3%) being three years old or less, compared with 19.6 per cent of EM male-led. However, Black employers tend to own the youngest businesses with 41.2 per cent trading for three years or less. • Just under a third of EM businesses (32.6%) had been trading for between 4 and 10 years, whilst almost half (47.3%) had been trading for over 10 years. Among non-EM businesses, 68.3 per cent had been trading for over 10 years. • Only a fifth (20%) of Black businesses had been trading for over 10 years (compared to the EM average of 47.3%).
  • 23. 23 When turning to look at sole traders, there are some significant differences for some ethnic groups. Only 9.2% of Other Asian (including Bangladeshi) businesses had been trading for less than four years compared with 20.9% of Other Asian employers. Black sole traders also tend to have been trading for longer than Black employers (87% of sole traders being at least four years old, compared with 59.2% of businesses with employees). 3.4 Industry Respondents were asked what their business actually did. The responses were concentrated in four blocks of business type, which align with the Standard Industrial Classification (SIC92) as follows: Primary sector: agriculture, hunting, forestry and fishing. Production industries: mining and quarrying; manufacturing; and electricity, gas and water supply. Construction Service sector businesses: include retailing, hotels and restaurants, transport and communications, financial services, business services, education, health and social work, and other services Table 3.4: Percentage of businesses in different Industries by ethnicity. Businesses with employees only Primary Production Construction Services Unweighted n Indian - 9.8 3.9 86.3 594 Pakistani - 7.0 1.1 91.9 241 Other Asian (incl. Bangladeshi) - 2.1 - 97.9 126 Black - 8.5 0.8 90.7 117 Chinese - - 0.1 99.9 122 Other - 7.4 6.7 85.9 172 Total (EM) Men Women Equal - 6.8 7.3 7.7 5.1 2.8 2.2 - 5.4 90.4 90.5 92.3 89.5 *1358 940 132 286 Total (non-EM) 2.6 16.8 10.6 69.9 4224 Total (All) 2.3 15.8 9.9 72.0 5582 England weighted data. n=5582 Note: * n=1372 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community. Among business with employees: • The majority of EM businesses are in the services sector (90.4%). This compares to 69.9 per cent of non-EM businesses. • The proportion of businesses in the services sector is particularly high among Chinese businesses (almost 100%) and other Asian businesses (97.9%)
  • 24. 24 • Black and Indian businesses are more likely to be in the production sector (8.5% and 9.8% respectively) than other ethnic businesses (average for EM businesses is 6.8%). Turning to sole traders, the only main difference within ethnic groups is among Black sole traders, with a quarter being in the production sector, compared with 8.5 per cent of Black employers. 3.5 Legal form of the business Respondents were asked about the legal form in which their business was organised. Three categories were offered: - Company - Partnership - Sole proprietor Table 3.5: Percentage of businesses of different legal forms by ethnicity: Businesses with employees only Company Partnership Sole proprietor Unweighted n Indian 35.3 25.6 38.8 594 Pakistani 20.1 24.6 54.4 241 Other Asian (incl. Bangladeshi) 33.6 18.3 47.8 126 Black 59.5 8.5 30.3 117 Chinese 19.0 26.5 53.7 122 Other 50.0 17.7 30.3 172 Total (EM) Men Women Equal 36.1 31.1 31.1 50.5 21.1 15.8 14.1 37.4 42.1 52.6 51.1 11.7 *1358 940 132 286 Total (non-EM) 63.9 18.7 17.3 4224 Total (All) 61.1 18.9 19.7 5582 England weighted data. n=5582 Note: * n=1372 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community Among businesses with employees: • EM businesses are more evenly spread across legal forms than non-EM businesses • Approximately a third (36.1%) of EM businesses were companies, compared with almost two-thirds (63.9%) of non-EM businesses. • EM businesses are more likely to be partnerships than non-EM businesses (21.1% and 18.7% respectively). • About two-fifths (42.1%) of EM businesses said they were sole-proprietors. This is much higher than the non-EM figure of 17.3 per cent. • Over half of both EM male-led (52.6%) and EM female-led (51.1%) businesses are sole proprietors, and approximately one third (31.1%) are companies.
  • 25. 25 • Slightly over half of Pakistani (54.4%) and Chinese (53.7%) businesses are sole proprietors, compared to 30.3 per cent of Black and Other businesses. • The proportion of partnerships was higher among Indian (25.6%), Pakistani (24.6%) and Chinese (26.5%) businesses and lowest among Black businesses (8.5%). • Black (59.5%) and Other (50%) are significantly more likely to be registered as a company compared to the average for EM businesses (36.1%) In addition, 56.8 per cent of the overall sample of EM businesses (excluded from the above breakdown) had no employees. 3.6 Financial turnover Research commissioned by the London Development Agency on Black and Minority Ethnic (BME) businesses in London found that turnover is lower among BME micro businesses than similar size non-BME businesses in London and also across the UK. This is supported by findings from the ASBS 2003 (see Table 3.2). The LDA research estimated, however, that if London’s BME owned businesses achieved the turnover by employment and / or enterprise seen across all UK enterprises, total revenues would increase by almost £10bn and at least 50,000 jobs created. All respondents in the ASBS 2003 were asked to provide the financial turnover of their business in the previous 12 months. Table 3.6: Percentage of businesses of different financial turnovers by ethnicity. Businesses with employees only Under £56K £56K - £250K £250K - £1.5m £1.5m – £2.8m More than £2.8m Not given Unweighted n Indian 10.4 15.4 20.4 5.4 0.1 48.3 594 Pakistani 18.8 15.7 10.0 3.0 - 52.5 241 Other Asian (incl. Bangladeshi) 6.6 26.9 6.2 5.3 - 55.0 126 Black 17.0 23.2 14.1 6.5 - 39.2 117 Chinese 10.7 32.9 1.6 0.6 - 54.2 122 Other 9.5 22.4 12.3 12.1 - 43.7 172 Total (EM) Men Women Equal 11.7 12.0 5.6 13.6 19.7 21.2 15.0 17.7 14.1 13.8 8.0 17.1 5.3 6.0 1.3 4.8 - - - - 49.2 46.9 70.0 46.8 *1358 940 132 286 Total (non-EM) 6.9 18.8 30.1 9.7 0.4 34.1 4224 Total (All) 7.4 18.9 28.6 9.3 0.3 35.6 5582 England weighted data. n=5582 Note: * n=1372 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community Among businesses with employees: • Financial turnover tends to be lower among EM businesses. • Over one in ten (11.7%) of EM businesses have a financial turnover of less than £56k. This compares with 6.9 per cent of non-EM businesses. • A further fifth of EM businesses (19.7%) earn under £250k.
  • 26. 26 • Almost a fifth (19.4%) of EM businesses have a turnover of more than £250k. This compares to 40.2 per cent of non-EM businesses. • Almost a fifth (18.8%) of Pakistani businesses and 17.0 per cent of Black businesses have a turnover of less than £56k. • Among Asian businesses substantial differences can be identified. A quarter (25.9%) of Indian businesses have a turnover of £250k or more, compared with 13.0 per cent of Pakistani businesses and 11.5 per cent of other Asian businesses. • Only 2.2 per cent of Chinese businesses have a turnover of £250k or more. (Chinese businesses are more likely to be in the hotel/catering sector which has lower turnover per business than other sectors) It should be noted that almost half of businesses surveyed did not provide the financial turnover of their company, so there is likely to be some non-response bias. Perhaps, unsurprisingly, sole traders tend to have a lower turnover than employers. Approximately a third (36.5%) of all EM sole traders have a turnover of less than £56k, compared to 11.7 per cent of employing EM businesses. This difference is particularly marked among Black (44.4%), Indian (39.2%) and Pakistani (38.6%) businesses. Table A3.1 excludes those who did not provide the financial turnover of their company. In this instance, among businesses with employees, almost a quarter (23.1%) of EM businesses have a turnover of less than £25k compared with 10.5 per cent of non-EM businesses. This is even higher among Pakistani businesses at 39.6 per cent. One in ten (10.3%) EM businesses that gave a figure for turnover, said they had a turnover of between £1.5 million and £2.8 million. This compares with 14.7 per cent of non-EM businesses. Respondents were asked whether they expected the turnover of their business to increase, decrease or stay the same over the next 12 months. Approximately half of businesses with employees (47.7% of EM businesses and 51.6% of non-EM businesses) believed their business turnover would increase. Over half of female-led EM businesses (55.2%) believed this. Black respondents were the most likely to expect their turnover to increase (72.3%), and Chinese the least likely (31.4%). 3.7 Family businesses Respondents were asked whether the business was a family-owned one. For the purposes of this survey, a family business is defined as one which is majority owned by members of the same family.
  • 27. Figure 3.1: Percentage of Family business by ethnicity. Businesses with employees only 75 65.3 65.2 61.8 58.3 39.9 87.9 56.2 45.1 63.1 67.7 67.3 0 10 20 30 40 50 60 70 80 90 100 C hinese Indian Pakistani O therAsian O ther Black EM equal-ow ned EM m ale-ow ned EM fem ale-ow ned EM total N on-EM totalTotal-all Percent England weighted data. n=5582 Among businesses with employees: • Approximately two-thirds of businesses are family owned businesses. A lower proportion of EM businesses are family-owned (63.1%) than non-EM businesses (67.7%). • The proportion of family-owned businesses varied between different ethnic groups. • Almost nine in ten (87.9%) EM equal-led businesses are family owned. • Three-quarters (75.0%) of Chinese businesses are family owned, the highest proportion of ownership among EM communities • Black businesses are the least likely to be family owned (39.9%). Table 3.7 presents information on the generation in control of the business. Table 3.7: Percentage of each generation in control of the business, by ethnicity. Businesses with employees only 1st 1st and 2nd , or 2nd 2nd and 3rd or 3rd Unweighted n Indian 74.4 24.9 0.6 400 Pakistani 71.9 25.7 2.4 161 Other Asian (incl. Bangladeshi) 76.6 23.4 - 82 Black 87.4 11.2 1.4 47 Chinese 79.5 19.2 1.3 92 Other 79.3 15.8 2.2 112 Total (EM) Men Women Equal 76.1 74.3 74.4 79.4 22.3 24.4 18.9 19.5 1.3 1.2 6.7 0.3 *873 557 63 253 Total (non-EM) 55.2 29.2 10.4 2717 Total (All) 57.2 28.5 9.5 3590 England weighted data. n=3590 NB – Note of caution over small sample sizes Note: * n= 894 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community 27
  • 28. 28 Among businesses with employees: • It is much more likely among EM-led businesses that business control is with the first generation. • In over three-quarters of family-led EM businesses (76.1%) control of the business lies with the first generation. This compares to just over half (55.2%) of non-EM family-led businesses. • Black businesses are the most likely to be controlled by someone in the first generation (87.5%) and Pakistani businesses the least (71.9%). • The proportion of EM businesses that are run by the 2nd and 3rd generation jointly, or by just the 3rd generation is very low (1.3%). However, one in ten (10.4%) non-EM businesses are controlled by this generation. 3.8 Physical characteristics of the main business location There was particular interest in looking at the booster sample in relation to the areas in which respondents or their businesses were based. The Index of Multiple Deprivation (IMD)10 calculates an overall measure of deprivation within local authority wards by looking at income, employment, health deprivation and disability, education, skills and training, housing and geographical access to services. The Office of the Deputy Prime Minister (ODPM) has calculated a revised Index which will be used in subsequent sweeps of the ASBS. This new version was not used due to timing of its release. • Forty per cent of EM employing businesses are based in the 15 per cent most deprived wards. This compares with 23.9 % of non-EM businesses. • Male-led EM businesses are more likely to be based in these wards (44.3%) than either female-led (34.6%) or equal-led (31.1%) EM businesses. • Among all EM businesses, Pakistani businesses have the highest proportion in a disadvantaged area (55.8%), and Chinese the least (31.4%). • Among each EM group, sole traders are more likely to be within the 15 per cent most deprived wards than employers. Almost two-thirds (65.8%) of Pakistani sole traders are located in these areas. People from ethnic minority communities are disproportionately represented in inner city areas that account for nearly all of the 15 per cent most deprived wards. This means that providing the right conditions for the sustained growth of EM businesses should provide a powerful driver for economic regeneration within these areas. Through the Phoenix Fund a range of initiatives such as Community Development Finance Initiatives, the Development Fund, a network of volunteer mentors and City Growth Strategies have sought to encourage entrepreneurship in disadvantaged areas. People living in deprived communities face all of the general challenges associated with starting and growing a business. On top of this, they may also come across further difficulties specific to where they live or their background. Government activity to encourage more enterprise in these disadvantaged communities and under- represented groups is important to both ensure equality of opportunity and also to 10 The IMD was produced by the Department for Transport, Environment and the Regions in 2000.
  • 29. 29 correct for specific market failures. Encouraging a thriving small business sector in such areas and groups should lead to increased economic and social benefits. The rurality definition is taken from that developed for the Countryside Agency11 . A business is classed as either rural or non-rural according to the characteristics of the ward in which it is located, in terms of population density, the economically active population, public transport to work, employment in agriculture / forestry / fishing, employment in primary production (mining / energy / water) and ethnicity. • There is a small EM business presence in rural areas. With respect to all businesses, less than one in ten (9.0%) of EM businesses in England were located, or had their main location, in a rural area (compared to 41.5% of non- EM businesses). • When looking at employers only, the figures are 8.3 per cent (5.7% male-led, 9.3% female-led and 14.4% equal-led) and 35.1 per cent respectively. • A third of all Chinese employers are based in rural areas. • 9.5% of EM sole traders are based in a rural area 3.9 Region Table 3.8: Percentage of businesses in each region by ethnicity. Businesses with employees only EM businesses Non-EM businesses All All Male- led Female- led Equal- led North East 1.1 0.9 0.1 2.1 6.1 5.6 North West 12.8 13 7.8 14.0 15.0 14.7 Yorks and Humber 7.5 8.5 3.9 6.3 17.7 16.7 East Midlands 8.2 7.0 5.5 12.3 6.7 6.8 West Midlands 15.6 17.0 15.4 12.0 7.6 8.3 East 6.4 5.1 3.8 10.9 10.3 9.9 London 36.6 37.3 53.2 28.5 12.2 14.6 South East 10.1 9.8 7.9 11.9 14.2 13.8 South West 1.7 1.5 2.4 1.9 10.3 9.5 England weighted data. n=5581 Among businesses with employees: • Over a third (36.6%) of EM-businesses are based in London and 15.6 per cent based in the West Midlands, compared to 12.2 per cent and 7.6 per cent of non-EM businesses respectively. • The North East and South West have the lowest proportion of EM-businesses (1.1 % and 1.7%). • Over half of female-led EM businesses (53.2%) are based in London. 11 This was developed by the Social Disadvantage Research Centre for the Department of Social Policy and Social Work at Oxford University in 2000.
  • 30. 30 Summary • Almost one in ten (9.8%) of businesses with employees in England are led by ethnic minorities (section 3.1) • EM businesses are more likely to be employers than non-EM businesses, and the majority (90.2%) of EM employers are micros (section 3.2). • EM businesses with employees tend to have been trading for less time than non-EM businesses (section 3.3) • The majority of EM businesses with employees are in the services sector (90.4%) (Section 3.4). • A higher proportion of EM businesses with employees are sole proprietors than non-EMs (section 3.5). • EM businesses with employees tend to have a lower financial turnover than non-EM businesses (section 3.6). • EM businesses with employees are less likely to be family-owned than non- EM businesses. Among ethnic communities, family-owned businesses with employees are highest among Chinese businesses and lowest among Black businesses (section 3.7). • It is much more likely for EM-led businesses with employees to retain business control in the first generation (section 3.7). • 40 per cent of EM businesses with employees are based in the 15 per cent most deprived wards (section 3.8). • There is only a small EM business presence in rural areas. Less than one in ten (9.0%) of all EM businesses in England were located, or had their main location, in a rural area (compared to 41.5% of non-EM businesses) (section 3.8)
  • 31. 31 4. New Businesses and those without employees This chapter looks specifically at businesses that have been trading for less than four years, and those that have no employees. 4.1 New businesses Background One of the SBS strategic themes is to encourage a more dynamic start-up market. This is considered important in contributing to the process of ‘productive churn’, where more efficient and innovative new businesses will displace those that are less effective, which will lead to an overall rise in productivity levels in the economy as a whole. Many new businesses captured by the survey may not have developed to the stage of taking on employees. This section therefore focuses on all businesses that have been trading for less than four years. Respondents who had started a business or taken over one in the past three years were asked what they were doing before they decided to start-up / start running the business. Table 4.1:Respondent’s status before new business started – Percentage in each category of all businesses trading for less than four years EM Non-EM All Full-time employment 58.9 62.2 62.2 Part-time employment 6.1 2.4 2.7 Self-employed 20.5 25.3 25.0 In education / training 7.5 0.6 1.1 Unemployed, on benefit 3.2 2.1 2.2 Unemployed, not on benefit 2.4 4.9 4.8 Something else 3.9 2.2 2.4 Unweighted n 251 678 929 England weighted data. n=929 For all businesses trading for less than four years: • There is little difference between EM and non-EM businesses in terms of activity prior to start-up • Almost three in five respondents from new EM business (58.9%) had been in full-time employment before setting up in business. This is slightly lower than among non-EM business respondents (62.2%). • A fifth (20.5%) of EM respondents had been self-employed compared to a quarter (25.3%) of non-EM respondents. • New EM business respondents were more likely than non-EM respondents to have been in education / training prior to starting their business. This is still low, however, at 7.5 per cent. 4.1.1 Rationales for business start-ups Respondents in new businesses were asked about their motivation for starting or taking over the business. A number of reasons were given. Figure 4.1 only includes those mentioned by over five per cent of the sample.
  • 32. Figure 4.1: Rationales for business start-ups 9.4 6.5 1.3 30.5 11.6 11.6 7.4 1.9 5.6 5.2 1.3 18.2 22.3 17.5 11.3 2.1 1.5 12.7 14.8 12 15.5 14.6 0 5 10 15 20 25 30 35 Independence,ow n boss D evelop ideas,hobby,skill M akem oney etc Careerprogression Saw gap in m arket H ard to find any job H ard to find rightjobPreventclosureFam ily tradition SocialenterpriseSom ething else Percentage EM business Non-EM business England weighted data. All respondents starting up a new business. England weighted data. n=918 Figure 4.1: Rationales for business start-ups Percentage in each category of all businesses trading for less than 4 years For all businesses trading for less than 4 years: • Overall there is not a large difference in rationale for business start-up for EM and non-EM businesses • The most frequently cited reason for business start-up by all new businesses was a wish to be independent and to be one’s own boss (22.3% of EM businesses and 30.5% of non-EM businesses). • Making money and developing ideas were also mentioned as reasons by about 15 per cent of businesses, both EM and non-EM businesses • Continuing family tradition or preventing closure was mentioned by a higher proportion of non-EM businesses (although still relatively low at 5.2%) than EM businesses. This is interesting as EM businesses are thought to be more family-orientated than non-EM businesses. • A higher proportion of EM businesses cited difficulties in finding the right job (6.5% compared to 1.9%), or any job (9.4% compared to 7.4%) as reasons for going into business. This implies a slight tendency away from opportunity entrepreneurship towards need. 4.1.2 Time taken to start trading Respondents were asked how long it had taken them to set up the business from the original business idea to the time they started trading. 32
  • 33. Table 4.2: Percentage time taken to set up business and start trading. All businesses trading for less than 4 years 6 months or less 6 months – 1 year 1 year – 2 years More than 2 years Uncertain Unweighted n Total (EM) 70.1 17.6 6.8 4.6 0.9 208 Total (non-EM) 83.2 9.1 4.3 1.1 2.3 461 Total (All) 82.2 9.8 4.5 1.3 2.2 669 England weighted data. n=669 For all businesses trading less than 4 years: • EM businesses tend to take longer to start trading than non-EM businesses • Although the majority of businesses take six months or less to start trading, there is a lower proportion of -EM businesses in this ‘quicker’ category than non-EM businesses (70.1% compared with 83.2.1%). • 11.4% of EM businesses took over a year to start trading, compared with 5.4 per cent of non-EM businesses Numbers are too small to give reliable figures for individual EM businesses, but figures suggest that Asian and Chinese businesses take less time to start trading than Black businesses. 4.1.3 Advice about starting up (or taking over) the business Managers of new businesses were asked whether or not they had sought any advice before starting up (or taking over) their business, and where they had sought it. Figure 4.2: Sources of advice about starting up the business. Percentage in each category of all businesses trading for less than 4 years 10.1 9 4.1 49.5 13.2 24.1 17.9 7.3 34.1 16.2 12 18.3 0 10 20 30 40 50 60 Friends,family, informalonly Publicsupport agency Accountant Bank Solicitor/lawyer Nothing Percent EM business Non-EM business England weighted data. n=916 33
  • 34. 34 Among businesses trading for less than 4 years: • EM businesses are generally less likely to seek advice than non-EM businesses (Figure 4.2). Where they do, informal sources and public sector agencies are more commonly used. • Just over a third (34.1%) of non-EM businesses and half (49.5%) of EM businesses had not sought any advice at all. Almost 1 in 5 (18.3%) EM businesses had only sought informal advice. • EM businesses are much less likely to seek advice from an accountant (10.1%) or the bank (9.0%) than non-EM businesses (24.1% and 17.9% respectively). • Just over 1 in 10 (12.0% of EM and 13.2% of non-EM) businesses had taken advice from a public service/support agency when starting up in business. 4.1.4 Obstacles to starting up the business Respondents were asked what had been the main obstacles to starting up or taking over the business. Table 4.3: Main obstacles to starting up (or taking over) new businesses. Percentage in each category of all businesses trading less than 4 years EM Non-EM All Obtaining finance 23.0 20.7 20.9 Cash flow 6.3 11.2 10.8 Recruiting staff 4.4 1.2 1.5 Regulations 3.2 5.1 4.9 Competition 9.9 7.3 7.4 Other 20.7 13.9 14.4 No opinion 7.7 15.7 15.1 None 32.4 24.8 25.3 Unweighted n 236 678 914 Weighted data. n= 914 Among businesses trading less than 4 years: EM businesses are less likely to cite any barrier than non-EM businesses. Almost a third of EM businesses (32.4%) and a quarter of non-EM businesses (24.8%) said that they had not faced any real obstacles in starting up. • Barriers mentioned are similar for EM and non-EM businesses: access to finance, recruiting staff and competition are, however, more likely to be mentioned by EM businesses than non EM-businesses. • The most commonly cited obstacle to starting up, or taking over, the business was obtaining finance (23.0% of EM and 20.7% of non-EM businesses). • Recruiting staff and competition were seen as issues for a higher proportion of EM businesses, whereas cash flow and regulations were seen as obstacles for a higher proportion of non-EM businesses • 20.7 per cent of EM businesses and 13.9 per cent of non-EM businesses cited ‘other’ problems. These were too varied or individualistic to include.
  • 35. • Other obstacles, such as the economy and taxation were mentioned by fewer than two per cent of businesses and have therefore not been included in the above table 4.2 Businesses with no employees A lower proportion of EM businesses have no employees than non-EM businesses in England (56.8% and 70.8% respectively). These businesses have been excluded from much of the report as they significantly outweigh those with employees. However, the following section looks at these businesses and identifies the rationales for not employing staff. 4.2.1 Reasons for having no employees Where applicable, respondents were asked to provide the main reason(s) that they had no employees at the time of the survey. Figure 4.3: Reasons for employing no staff at time of survey. Percentage in each category. Businesses without employees. 52.5 16.3 15.6 10.9 0.6 4.9 48 27.8 2.1 10.6 12.3 8.1 8.8 18.4 0 10 20 30 40 50 60 Insufficient work Prefer to work on own Use family Too expensive Use casual staff Employment regulations Something else Percentage EM business Non-EM business England weighted data. n=1270 Among all businesses without employees: • Around half of businesses (52.5% of EM and 48% of non-EM businesses) said that there was not enough work to require employees. • A further 27.8% of non-EM businesses and 18.4% of EM businesses said they preferred to work alone. • Use of family, and high expense of staff were cited by a higher proportion of EM businesses (16.3% and 15.6%) than non-EM businesses (2.1% and 10.6%). • Employment regulations, although not a major reason given, were mentioned by a lower proportion of EM businesses (0.6%) compared to non-EM businesses (8.1%). 35
  • 36. 36 Summary • The majority of respondents from new (EM and non-EM) businesses had been in full-time employment before setting up in business (section 4.1). • The majority of respondents from new (EM and non-EM) businesses had been in full-time employment before setting up in business (section 4.1). • A higher proportion of respondents from EM businesses cited difficulties in finding the right job, or any job as reasons for going into business (section 4.1.1). • EM businesses tend to take longer to start trading than non-EM businesses (section 4.1.2). • EM businesses were less likely to have sought advice about starting the business than non-EM businesses (section 4.1.3). • The most commonly cited obstacle to starting up / taking over the business amongst both EM and non-EM businesses was obtaining finance (section 4.1.4). • Around a half of all businesses with no staff, both EM and non-EM, said there was not enough work to require employees (section 4.2.1)
  • 37. 37 5. Business Operation This chapter looks at the way businesses tend to operate. This includes whether or not they export outside the UK, whether businesses are innovative, and whether ICT is used within the running of the business. Business operation among EM businesses is compared with that of non-EM businesses. 5.1 Whether or not the business exports outside the UK Respondents were asked whether their business sells outside the UK. Table 5.1: Percentage of businesses that export or are wholly domestic by ethnicity. Businesses with employees only Exporter Wholly domestic Unweighted n Indian 13.0 87.0 606 Pakistani 10.2 89.8 249 Other Asian (incl. Bangladeshi) 8.3 91.7 129 Black 19.4 80.6 118 Chinese 2.6 97.4 129 Other 19.5 80.5 190 Total (EM) Men Women Equal 12.6 13.6 8.1 11.9 87.4 86.4 91.9 88.1 *1409 974 139 296 Total (non-EM) 21.9 78.1 6019 Total (All) 21.0 79.0 7428 England weighted data. n=7428 Note: * n=1421 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community Among businesses with employees EM businesses are less likely to export than non-EM businesses. 12.6 per cent of EM businesses with employees sell outside the UK, compared with 21.9 per cent of non-EM businesses. • Female-run EM businesses are less likely to be exporters than male-led EM businesses. • Almost a fifth of Black and ‘Other ethnic group’ businesses (19.4% and 19.5% respectively) sell outside the UK. Chinese businesses are the most likely to be wholly domestic (97.4%). For businesses with employees, we have seen that the majority of EM businesses are in the services sector (Chapter 2). When comparing EM and non-EM businesses in both services and in production, Table 5.2 shows that there is a wider gap in proportions exporting within the services sector (11.5% of EM businesses export compared to 20.4% of non-EM businesses), than within production (32.3% of EM businesses compared with 40.1% of non-EM businesses). Within the services sector, Black businesses are more likely to export (17.9%) and Chinese the least (2.6%).
  • 38. 38 There are too few EM businesses within the construction and primary sector to report on these differences. Table 5.2: Percentage of businesses selling outside the UK, by sector and ethnicity. Businesses with employees only Production Services Unweighted n Indian 33.1 11.3 585 Pakistani 42.4 7.9 238 Other Asian (incl. Bangladeshi) 32.9 7.7 126 Black 36.8 17.9 116 Chinese - 2.6 121 Other 35.6 19.7 166 Total (EM) Men Women Equal 32.2 30.1 27.1 43.5 11.5 12.6 6.5 10.8 *1337 927 132 278 Total (non-EM) 40.1 20.4 3718 Total (All) 39.8 19.3 5055 England weighted data. n= 5055Note: * n=1352 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community Even among businesses who do sell outside the UK, the vast majority of their sales are within the UK. EM businesses are more likely than non-EM businesses to have customers or markets that are mostly within the local town or county (59.8% and 39.8% respectively). This is even higher among female-led EM businesses (68.6%). Just over half of non-EM businesses (55.4%) state that their customers and markets are mostly in the regions and the UK, compared with a third (36.9%) of EM businesses. Almost one in nine (89.6%) of Chinese businesses mostly serve their local town or county, compared with less than a third (30.5%) of Black businesses. 5.2 Innovation A random 50 per cent of employers were asked whether they had introduced new or significantly improved products or services, or processes, in the past 12 months. Table 5.3: Product and process innovation: percentage saying they had introduced in the past year – Businesses with employees only Yes – products or services Yes – processes Unweighted n Total (EM) 45.1 47.3 117 Total (non- EM) 39.0 32.0 2078 Total (All) 39.2 32.5 2195 England weighted data of random 50 per cent of employers. n=2195
  • 39. 39 Among businesses with employees: • EM businesses are generally more likely to be innovative than non-EM businesses • Almost half of EM businesses had introduced new products or services (45.1%), or processes (47.3%) in the past 12 months, compared to 39.0 per cent and 32.0 per cent of non-EM businesses. This supports the findings from GEM 2003 that EM businesses tend to be more innovative. There could, however, be a link to sector and age of business. Businesses from the services sector and businesses that have been trading for 3 years or less tend to be more innovative than the average. The majority of EM businesses are in the services sector, and one in five (20.0%) have been trading for less than four years (section 3.3). Whether or not businesses had introduced innovative processes or products / services, they were asked questions about how important process and product innovation is to the success of the business (Table 5.4 and Table 5.5). Table 5.4: Percentage of businesses indicating importance of product / services innovation. Employers making innovation only Very important Important Neither important or unimportant Unimportant Very unimportant Unweighted n Total (EM) 39.1 18.5 13.7 21.5 7.3 117 Total (non- EM) 32.1 28.2 12.8 21.8 5.1 2078 Total (All) 32.3 27.9 12.9 21.8 5.1 2195 England weighted data of employers making product / services innovation. n=2195 Among employers making product/services innovation: • A higher proportion of EM businesses (39.1%) than non-EM businesses (32.1%) see innovation as very important. Over half of all EM (57.6%) and non-EM (60.3%) businesses felt that having new products or services were important or very important to the success of the business. Numbers are too small to give reliable figures for male-led and female-led EM businesses, but they suggest that EM male-led businesses are more likely to feel that new products and services are important to the business than EM female-led businesses. Table 5.5: Percentage of businesses indicating importance of processes innovation – Businesses with employees only Very important Important Neither important or unimportant Unimportant Very unimportant Unweighted n Total (EM) 29.8 24.5 18.3 21.7 5.6 117 Total (non- EM) 24.4 26.0 16.3 27.7 5.6 2078 Total (All) 24.5 26.0 16.4 27.5 5.6 2195 England weighted data of employers making process innovation. n=2195
  • 40. 40 • A slightly higher proportion of EM businesses (54.3%) said that new processes were important or very important than non-EM businesses (50.4%). • New products and services were felt to be slightly more important than new processes. • Almost a third of businesses felt both were unimportant or very unimportant. Again, due to the small sample size of EM male-led and EM female-led businesses, it is not possible to give reliable figures. However, numbers suggest that more EM female-led businesses believe new processes are important to the success of the business. 5.3 ICT usage among EM businesses Background As was discussed in Chapter 1, the Ethnic Minority Business Forum (EMBF) was established by Government in July 2000 to provide independent, strategic advice to Government as to policies and practices, which would impact positively on EM businesses. In its first annual report (2001), the Ethnic Minority Business Forum (EMBF) highlighted five specific areas of interest, one of which was ICT and e- commerce. It recommended that there should be research undertaken to establish the actual extent of ICT take-up within EM businesses in comparison with non-ethnic businesses. Research in 2001 confirmed anecdotal evidence that ICT take-up and skills among EM businesses are at lower levels than among White-led businesses (Foley and Ram 2001). Some further focus group research conducted in February- April 2004 explored some of the reasons for this lower take-up of ICTT 12 . An ICT pilot project in the North West during the second half of 2004 and running into 2005 look to map local ICT initiatives, identify any take-up by EM businesses, engage with consultants, stakeholders and best practice businesses, and follow a number of EM businesses, case studies and ICT champions in the area. Many of the sectors or markets that EM businesses operate in can generally be characterised as displaying lower than average levels of ICT usage. However, the ASBS 2003 boost of EM businesses allows for comparisons to be made between EM businesses and non-EM businesses in the same sectors to see whether lower take-up still exists among minority businesses, even allowing for sectoral concentrations (see section 5.3.1). In the ASBS 2003, all respondents were asked how their business use technology such as computers and the Internet. Table 5.7 gives the responses of businesses with employees. 12 Ethnic Minority Businesses and ICT. Focus Group Research, 2004. http://www.sbs.gov.uk/content/analytical/EMB_and_ICT.pdf
  • 41. 41 Table 5.6 Uses of ICT, by ethnic group Businesses with employees only Accounts % Record keeping % Email communi cation % Business website % Internet – govt interactions % Purchasing % Sales via internet % Sales via other e- networks % Research % Designing products % Word processing % Don’t use % Unweighted n Indian 35.1 44.8 26.4 9.3 2.9 6.3 5.6 4.2 20.9 3.3 29.9 21.3 501 Pakistani 25.2 30.3 22.4 3.4 1.5 6.6 6.6 3.3 18.5 1.0 15.1 35.9 193 Other Asian (incl. Bangladesh i) 20.8 28.5 16.7 5.6 1.7 1.9 2.4 3.0 10.3 2.6 20.5 47.8 104 Black 62.3 54.9 46.8 18.6 3.5 3.0 14.4 0.6 35.2 12.3 40.2 13.4 107 Chinese 9.4 11.6 3.7 3.5 0.6 0.4 0.5 1.7 6.9 1.9 8.9 65.8 106 Other 39.4 35.8 39.0 30.1 5.1 1.0 2.3 0.1 29.1 4.3 34.1 26.6 136 Total (EM) Men Women Equal 32.2 32.2 25.7 34.5 36.6 36.5 45.3 33.4 26.0 26.7 30.1 22.5 11.0 9.1 13.8 14.9 2.5 2.7 0.7 2.9 4.0 4.2 - 5.1 5.0 6.0 0.2 4.2 2.7 3.9 0.1 0.4 20.6 20.6 22.3 20.1 4.1 4 3.8 4.5 25.8 24.3 29.8 28.5 31.6 33.1 19.9 32.1 *1126 789 111 226 Total (non- EM) 44.5 36.1 37.8 22.6 4.0 6.6 7.8 1.0 28.6 9.4 25.6 15.3 3899 Total (All) 43.4 36.2 36.7 21.6 3.8 6.4 7.6 1.1 27.8 8.9 25.6 16.8 5025 England weighted data. Employers only. Excludes “Don’t know” and “Unwilling” n=5025 Note: * n=1147 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community.
  • 42. For businesses with employees: • EM businesses are less likely to use ICT than non-EM businesses. This applies for almost every mechanism. Almost a third (31.6%) of EM businesses do not use ICT at all, compared to 15.3 per cent of non-EM businesses. • Accounts, record keeping, email communication, word processing, and research are the five most common uses of ICT among all businesses (EM and non-EM) with employees. EM businesses, however, are significantly less likely than non-EM businesses to use ICT for accounts (32.2% compared with 44.5%), email communication (26.0% compared with 37.8%) and research (20.6% compared with 28.6%). • Black businesses are generally more likely to use ICT than other EM and also non-EM businesses. For instance, three in five (62.3%) use ICT for accounting, over half (54.9%) for record keeping, almost half (46.8%) for email, and approximately a third (35.2%) for research. • ICT usage is lowest among Chinese businesses. Even for the most common uses mentioned above, only about one in ten, or less, of Chinese employers said they used ICT. This is particularly apparent for record keeping (11.6%) accounting purposes (9.4%) and email communication (3.7%). ICT use tends to be lower among EM sole traders. The main exception, however, is among Chinese sole traders. They are more likely to use ICT than Chinese employers. This is the case for accounts, record keeping, email communication, research and word processing. It should be noted, however, that this is based on a low sample size (n=44). Although most businesses use ICT to some extent, the level of use varies across ethnic groups. Level of use has been categorised as low usage (1-3 uses) and high usage (4+). 42
  • 43. Table 5.7 Level of ICT use by ethnicity. Businesses with employees only Do not use % 1-3 % 4+ % Unweighted n Indian 21.4 63.1 15.4 498 Pakistani 36.3 55.9 7.8 191 Other Asian (incl. Bangladeshi) 48.1 43.5 8.4 103 Black 13.4 47.0 39.6 107 Chinese 67.0 30.8 2.1 105 Other 26.7 50.0 23.3 135 Total (EM) Men Women Equal 31.9 33.4 20.5 32.1 52.4 50.4 67.1 52.4 15.7 16.2 12.5 15.5 *1118 783 109 226 Total (non-EM) 15.5 59.0 25.4 3863 Total (All) 17.0 58.4 24.6 4981 England weighted data. Excludes “Don’t know” and “Unwilling”. n=4981 Note: * n=1139 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community For businesses with employees: • EM businesses are less likely than non-EM businesses to use ICT (68.1% compared with 84.4%). • Chinese are the least likely to use any ICT (only 32.9% do) and Black businesses are the most likely (86.6%). • Almost two in five Black businesses (39.6%) use ICT for 4 or more applications. This is higher than either the average for EM businesses (15.7%) or non-EM businesses (25.4%). 5.3.1 Level of ICT use in different sectors ICT usage may be dependent on the sector the business is in, as some, for instance catering, have less need for ICT than others. Chinese businesses are more likely to be in the sectors where less use of ICT is made. Table 5.9 Level of ICT use in different sectors, by ethnicity. Businesses with employees only Primary % Production % Services % Construction % Do not use EM Non-EM * 14.9 17.6 10.8 33.8 16.2 * 18.8 1-3 uses EM Non-EM * 58.5 55.3 63.9 51.5 58.4 * 55.9 4+ uses EM Non-EM * 26.6 27.1 25.4 14.6 25.4 * 25.3 England weighted data. n=3485 (EM=959. Non-EM=2526) * Indicates sample size too small to provide breakdown 43
  • 44. • For businesses with employees, within the Services sector non-use is significantly higher among EM businesses (33.8% compared with 16.2% of non-EM businesses). Turning to look at certain industries which EM businesses are more likely to be involved in (retail, hotel and restaurants, and health and social work), the general trend of higher ICT use among non-EM businesses is more marked. Sector is a key factor for some ethnic groups having lower usage, but within these sectors usage is still lower than for equivalent non-EM businesses. Table 5.10 Level of ICT use in certain industries by ethnicity. Businesses with employees only Retail % Hotels / restaurants % Health / social work % Do not use EM Non-EM 51.1 21.4 70.2 39.6 14.0 15.2 1-3 uses EM Non-EM 43.2 62.5 28.2 52.2 70.3 71.1 4+ uses EM Non-EM 5.7 16.1 1.6 8.2 15.7 23.7 England weighted data. n=1399 (EM=566. Non-EM=833) Among businesses with employees: • Just over half (51.1%) of EM businesses in the retail industry do not use ICT, compared with 21.4 per cent of equivalent non-EM businesses. • Among the hotel and restaurant sector, non-use is higher still, with 70.2 per cent of EM businesses not using ICT compared with 39.6 per cent of equivalent non-EM businesses. • In the hotel and restaurant sectors, just under three in ten (28.2%) of EM businesses are low users, compared with over half (52.2%) of non-EM businesses. There is a lower proportion of high ICT users amongst both EM and non-EM businesses (1.6% and 8.2% respectively). • The majority of businesses in health and social work use ICT. There is generally much less of a difference between EM and non-EM businesses in this sector. However, only 15.7 per cent of EM businesses in this sector are high ICT users, compared with almost a quarter (23.7%) of non-EM businesses. 5.3.2 Level of ICT use among businesses of different ages. Table 5.11 shows the proportion of EM and non-EM businesses with employees that use ICT in relation to the number of years they have been trading. 44
  • 45. Table 5.11: Any ICT use by age of businesses. Businesses with employees only. 3 years or less % 4 – 10 years % More than 10 years % Total (EM) 70.6 65.2 69.1 Total (non-EM) 89.1 85.2 83.3 Total (All) 86.7 82.1 82.4 England weighted data. n=4968 (EM=1118. Non-EM=3850) • 70.6 per cent of EM businesses that have been trading for less than four years make use of ICT, compared with 89.1 per cent of non-EM businesses that have been trading for a similar time. Table 5.12: Level of ICT use by age of business, by ethnic group. Businesses with employees only 3 years or less % 4 – 10 years % 10 years + % Do not use EM Non-EM 29.4 10.9 34.8 14.8 30.9 16.7 1-3 uses EM Non-EM 52.8 47.3 49.4 64.0 54.4 60.1 4+ uses EM Non-EM 17. 8 41.7 15.7 21.3 14.7 23.2 England weighted data. n=4968 (EM=1118. Non-EM=3850) Among businesses with employees: • The proportion of high ICT users (4+ uses) is larger amongst younger firms. This is more apparent for non-EM businesses (with 41.7% of businesses who have been trading for 3 years or less being high users, compared with 21.3% of those who have been trading for 4-10 years). • Amongst EM businesses there does not appear to be a marked difference between age of business and high ICT use. 45
  • 46. 5.3.3 Level of ICT use for different sizes of business Table 5.13 shows the level of ICT use by businesses of different sizes. Table 5.13: Any ICT use by size of business by ethnicity. Businesses with employees only Micro % Small % Medium % Total (EM) 65.8 87.6 99.7 Total (non-EM) 81.9 95.6 99.9 Total (All) 80.3 95.2 99.9 England weighted data. n=4968 (EM=1118. Non-EM=3850) Among businesses with employees only: • 65.8 per cent of EM micros use ICT, compared with 81.9 per cent of non-EM micros. • ICT usage appears to be associated with business size – smaller businesses are less likely to use ICT than larger ones. • For all business sizes, EM businesses use ICT less than non-EM businesses. Table 5.14 reports the proportion of businesses of different sizes that use ICT. Table 5.14: Level of ICT use by size of business and ethnicity. Businesses with employees only 1-9 (micro) % 10-49 (small) % 50+ (medium) % Do not use EM Non-EM 34.2 18.1 12.4 4.4 0.3 0.1 1-3 uses EM Non-EM 51.4 59.8 61.9 57.1 62.1 45.9 4+ uses EM Non-EM 14.4 22.1 25.7 38.5 37.6 53.9 England weighted data. n=4688 (EM=1118. Non-EM=3850) Among businesses with employees: • Over half of all businesses are low ICT users. • Larger businesses are more likely to be high ICT users. For instance, 37.6 per cent of EM medium businesses use ICT for four or more mechanisms, compared with 25.7 per cent of EM small businesses, and 14.4 per cent of EM micro businesses. • Approximately a third (34.2%) of EM micros do not use ICT at all. This compares with 18.1 per cent of non-EM micros. 46
  • 47. Summary • Among businesses with employees, EM businesses are less likely to sell outside the UK than non-EM businesses. (Section 5.1) • Among businesses with employees, EM businesses are more likely to be innovative than non-EM businesses (section 5.2) • Among businesses with employees, EM businesses are less likely than non- EM businesses to use ICT in their business. This is the case across all business sizes, ages and sectors. Sector is a key factor for some ethnic groups having lower usage of ICT, but within these sectors usage is still lower than for equivalent non-EM businesses (section 5.3) • Among businesses with employees, Black businesses are more likely to use most ICT packages than other ethnic and non-EM businesses. Chinese are the least likely to use ICT (section 5.3) • Among businesses with employees, ICT usage appears to be correlated with business size – smaller businesses appear less likely to use ICT than larger ones (section 5.3.3). 47
  • 48. 6. Financing the business This chapter identifies which businesses attempt to access finance, and whether they experience any difficulties in getting the required money. How this impacts on the business is also addressed. Reasons for seeking finance, including which sources were approached, are also discussed. Background Access to finance is seen as a perennial problem for all small businesses. The Ethnic Minority Business Forum (EMBF) is concerned that difficulties in accessing finance, for whatever reason, are major barriers to EM business success. While access to finance can be a problem for any business, there are certain issues facing EM businesses that can lead to greater difficulties for them. One example is that it is against the Islamic religion for Muslims to obtain finance at interest. Some EM business managers have problems understanding what finance is available and also the language used by providers. In other cases, specific sectors that have a high proportion of EM businesses are ineligible for certain types of finance. It is important for EM businesses to be able to access the finance they need to survive and grow, without facing disadvantages inherent in their EM status. We have seen that EM businesses are more likely than White businesses to be located in deprived areas (Chapter 3). Analysis of data on self-employment in these areas suggests that potential entrepreneurs and businesses are more likely than the general population to have problems accessing bank finance (Bank of England, 2002)13 . Government is increasing the levels of investment in the most deprived areas of England through the Bridges Community Development Venture Fund and supporting the growth of Community Development Finance Institutions throughout the UK. 6.1 Seeking finance Respondents were asked whether they had tried to obtain finance for their business in the past 12 months (Table 6.1). 13 Ram, M, Smallbone D. & Deakins D. 2002 Ethnic Minority Business In the UK: access to finance and business support, British Bankers Association 48
  • 49. Table 6.1: Percentage of businesses saying whether finance was sought in the past 12 months. Businesses with employees only Yes – once only Yes, more than once No Unweighted n Indian 15.8 6.8 77.4 566 Pakistani 17.6 8.8 73.5 229 Other Asian (incl. Bangladeshi) 22.1 3.5 74.4 119 Black 19.5 17.6 62.9 113 Chinese 9.0 1.2 89.8 116 Other 10.2 11.7 78.1 166 Total (EM) Men Women Equal 15.5 18.5 11.1 9.3 7.6 6.1 14.5 8.6 76.9 75.3 74.3 82.0 *1295 894 127 274 Total (non-EM) 17.1 7.7 75.2 4159 Total (All) 16.9 7.7 75.3 5454 England weighted data. Excludes ‘don’t knows’ and ‘unwilling to answer’. n=5454 Note: * n=1309 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community Among businesses with employees: • On average, the proportion of EM businesses that had tried to obtain finance on at least one occasion was almost the same as non-EM businesses at approximately a quarter (23.1% and 24.8% respectively). • However, among EM businesses there was a degree of variation with almost two in five (37.1%) Black businesses attempting to obtain finance, compared with only one in ten (10.2%) Chinese businesses. • Just over a fifth (22.1%) of Other Asian businesses had attempted on one occasion to obtain finance, but only a further 3.5 per cent had tried on more than one occasion (this compares to the EM average of 7.6%). Black businesses were the most likely to have attempted to obtain finance on more than one occasion (17.6%). 6.2 Difficulties in obtaining finance Some businesses face difficulties in accessing finance, and it has been raised within previous research that some EM businesses tend to have more difficulties than others. Respondents who had sought finance were asked whether they had experienced any difficulties in obtaining the desired level from the first source approached (Table 6.2). 49
  • 50. Table 6.2: Percentage of businesses saying they had difficulty in obtaining finance. Businesses with employees who had sought finance Unable to obtain any finance Obtained some finance but not all Obtained all finance with some problems Had no difficulties in obtaining finance Unweighted n Total (EM) 19.4 8.7 10.1 61.7 300 Total (non- EM) 11.5 4.9 6.5 77.1 1213 Total (All) 12.2 5.3 6.6 75.8 1513 England weighted data. Excludes ‘don’t knows’ and ‘unwilling to answer’. n=1513 Among businesses with employees that had sought finance: • Overall, EM businesses that try to raise finance report more difficulties than non-EM businesses. • Almost one in five (19.4%) of EM businesses were not able to obtain any finance from the first source, compared with just over one in ten (11.5%) non- EM businesses. A further 8.7 per cent of EM businesses and 4.9 per cent of non-EM businesses were unable to obtain all (but some of) the finance they required. • One in ten (10.1%) EM businesses did manage to obtain all the finance they required but this was with some problems; again a higher proportion than non- EM businesses (6.5%). • Six in ten (61.7%) of EM businesses compared with almost eight in ten (77.1%) of non-EM businesses had no difficulty in obtaining finance. When turning to all businesses (including sole traders) in England, almost a quarter (23.7%) of EM businesses that had sought finance were unable to obtain any finance at all. This compares with 12.6 per cent of non-EM businesses. Almost three in five (59.5%) of EM businesses had no difficulties in obtaining finance, compared with approximately three-quarters (76.4%) of non-EM businesses. Although sample sizes are too small to give statistical information on ethnic businesses trying to obtain finance, it would appear that: • Black businesses are generally more likely to have difficulties with accessing finance. Almost half were unable to obtain any finance. • Indian and Chinese businesses would appear to have the least difficulties in obtaining finance (approximately 5 in 7 Indian and Pakistani respondents had no difficulties in obtaining finance). Businesses who had problems obtaining finance were asked whether the financial organisation / source approached had offered them any help or advice to improve their application / business case (Table 6.4). 50
  • 51. Table 6.3: Percentage of businesses saying whether they were offered any help or advice by first source. Businesses with employees having difficulty obtaining finance only Source assisted directly Source recommended another organisation No Unweighted n Total (EM) 31.1 3.0 65.9 105 Total (non- EM) 31.1 4.4 64.5 250 Total (All) 31.1 4.2 64.7 355 England weighted data. Excludes ‘don’t knows’ and ‘unwilling to answer’. n=355 Among employers who had difficulty obtaining finance: • There does not appear to be any difference among businesses, regardless of ethnicity, when it comes to the help or advice offered to them. Almost a third (31.1%) of businesses that faced difficulties in obtaining finance were offered direct assistance from the financial organisation they had approached. However, 65 per cent of businesses were not offered any help at all. Sample sizes were too small either to look at differences between ethnic groups, or to explore further whether having assistance helped with obtaining future finance. 6.3 Impact of difficulties in raising finance All respondents who said they had experienced difficulties in raising finance were asked about the effect on their business. Table 6.5: Impact of difficulty raising finance Percentage in each category Employers who had difficulty obtaining finance only Threatens survival Can’t grow as fast as would like Takes up management time Pushes up cost Affects investment Affects produc tivity Unweighted n Total (EM) 4.1 33.5 18.1 8.4 15.6 3.4 105 Total (non- EM) 13.1 36.3 15.9 5.7 6.3 16.7 255 Total (All) 11.9 36.0 16.2 6.1 7.5 14.9 360 England weighted data. Excludes ‘don’t knows’ and ‘unwilling to answer’. n=360 Among employers who had difficulty obtaining finance: • Although the greatest impact for both EM and non-EM businesses was on growth, there were a number of differences around survival, productivity and investment. 51
  • 52. • Over a third of all employers (33.5% of EM and 36.3% of non-EM) who had difficulty raising finance, said that they could not grow as fast as they would like. • EM employers were more likely to say this affected investment, whereas non- EM employers were more likely to feel that it threatened survival or affected productivity. The impact of difficulties raising finance is less threat to the survival of the EM business (4.1%) than it is to the non-EM business (13.1%) 6.4 Reasons for seeking finance Businesses who had attempted to access finance were asked what this was intended for. If they had tried on more than one occasion, they were asked about the most important of these occasions. Table 6.6 summarises the top five things finance was sought for. Responses that accounted for less than two per cent have not been included. An “Other” category made up nine per cent. Sample sizes for different ethnic groups were too small to report on them individually. Table 6.6: Reasons for seeking finance Employers who had sought finance Working capital, cashflow % Buying land or buildings % Improving buildings % Acquiring capital equipment or vehicles % Training / staff development % Unweighted n Total (EM) 37.6 17.5 15.5 18.4 2.8 300 Total (non- EM) 31.1 12.0 6.0 35.6 1.3 1219 Total (All) 31.7 12.4 6.8 34.1 1.4 1519 England weighted data. Excludes ‘don’t knows’ and ‘unwilling to answer’. n=1519 Among employers who had sought finance: • There are marked differences between EM and non-EM businesses. • Approximately a third of all businesses attempted to access finance for working capital/cash flow (37.6% of EM businesses and 31.1% of non-EM businesses). • Acquiring capital for equipment or vehicles was mentioned by 18.4 per cent of EM businesses compared with 35.6 per cent of non-EM businesses. This can be related to the sector of the business, with businesses in construction being more likely to seek finance for this reason. EM businesses are less likely to be in construction than non-EM businesses. • A significantly higher proportion of EM businesses looked to obtain finance for improving buildings than non-EM businesses (15.5% and 6.0% respectively). This may relate to a higher proportion of EM businesses being located in deprived areas. 52
  • 53. Future research into investment strategies of different kinds of SMEs could be beneficial in exploring this issue further. 6.5 Type of finance sought All respondents who had sought finance were asked what source was approached. Only sources mentioned by over five per cent of these businesses have been included in Table 6.7. Table 6.7: Type of finance sought. Percentage in each category. Employers who had sought finance Bank overdraft Bank loan Mortgage for property purchase Leasing / hire purchase Grant Unweighted n Total EM) 16.6 51.7 7.3 6.0 8.9 309 Total (non- EM) 20.3 47.2 6.3 12.3 7.9 1236 Total (All) 20.0 47.6 6.4 11.8 8.0 1545 England weighted data. Excludes ‘don’t knows’ and ‘unwilling to answer’. n=1545 Among employers who had sought finance: • Approximately half of employers (47.6%) who had sought finance had attempted to get a bank loan. This is slightly higher for EM businesses (51.7%) than non-EM businesses (47.2%). • Bank overdrafts were mentioned by 16.6 per cent of EM businesses and a fifth (20.3%) of non-EM businesses. • EM businesses were much less likely to lease or hire purchase (6.0% compared with 12.3% of non-EM businesses). This is related, in part, to the effect of sector, with a higher proportion of businesses in construction citing this, compared to those in services. Table 6.8: Type of finance sought, by sector. Percentage in each category Employers who had sought finance Bank overdraft Bank loan Mortgage for property purchase Leasing / hire purchase Grant Unweighted n Production EM Non-EM 45.9 21.9 38.9 48.7 4.6 1.9 2.4 14.8 15.9 8.0 38 305 Services EM Non-EM 14.8 18.3 52.3 46.4 7.6 7.8 6.3 12.0 7.7 9.5 266 767 Total (All) 20.0 47.6 6.4 11.8 8.0 1376 England weighted data. Excludes ‘don’t knows’ and ‘unwilling to answer’ n=1376 • EM businesses in the production sector were more likely than equivalent non- EM businesses to seek bank overdrafts and grants (45.9% and 21.9% respectively). Caution should be taken over the small sample size however. 53
  • 54. • Within services, EM businesses were slightly more likely to seek a bank loan (52.3%) than non-EM businesses (46.4%) and less likely to lease / hire purchase (6.3% compared with 12.0% of non-EM equivalent businesses). Summary • EM and non-EM employers were equally likely to have tried to obtain finance for their business in the past 12 months (section 6.1). • A higher proportion of EM employers that tried to access finance were not able to obtain any (section 6.2). • Black business employers were the most likely to have attempted to obtain finance and Chinese the least. Although based on a small sample, it would appear that Black businesses face greater difficulties in accessing finance than other ethnic groups (section 6.2). • While seeking finance for capital/cash flow was a reason for seeking finance among approximately a third of EM and non-EM businesses with employees, there were differences in the other reasons provided. For instance, EM businesses were much less likely to acquire capital for equipment or vehicles, but were more likely to seek finance for improving buildings (section 6.4). • Difficulties raising finance prevents, to a similar extent, both EM and non-EM businesses with employees from growing as fast as they would like (section 6.3). 54
  • 55. 7. Business Support This chapter initially looks at business support and advice, both generally and in relation to regulations. The chapter then moves on to capture the extent of contact that businesses have with the government and finally deals with small businesses and youth schemes. 7.1 Business advice, support and information / knowledge This section deals with general business advice and also advice on regulations. The reasons why businesses choose not to seek external advice are also addressed. Background Business support is considered a key input to the survival and growth of many businesses. The SBS and Regional Development Agencies (RDAs) are working with the Business Link Operators (BLOs) to ensure that Business Link service delivery plans meet the needs of all existing and potential entrepreneurs, whatever their background, and to improve on the area of data collection to understand penetration levels. Offering the right advice is very important as there is significant evidence that the provision of effective and appropriate business advice can help businesses to become established, to prosper and to grow. 7.1.1 Seeking general business advice The Annual Small Business Survey covers respondents’ usage of all business support. Table 7.1 shows the proportion of businesses that had received some business advice or information in the past 12 months. Table 7.1: Business advice and information used in past 12 months - Businesses with employees only. Sought advice % No advice % Unweighted n Indian 44.4 55.6 593 Pakistani 45.0 55.0 241 Other Asian (incl. Bangladeshi) 27.8 72.2 126 Black 47.5 52.5 117 Chinese 39.1 60.9 122 Other 49.1 50.9 172 Total (EM) Men Women 45.9 39.3 53.9 51.7 56.1 60.7 46.1 48.3 *1357 940 132 Equal 285 Total (non-EM) 51.1 48.9 4224 Total (All) 50.4 49.6 5581 England weighted data. Employers only. n= 5581 Note: * n=1371 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community 55
  • 56. Among businesses with employees: • EM businesses were generally less likely to seek advice than non-EM businesses. A higher proportion of EM than non-EM businesses had not sought any advice (56.1% and 48.9% respectively). • Other Asian (including Bangladeshi) businesses were the least likely to have sought advice (27.8%), followed by Chinese businesses (39.1%). • A higher proportion of EM female-led businesses (53.9%) sought advice than EM male-led businesses (39.3%). Figures from the Business Link and Companies House Survey of Awareness & Understanding 200414 suggest that, overall, EM businesses are significantly less aware than White-led businesses of Business Link (46% of businesses with a majority of owners from a EM background were aware compared to 72% of businesses with no EM ownership). However, for all businesses in the sample that were aware of Business Link, awareness of specific services was only slightly lower for EM businesses compared to those led by White counterparts. A number of individual Business Link Operators (BLOs) have put in place initiatives to develop community links and to engage at a deeper level with EM communities. 7.1.2 Reasons for not using advice Over half (56.1%) of EM employers and 48.9 per cent of non-EM employers had not used any external sources of advice or information during the previous year. These respondents were asked the reasons for this non-use. Figure 7.1 includes the three main reasons cited. Figure 7.1: Reasons given for not using external information. Percentage in each category. Employers not using external sources of advice. 54.7 12 13.5 58.4 15.2 7.2 57.9 14.7 8.1 0 10 20 30 40 50 60 70 Don't need help In-house experience Insufficent time Percent EM Non-EM Total - all England weighted data. N=1209 14 Business Link and Companies House Awareness and Understanding, 2004. Report prepared by Databuild September 2004 56
  • 57. Among employers not using external sources of advice: • By far the greatest reason given for not using external help across all groupings was businesses not feeling they needed help at the moment. This was mentioned by over half of businesses (54.7% of EM businesses and 58.4% of non-EM businesses). • A higher proportion of EM businesses (13.5%) than non-EM businesses (7.2%) mentioned insufficient time as a reason for not seeking advice. • Having in-house experience was mentioned by over one in ten businesses (12.0% of EM businesses and 15.2% of non-EM businesses). • Less than five per cent (3.8% of EM businesses and 2.5% of non-EM businesses) said that they did not know advice was available. The above findings suggest that EM businesses are more likely to say that they need advice or information but are less likely to have experience in-house, and even when they do, insufficient time could prevent them from using it. It could also suggest that EM businesses may have problems relating to accessing information, be it in terms of location, language or cultural reasons. The research around EM businesses and ICT use gives a good example of this discussion15 . Table 7.2 looks at the relationship between the age of the business and the reasons given for not seeking general business advice. It can be seen that younger businesses with employees were more likely to state that time constraints prevented them from seeking advice. Over a fifth (22.5%) of EM businesses aged less than four years and 15.5 per cent of equivalent non-EM businesses gave “insufficient time” as a reason, compared with 11.0 per cent and 6.3 per cent respectively for EM and non-EM businesses aged over 10 years. The cost of using advice was mentioned by 14.5 per cent of young EM businesses compared to 2.6 per cent of EM businesses aged 4-10 years and 4.9 per cent of those aged over 10 years. Perhaps unsurprisingly, older businesses were more likely to feel they did not need help or advice about running their business. Table 7.2: Reasons for not using advice, by age of business and ethnicity. Employers not using external sources of advice Don’t need help % In-house experience % Insufficient time % Cost % Unweighted n Less than 4 years EM Non-EM 41.0 46.4 11.9 14.0 22.5 15.5 14.5 5.6 72 52 4-10 years EM Non-EM 53.6 64.6 11.9 7.9 12.6 7.0 2.6 5.0 158 117 10+ years EM Non-EM 60.3 58.1 12.2 17.3 11.0 6.3 4.9 4.3 245 565 Total (All) 57.9 14.7 8.1 4.7 1209 England weighted data n=1209 15 Ethnic Minority Businesses and ICT. Focus Group Research, 2004. http://www.sbs.gov.uk/content/analytical/EMB_and_ICT.pdf 57
  • 58. 58 7.1.3 Seeking advice about business regulations Respondents were asked which sources, in the last 12 months, they used for advice about how regulations may affect their business (Table 7.3).
  • 59. 59 Table 7.3: Sources of advice about regulations used in the past year by ethnicity. Percentage in each category. Businesses with employees only Accountant Bank Trade / Business Associati on Business Link Consultant Internet / library / press Customers etc Solicitor Local authority Other regulators DTI / SBS Other None Unweighted n Indian 7.8 1.6 12.1 0.7 4.3 5.6 2.8 3.8 4.5 4.0 3.2 2.9 52.2 593 Pakistani 7.6 3.9 11.0 0.9 1.3 3.1 1.5 3.9 4.6 6.6 2.8 0.9 61.0 241 Other Asian (incl. Bangladeshi) 10.2 0.7 9.3 1.0 1.1 0.8 2.9 2.2 5.7 8.7 5.2 2.3 60.5 126 Black 5.5 6.4 13.9 6.5 4.3 10.4 3.4 4.9 4.3 0.1 6.2 0.6 42.8 117 Chinese 19.7 0.5 2.3 - 0.4 2.6 0.5 4.7 4.8 2.8 0.1 6.9 54.7 122 Other 8.6 3.9 12.8 3.3 0.7 10.0 4.5 5.1 2.7 3.8 3.2 4.3 53.5 172 Total (EM) Men Women Equal 9.4 8.7 5.1 13.0 2.3 1.8 1.0 4.0 11.2 9.5 12.6 15.1 1.6 0.8 2.7 3.3 2.5 2.2 3.3 2.9 5.3 4.1 2.3 9.6 2.6 2.3 2.5 3.3 4.1 3.1 4.6 6.2 4.3 5.0 2.8 3.1 3.7 3.9 0.6 4.5 3.4 3.0 4.6 3.9 3.0 2.1 2.0 5.8 53.6 58.4 53.8 41.3 *1357 940 132 285 Total (non-EM) 15.9 2.8 17.5 3.8 4.1 6.9 3.0 5.0 2.4 4.5 5.3 5.4 39.2 4224 Total (All) 15.2 55812.8 16.9 3.6 4.0 6.8 2.9 4.9 2.6 4.4 5.1 5.1 40.6 England weighted data. Employers only. n=5581 Note: * n=1371 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community
  • 60. 60 Among businesses with employees: • Over half (53.6%) of EM businesses had not sought any advice about regulations over the last 12 months, compared with 39.2 per cent of non-EM businesses. This was highest among Pakistani and Other Asian businesses (61% and 60.5% respectively). Equal-run EM businesses were more likely to have sought advice (59.7%) than either male-led (41.6%) or female-led (46.2%) EM businesses. This may, however, be a function of size rather than the ethnicity of the owner – micro businesses are less likely than small or medium businesses to seek advice about regulations, and a higher proportion of EM businesses are of this smaller size than non-EM businesses. • Among those businesses who had sought advice, Trade / Business Associations were the most common source (11.2% of EM businesses and 17.5% of non-EM businesses). • Chinese businesses were the most likely to seek advice from accountants (almost one in five). • One in ten Black businesses sought advice from the Internet / library / press. 7.2 Contact With / Use of Government Services This section identifies which businesses are more likely to have contact with the government, and for what reasons. Issues around public procurement are discussed, predominantly in terms of whether EM businesses are as likely to express an interest in public sector work, and whether they subsequently get this work. Background The Small Business Service defines small businesses’ experience of government services as any interaction they may experience with government, including tax and regulatory guidance and transactions, selling to government, business support and consultations. The government aims to improve the experience by making services more accessible, of higher quality and more coherent. The needs of small businesses should be taken into account when tailoring such services, and design and delivery should be simplified. 7.2.1 Contact with Government Respondents were asked whether they had had any contact with Government in the last 12 months. Contact could include letters, e-mails, web sites, telephone calls, and personal visits.
  • 61. 61 Table 7.4: Areas of contact with Government by ethnicity. Percentage in each category. Businesses with employees only VAT related Non VAT tax related Claiming grants or loans Companies House Patenting Business Advice Regulation enforcement Consultation or survey Employee related None of these Unweighted n Indian 29.6 15.3 4.6 20.9 2.0 5.5 13.8 5.2 12.3 41.6 534 Pakistani 27.9 13.6 2.7 12.6 0.8 4.3 19.4 3.5 9.9 47.5 202 Other Asian (incl. Bangladeshi) 31.5 14.5 1.3 20.0 3.2 3.8 23.5 10.9 23.3 38.6 110 Black 26.0 16.9 2.7 31.0 6.1 13.9 13.8 4.1 7.7 38.4 110 Chinese 33.4 17.3 1.7 5.6 0.1 10.2 17.7 1.2 10.4 48.4 111 Other 25.0 20.9 1.8 22.7 2.0 3.5 9.5 8.1 15.3 33.8 152 Total (EM) Men Women Equal 29.8 31.6 23.4 27.6 16.4 17.9 10 15.2 3.0 3.3 2.7 2.5 19.4 19.7 20.9 18.0 1.8 1.7 4.3 1.1 6.7 5.8 7.9 8.6 15.0 15.0 11.3 16.3 4.9 5.2 3.6 4.5 13.3 13.4 7.7 15.3 41.4 39.8 46.5 43.3 *1199 828 122 249 Total (non-EM) 35.4 22.4 6.8 28.9 2.3 6.0 17.9 6.7 10.4 36.2 3963 5162Total (All) 34.9 21.9 6.4 28.0 2.3 6.1 17.7 6.5 10.6 36.6 England weighted data. n=5147 England weighted data. n=5162 Note: * n=1219 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community
  • 62. For businesses with employees: • A slightly lower proportion of EM businesses had contact with the government over the last year than non-EM businesses. • Contact with government was highest for VAT related areas (29.8% of EM businesses and 35.4% of non-EM businesses). • The only area of contact that was higher for EM than non-EM businesses was in relation to employee matters (13.3% compared with 10.4%). • A higher proportion of EM male-led businesses (60.2%) than EM female-led businesses (53.5%) tended to have contact with government in the last 12 months. • There was a mixed level of contact for different ethnic groups on matters relating to Companies House, Business Advice, Regulation enforcement and employee related matters. For instance, approximately a fifth of Indian (20.9%) and Other Asian businesses (20.0%) had contact with Companies House compared with only 5.6 per cent of Chinese businesses. A greater proportion of Black and Chinese businesses contacted the government regarding business advice (13.9% and 10.2% respectively) compared to 6.1% overall. A higher proportion of Other Asian group businesses had contact over regulation enforcement (23.5% compared to 17.7% overall) and employee related matters (23.3% compared to 10.6% overall). Contact with Government among sole traders tended to be more limited than among employers. However, some marked differences include: • Black sole traders are the most likely to contact the government over VAT related and non-VAT tax related issues (49.9% and 40.2% respectively). • Chinese sole traders were more likely to have contact with Companies House (22.6%) than Chinese employers (5.6%). 7.2.2 Government responsiveness to business concerns Respondents were asked how much they felt the Government takes into account the concerns of small businesses. • EM businesses are generally more positive than non-EM businesses. A reasonably large minority of businesses (32.7% of EM businesses and 40.9% of non-EM businesses) felt that the government does not take into account the concerns of small businesses at all. This is highest among female-led EM businesses at 44.2 per cent. Less than ten per cent (9.0% of EM businesses and 6.3% of non-EM businesses) felt the government took concerns into account very much / quite a lot, and just under 40 per cent of all businesses (37.5% of EM businesses and 39.6% of non-EM businesses) felt that small business concerns were taken into account a little. 62
  • 63. 7.2.3 Public procurement Background The EMBF have raised concerns that EM businesses often find it difficult to tender for contracts from larger companies or for government contracts. The procedures are thought to be often too lengthy and complicated for the generally smaller businesses that EM businesses own to see an advantage in tendering. The establishment of two national procurement pilots have been significant recent developments, and a report “Government: Supporter and Customer?” identified the barriers faced by SMEs in accessing public procurement and helped to inform the Government’s Action Plan for Small Businesses (published in January 2004). This set out a strategy to help create “an environment in which small businesses are able to compete effectively for a bigger proportion of government contracts”. There are a number of initiatives aimed at encouraging public and private sector organisations to trade more directly with EM businesses. The Supplier Development East Midlands (SDEM), collaboration between East Midlands Development Agency (EMDA) and De Montfort University, has been integral in promoting ways to increase the number of ethnic minority-led businesses that supply goods and services to both public and private sector organisations. This in turn is intended to encourage greater economic growth in the areas these businesses are based. Questions were asked to all respondents in the ASBS 2003 about whether they had sought any work from the Government or public sector in the past 12 months. Those who had expressed an interest were then asked whether they had actually done any business for the public sector in the same period. Figure 7.2: Percentage of businesses that expressed interest in public sector work. Businesses with employees only. 24.5 22.6 18.6 18.5 13.8 5.6 26.3 19.6 15.8 17.8 18 18 0 5 10 15 20 25 30 O ther BlackO therA sian Indian Pakistani Chinese EM fem ale-ow ned EM equal-ow ned EM m ale-ow ned EM total N on-EM totalTotal-all Percentage England weighted data. n=5110 Among businesses with employees: • EM and non-EM businesses were equally likely to have expressed an interest in public sector work. Just under a fifth of businesses (17.8% of EM and 63
  • 64. 64 18.0% of non-EM) had expressed an interest in the past 12 months in at least one contract advertised by the public sector, such as the local authority or health service authority. • Expression of interest was higher among female-led EM businesses (26.3%) than male-led EM businesses (15.8%). • Over a fifth of Black employers (22.6%) had expressed an interest compared with only 5.6 per cent of Chinese businesses. This could relate to business type, with Black businesses being more likely to be in production than Chinese businesses. Of those who had expressed an interest in this work, a good proportion (over 80%) had done some business for the public sector in the past 12 months. 7.3 Small businesses and youth Background One of the SBS key themes is in building an enterprise culture. A key objective in this is to provide people with a sufficient level of understanding to enable them to make an informed choice between employment and enterprise. For the latter to grow there needs to be a culture which gives confidence to those people who have the initiative, skills and drive to start and run a successful business. Young people are influenced not only by friends and family, but also by work experience and the media. There are a number of organisations that help young people learn about business. Respondents in the ASBS were asked whether they had heard of any of these.
  • 65. 65 Table 7.5: Percentage of businesses aware of organisations working with young people by ethnicity. Businesses with employees only. Young Enterprise Princes Trust Business Dynamics Business in the Community Shell LiveWIRE Academy of Enterprise Education Business Partnerships None Unweighted n Indian 49.5 79.8 13.7 30.5 5.4 9.2 22.5 12.3 548 Pakistani 51.4 77.3 12.0 23.5 3.5 14.0 31.3 16.9 210 Other Asian (incl. Bangladeshi) 37.7 62.6 12.0 19.9 7.8 7.9 26.2 29.3 111 Black 36.0 84.3 12.2 34.4 16.6 9.0 30.8 12.5 110 Chinese 40.6 52.4 11.1 23.5 8.6 10.3 15.1 32.6 112 Other 42.7 74.9 8.3 27.9 3.3 12.9 29.1 18.0 157 Total (EM) Men Women Equal 46.1 45.2 49.3 47.1 74.3 73.6 76.1 75.4 12.6 11.6 13.3 14.9 27.9 24.8 21.0 38.5 6.4 5.4 7.5 8.6 10.1 9.2 10.0 24.4 22.4 17.7 32.2 17.8 18.8 17.6 15.6 *1231 849 12.6 124 258 Total (non-EM) 53.4 89.2 6.9 38.1 5.9 4.1 25.0 4011 5242 7.1 8.1Total (All) 52.7 87.8 7.5 37.1 5.9 3.8 24.9 England weighted data. n=5242 Note: * n=1248 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community.
  • 66. Among businesses with employees: • Generally, awareness levels are high for these organisations, although it tends to be a little lower for EM businesses than non-EM businesses. • Knowledge is varied among different EM businesses. • The Princes Trust is the most known about organisation that helps young people learn about business. Almost three-quarters (74.3%) of EM businesses and 9 in 10 (89.2%) of non-EM businesses had heard of it. • Young Enterprise, Business in the Community and Education Business Partnerships were also fairly well known (52.7%, 37.1% and 24.9% respectively among all employers). Equal-led EM businesses (38.5%) were significantly more likely to have heard about Business in the Community than either male-led (24.8%) or female-led (21.0%) EM businesses. • Within EM businesses, a higher proportion of Indian, Pakistani and Black businesses tended to have heard of organisations than other ethnic groups. • A lower proportion of EM businesses (17.8%) compared with 7.1 per cent of non-EM businesses had not heard of any of the organisations. This was highest among Chinese (32.6%) and Other Asian businesses (29.3%). Although the sample sizes are too small to draw substantive conclusions, it would appear that female-led EM businesses are more likely to have some involvement with such organisations. Summary • Among businesses with employees, EM businesses were less likely to have sought any general business advice or advice about regulations over the last 12 months, than non-EM businesses (section 7.1.3). • Among businesses with employees, a lower proportion of EM businesses had contact with government over the last year than non-EM businesses (section 7.2.1). • Contact with government for all businesses was highest for VAT related areas (section 7.2.1). • Among businesses with employees, EM and non-EM businesses were equally likely (18%) to have expressed an interest in public sector work and also to have done some work in the past 12 months. This varied, however, between ethnic groups (section 7.2.3). 66
  • 67. 8. Experience and Perceptions This chapter deals with growth among small businesses, both actual past growth and anticipated future growth. It also addresses some of the barriers and obstacles that businesses face. The perceived experience of discrimination and business experience of crime is also looked at. 8.1 Business objectives and growth This section reports on businesses’ intentions to grow and how they anticipate achieving this growth. The rationales for growth and for not growing are also addressed. 8.1.1 Recent and anticipated employment growth Respondents were asked about job growth in the past year (A8.1). • Twenty point six per cent of EM businesses with employees had increased their employment in the last year, compared with 18.4 per cent of non-EM employers. This was higher among EM female-led businesses (29.1%) than either EM male-led (20.2%) or equal-led EM businesses (18.1%). • For almost two-thirds (64.9% of EM employers and 64.4% of non-EM employers), the number of employees had stayed the same. • Eleven point two per cent of EM employers had reduced their headcount. This compares to 16.2 per cent of non-EM employers. In order to derive a wider indicator of growth trends among small businesses, past and anticipated job growth were combined into a single indicator. The categories for this are as follows: • Sustained growth: Employment grew in the past year and expected to grow again in the next one. • Contained growth: Employment grew in the past year but was not expected to grow again in the next one. • New growth: Employment did not grow in the past year but expected to grow again in the next one. • No growth: No employment growth in the past year, not expected any in the next one. This measure of growth is very much about perception and confidence, and therefore may not relate to a proper assessment of growth potential in some cases. 67
  • 68. Table 8.1: Past and anticipated job growth: Percentage in each category. Businesses with employees only Sustained growth Contained growth New growth No growth Unweighted n Indian 10.4 7.3 15.1 66.9 594 Pakistani 10.6 14.0 20.8 53.6 240 Other Asian (incl. Bangladeshi) 11.4 10.0 15.4 59.2 126 Black 20.3 11.0 35.7 32.4 117 Chinese 2.7 9.3 12.4 75.6 122 Other 13.8 11.9 17.0 56.9 172 Total (EM) Men Women Equal 11.1 9.8 12.5 13.7 9.5 10.4 16.6 4.4 17.5 16.9 11.9 21.4 61.2 62.1 58.9 59.7 *1357 939 132 286 Total (non-EM) 8.6 9.6 15.5 66.0 4224 Total (All) 8.9 9.6 15.7 65.5 5581 England weighted data. n=5581 Note: * n=1371 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community. Among businesses with employees: • On average, anticipated sustained growth is slightly higher among EM businesses than non-EM businesses (11.1% and 8.6% respectively), and significantly higher among Black businesses (20.3%). • Only a third of Black businesses (32.4%) fell into the category of ‘No growth’, which is significantly lower than the average for EM businesses (61.2%). More Black businesses (35.7%) compared to all EM businesses (17.5%) expected new growth. • Chinese businesses were the least likely to have sustained growth, and three- quarters (75.6%) had no employment growth in the past year and did not expect any in the next one. This is likely to be related to the fact that most are in the catering industry, which tends not to expand in the same way as other sectors. 8.1.2 Intention to grow the business Respondents were asked whether or not they intended to grow their businesses over the next two to three years. The form of this growth was not specified; rather the respondent could cover anything they considered to be growth. 68
  • 69. Table 8.2: Intention to grow the business over next 2 to 3 years. Businesses with employees only Yes – intend to grow % Unweighted n Indian 58.5 594 Pakistani 71.1 241 Other Asian (incl. Bangladeshi) 64.8 126 Black 92.4 117 Chinese 44.8 122 Other 60.5 172 Total (EM) Men Women Equal 62.4 62.8 *1358 940 64.2 132 60.6 286 Total (non-EM) 61.4 4224 Total (All) 61.5 5582 England weighted data. n=5582 Note: * n=1371 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community. Among businesses with employees: • There is little overall difference between EM and non-EM businesses in terms of intention to grow. Approximately three in five businesses with employees intend to grow (63.4% of EM businesses and 61.4% of non-EM businesses). • However, within ethnic groups there is a mix of intentions. Black businesses (92.4%) were significantly more likely to expect to grow than other EM businesses, and Chinese businesses (44.8%) were significantly less likely. This is likely to reflect a higher level of confidence among Black businesses, but can also be related to sectoral growth and to the age of the business. 8.1.3 Means of achieving growth The respondents who said that they intended to grow their business during the next two to three years were asked how they were looking to achieve this. The answers to the multi-response question were then coded into six categories (see Table 8.3) 69
  • 70. 70 Table 8.3: Means of achieving business growth by ethnicity. Percentage in each category. All employers who intended to grow Increase profit Increase turnover / sales Take on more staff Increase product range Enter new markets Expand / New premises Unweighted n Indian 4.3 46.9 9.0 16.8 17.5 28.1 331 Pakistani 3.2 42.5 4.3 9.5 24.6 38.0 141 Other Asian (incl. Bangladeshi) 8.2 50.1 7.3 14.6 9.9 31.9 79 Black 6.9 58.3 20.9 9.1 27.3 25.4 89 Chinese 7.9 40.5 7.2 6.1 7.3 30.5 49 Other - 49.9 19.1 18.4 17.8 23.4 104 Total (EM) Men Women Equal 4.7 4.8 9.2 2.4 48.8 49.9 50.9 45.1 11.3 9.1 14.8 15.5 13.7 13.2 17.7 13.4 18.4 17.5 15.8 21.7 28.2 27.8 27 29.7 *775 534 78 163 Total (non-EM) 8.3 58.3 14.0 15.2 15.8 15.9 2920 Total (All) 7.9 57.4 13.8 15.1 16.1 17.1 3695 England weighted data. All employers who intended to grow. N=3695. Note 1: * n=793 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community Note 2: small sample sizes for some groups Among employers who intended to grow: • For both EM and non-EM businesses who intend to grow, increasing turnover / sales is the most likely approach (48.8% and 58.3% respectively). • Property expansion can also be a key route for expansion for some EM businesses. Almost three in ten EM businesses (28.2%) sought growth through expanding their premises compared with 15.9 per cent of non-EM businesses. This was highest among Pakistani businesses (38.0%). • Increasing sales as a route to achieving business growth was highest among Black businesses (58.3%) and lowest among Chinese businesses (40.5%). • Approximately a quarter of Pakistani businesses (24.6%) and Black businesses (27.3%) looked to grow by entering new markets. Less than 10 per cent of Chinese businesses (7.3%) and Other Asian businesses (9.9%) cited this route. • A fifth (20.9%) of Black businesses expected to achieve growth by taking on more staff. This was almost double the EM average (11.3%). 8.1.4 Rationales for growth Respondents intending to grow were also asked why they were seeking this growth. The answers were again grouped into a number of categories shown in Table 8.4.
  • 71. 71 Table 8.4: Rationales for achieving business growth by ethnicity. All employers who intended to grow Increase profit % Increase turnover / sales % Jobs, family / colleagues % Increase product availability % Survival % Long term security % Opportunity exists % Unweighted Indian 40.6 30.9 1.7 8.6 10.5 9.6 10.3 373 Pakistani 27.6 31.4 2.7 11.1 9.7 7.0 10.1 171 Other Asian (incl. Bangladeshi) 32.3 20.7 1.2 10.7 14.7 6.0 13.9 86 Black 57.0 20.3 1.9 10.4 11.2 1.4 11.7 103 Chinese 37.5 25.6 - 9.2 5.3 5.6 8.7 58 Other 42.5 35.0 0.1 11.8 8.1 1.1 6.1 113 Total (EM) Men Women Equal 42.3 38.5 45.4 51.1 28.2 31.1 20.9 23.8 1.7 1.9 - 1.7 9.3 8.5 20.0 7.0 9.8 8.6 14.4 11.1 6.6 8.0 6.7 2.6 10.5 9.3 12.0 13.2 *883 618 87 178 Total (non-EM) 53.1 21.1 2.0 5.1 2921 3804 12.0 10.7 8.3 Total (All) 52.0 21.8 2.0 5.5 11.8 10.3 8.5 England weighted data. n=3804 Note: * n=904 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community.
  • 72. Among employers who intended to grow: • There is little overall difference between EM and non-EM businesses in terms of rationales for achieving business growth. Increasing profit, turnover or sales were cited by 70.5 per cent of EM and 74.2 per cent of non-EM businesses. • Among ethnic groups, however, rationales differ significantly. More non-EM businesses (53.1%) than EM businesses (42.3%) intended to grow as a means of increasing their profits or net income. Black businesses were the most likely to cite this (57.0%) and Pakistani businesses the least (27.6%). • Male-led EM businesses were more likely to cite increasing turnover or sales as a reason of growing (31.1%) than female-led businesses (20.9%). However female-led businesses were more likely to seek growth by increasing product availability (20.0%) than male-led businesses (8.5%). • Asian businesses (9.6% of Indian, 7.0% of Pakistani and 6.0% of Other Asian businesses) were much more likely than other EM businesses (5.6% of Chinese, 1.4% of Black and 1.1% of Other businesses) to cite issues of long- term security in terms of viewing growth as important. 8.1.5 Rationales for not growing The 38.5 per cent of respondents in England who said they did not intend to grow during the coming two or three years were asked why they not looking to do so. The full multi-response answers can be seen in Table 8.5. Table 8.5 shows the main rationales for not growing, for each ethnic group. 72
  • 73. Table 8.5: Top three reasons for not growing by ethnicity. Employers who did not intend to grow 1 2 3 Indian Happy at present size (23.6%) Market won’t support (14.7%) Looking to retire / close down (13.9%) Pakistani Happy at present size (27.5%) Market won’t support (17.3%) Haven’t considered it (16.9%) Other Asian (incl. Bangladeshi) * * * Black * * * Chinese Happy at present size (36.8%) Insufficient resources (25.9%) Looking to retire / close down (14.5%) Other Market won’t support (22.8%) Happy at present size (18.3%) Insufficient resources (15.8%) Total (EM) Men Women Equal Happy at present size (26.7%) Happy at present size (25.5%) * Insufficient resources (14.4%) Market won’t support (15.2%) * Insufficient resources (15.3%) Market won’t support (14.1%) Insufficient resources (14.4%) * Happy at present size (23.9%) Market won’t support (13.7%) Total (non-EM) Happy at present size (33.2%) Looking to retire / close down (20.3%) Insufficient resources and Market won’t support (13.6% each) Total (All) Happy at present size (32.6%) Looking to retire / close down (19.6%) Insufficient resources (13.7%) England weighted data. All employers who did not intend to grow. n=1777 * Sample sizes were less than 50 and therefore too small to be included in this table Of employers who did not intend to grow: • The most frequently cited reason for businesses not growing was being content with their present size. This was the case for approximately a quarter (26.7%) of EM businesses and a third (33.2%) of non-EM businesses. Chinese businesses (36.8%) were the most likely to mention this as a reason for not growing. • 13.8 per cent of EM businesses compared to a fifth (20.3%) of non-EM businesses said they were looking to retire or close down the business. • Insufficient resources and market constraints were the second main reasons for EM businesses not looking to grow. • A quarter (25.9%) of Chinese businesses not looking to grow said that they had insufficient resources. This compares with 14.4 per cent of EM businesses in general, but less than five per cent of Pakistani businesses. • Pakistani businesses were significantly more likely to say that they had not considered growing (16.9%) than either the EM average (5.5%) or non-EM businesses (1.4%). 73
  • 74. 8.1.6 Small business perspectives on growth The sections above looked at businesses who were aiming to grow, and those who were not. It also identified the reasons for this. The following section looks at all businesses with employees and categorises them into four groups. The distinction is made between businesses that are aiming to grow, those who do not want to grow, those who do not think the conditions are right for growth, and those who are, to some extent, prevented from growing. The categories are: • Proposing to grow • Not proposing to grow, because: o Happy with present size o Wish to remain independent o Wish to reduce the number of hours worked o Looking to retire or close down the business o Hadn’t thought about it o No reason / other reason • Market constraints; not proposing to grow, because o Market wouldn’t support growth • Resource constraints; not proposing to grow, because: o Too complicated to take on staff o Prevented by regulations o Too costly / would need to get into debt o Too risky o Don’t have the resources to grow, e.g. space, people. Table 8.6: Business perspectives on growth. Percentage in each category. Businesses with employees only Aim to grow Don’t aim to grow Market constraints Resource constraints Unweighted n Indian 58.5 24.8 6.1 10.6 594 Pakistani 71.1 22.5 5.0 1.4 241 Other Asian (incl. Bangladeshi) 64.8 20.4 4.8 10.0 126 Black 92.4 5.2 1.5 0.9 117 Chinese 44.8 32.3 4.0 18.4 122 Other 60.5 21.7 9.0 8.8 172 Total (EM) Men Women Equal 62.4 62.8 64.2 60.6 23.4 23.0 26.2 23.3 5.3 5.6 2.8 5.4 8.9 8.6 6.7 10.6 *1358 940 132 286 Total (non-EM) 61.4 23.7 4.9 10.0 4224 Total (All) 61.5 23.6 4.9 9.9 5582 England weighted data. n=5582 Note: * n=1372 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community. 74
  • 75. 75 Table 8.6 shows that among businesses with employees: • Overall, there is very little difference between EM and non-EM businesses. All businesses with employees were equally likely to expect to grow their business (62.4% of EM and 61.4% of non-EM businesses). • There are, however, some significant differences between ethnic groups. Black businesses are the most likely to expect to grow (92.4%), and Chinese businesses the least (44.8%). • Almost a fifth (18.4%) of Chinese businesses mentioned resource constraints as an issue. This is significantly higher than the average for all EM businesses (8.9%). 8.2 Barriers and Obstacles to achieving business objectives This section looks at what obstacles, including specific regulations, have an impact on the success of a business and what the effect is. 8.2.1 Overall incidence of obstacles to business Respondents were asked what they saw as the main obstacles to the success of the business in general. The question was first asked unprompted and then with prompted responses. Table 8.7 gives the overall percentage (combined prompted and unprompted) for each obstacle. It should be noted that more than one response could be mentioned.
  • 76. 76 Table 8.7: Obstacles to the success of business by ethnicity. Percentage in each category. Businesses with employees only. The economy Obtaining finance Cash flow Taxati -on Recruiting staff Keeping staff Transport issues Lack of broad- band access Regulations Keeping up with new technology Availability / cost of premises Competition Shortage of managerial skills / expertise Other None Unweighted n Indian 36.4 23.6 26.8 36.1 34.5 23.3 17.6 2.8 36.1 18.3 25.9 52.4 18.2 26.5 29.0 594 Pakistani 40.2 25.7 31.2 43.4 40.7 26.7 19.7 7.5 36.3 22.6 35.2 54.2 19.1 32.3 36.5 241 Other Asian (incl. Bangladeshi) 45.3 19.5 36.2 36.6 42.3 29.5 18.1 4.0 29.6 13.2 31.6 62.6 24.9 31.3 32.5 126 Black 60.5 57.9 59.0 48.4 46.0 35.5 38.5 8.3 44.8 11.9 37.6 42.4 22.7 15.9 18.8 117 Chinese 33.5 13.7 19.2 28.5 32.5 23.6 11.1 1.6 13.9 13.1 25.0 71.4 14.3 26.8 36.9 122 Other 44.3 24.7 33.9 43.1 43.0 18.5 21.5 3.6 37.1 13.6 27.3 50.7 24.4 41.3 26.7 172 Total (EM) Men Women Equal 40.9 38.1 47.6 45.5 25.3 25.3 35.3 21.5 31.5 30.2 40.7 31.1 39.2 38.9 50.6 35.6 38.5 35.8 39.5 45.0 25.0 24.0 28.9 25.8 20.3 20.2 19.6 20.8 4.4 4.0 5.6 4.7 34.1 32.7 42.5 34.4 16.5 17.8 21.0 11.3 29.0 29.4 27.4 28.6 53.6 54.8 50.1 52.2 20.4 20.5 29.4 16.5 29.0 26.4 22.0 38.7 29.7 29.8 29.5 29.5 *1358 940 132 286 Total (non- EM) 49.2 14.1 35.4 46.8 34.8 13.7 20.1 7.6 48.6 13.9 21.4 48.3 15.9 25.0 16.3 4224 Total (All) 48.4 15.2 558219.535.0 46.0 35.1 14.8 20.1 7.3 47.2 14.2 22.2 48.8 16.3 25.4 England weighted data. n=5582 Note: * n=1372 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community.
  • 77. Among businesses with employees: • EM businesses share many of the same concerns as non-EM businesses, for instance the economy and competition. However, they appear less concerned than non-EM businesses about regulations and taxation, and more about staffing, premises and obtaining finance. • The economy (48.4%), competition (48.8%), regulations (47.2%) and taxation (46%) were the most frequently cited obstacles. Other than competition, EM businesses were less likely to cite these barriers than non-EM businesses. • Almost three in ten (29.0%) EM businesses mentioned the availability or cost of premises as an obstacle, and a quarter cited obtaining finance (25.3%) and keeping staff (25.0%) as obstacles. A further 38.5 per cent mentioned recruiting staff as an obstacle. Recruiting and keeping staff was seen as more of an obstacle for EM businesses (63.5%) than non-EM businesses (48.5%). • Black businesses were more likely to have mentioned most obstacles than any other ethnic group. However, they were the least likely to cite competition (42.4% compared to a EM average of 53.6%). • Over half (50.6%) of EM female-led businesses cited taxation as obstacles to the success of their business. This compares to 38.9 per cent of EM male-led businesses. • Chinese businesses were less likely than other ethnic groups to have mentioned most obstacles. However, 71.4 per cent of Chinese businesses felt that competition was an obstacle to the success of their business. This is significantly higher than the EM average of 53.6 per cent. 8.2.2 Greatest obstacles to business. Respondents were asked, from the obstacles already given, which was the biggest obstacle to the success of their business. Table A8.3 shows the full breakdown of greatest obstacles. Table 8.8 gives the top five obstacles. 77
  • 78. Table 8.8: Greatest 5 obstacles to the success of the business. Businesses with employees only 1 2 3 4 5 Indian Competition (22.4%) Recruiting staff (12.1%) Regulations (9.7%) The economy (7.4%) Taxation (7.4%) Pakistani Competition (21.6%) Recruiting staff (10.2%) Cash flow (9.2%) Premises (8.2%) Regulations (7.1%) Other Asian (incl. Bangladeshi) Competition (25.1%) Recruiting staff (14%) Taxation (9.8%) The economy (8.0%) Regulations (6.5%) Black Obtaining finance (21.7%) Recruiting staff (12.7%) Regulations (12.2%) Competition (11.2%) Cash flow (9.2%) Chinese Competition (40.6%) Recruiting staff (18.0%) The economy (7.6%) Premises (6.3%) Obtaining finance (3.2%) Other Competition (16.4%) The economy (16.0%) Recruiting staff (11.9%) Regulations (10.1%) Cash flow (8.2%) Total (EM) Men Women Equal Competition (21.6%) Competition (24.1%) Competition (21.8%) Competition (15.1%) Recruiting staff (13.3%) Recruiting staff (14.0%) Taxation (17.3%) The economy (13.9%) The economy (8.6%) Regulations (8.5%) Obtaining finance (13.4%) Regulations (8.4) Taxation (6.9%) Recruiting staff (9.3%) Taxation (7.5%) The economy (6.8%) Premises (7.5%) Taxation (5.3%) Recruiting staff (13.2%) Regulations (8.9%) Total (non-EM) Competition (16.6%) Regulations (16.3%) The economy (13.2%) Taxation (10.1%) Recruiting staff (9.8%) Total (All) Competition (17.1%) Regulations (15.6%) The economy (12.8%) Recruiting staff (10.2%) Taxation (9.9%) England weighted data. n=5343 Among businesses with employees: • Competition was most often cited as the main obstacle to the success of the business (21.6% of EM businesses and 16.6% of non-EM businesses). This was highest among Chinese businesses (40.6%), and lowest among Black businesses (11.2%). • Recruiting staff was seen as the next biggest obstacle among EM businesses (again, highest among Chinese businesses). Regulations were the second biggest obstacle for non-EM businesses. 78
  • 79. 79 • The most cited obstacle among Black businesses was obtaining finance (21.7%). This obstacle was also cited more often among female-led EM businesses (13.4%) than either male-led (6.7%) or equal-led (4.5%) EM businesses. • The third greatest obstacle amongst EM businesses varied substantially between ethnic group, including regulations (Indian and Black businesses), cash flow (Pakistani businesses), taxation (Other Asian businesses) and the economy (Chinese). 8.2.3 Effect of greatest obstacle on business Respondents were asked how the greatest obstacle had actually affected their business.
  • 80. 80 Table 8.9: Effect of the greatest obstacle on business. Percentage in each category. Businesses with employees only Reduces sales Can’t increase sales Profit margin lower /costs higher Takes management or staff time Reduced capacity Needs / can’t get cash for investment Needs / can’t get cash for working capital Other Unweighted n Indian 38.2 13.1 12.3 13.1 11.8 7.5 4.0 13.8 420 Pakistani 30.2 17.9 10.8 10.2 15.6 5.7 7.2 8.4 168 Other Asian (incl. Bangladeshi) 36.1 10.6 20.2 13.2 7.6 4.1 3.0 14.2 87 Black 18.4 22.4 10.0 14.1 20.8 13.1 8.6 7.0 83 Chinese 50.0 9.4 10.8 12.1 7.2 2.8 5.5 9.3 89 Other 41.3 16.5 10.7 5.9 16.6 6.3 4.8 9.6 127 Total (EM) Men Women Equal 36.0 34.9 30.5 40.9 14.6 17.0 11.9 9.2 11.7 12.0 14.6 10.0 12.2 11.1 11.8 15.2 13.4 11.9 22.0 14.3 6.5 6.6 7.1 6.0 5.1 5.3 8.8 3.5 11.0 11.8 8.7 9.6 *964 673 90 201 Total (non-EM) 31.6 17.8 13.7 8.9 12.6 5.5 2908 3872 13.78.9 13.4Total (All) 32.1 17.5 13.5 9.3 12.7 5.6 8.5 England weighted data. n=3872 Note: * n=974 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community.
  • 81. 81 Among businesses with employees: • The effect mentioned by the largest proportion of all employers was that of reducing sales. 36.0 per cent of EM and 31.6 per cent of non-EM businesses mentioned this. This was substantially greater among Chinese businesses (50.0%) and lower among Black businesses (18.4%). • The inability to increase sales was mentioned by 17.5 per cent of employers (14.6% of EM and 17.8% of non-EM). It was highest among Black businesses at just over a fifth (22.4%) and lowest among Chinese businesses (9.4%). • Black businesses were substantially more likely to say that they could not get cash for investment (13.1%) than other EM businesses (6.5% on average). • A fifth (20.2%) of other Asian businesses cited lowered profit margins / or increased costs. This was higher than the EM average of 11.7 per cent. 8.2.4 Regulations as an obstacle to business Background The government’s main objective in developing better regulation and policy is to reduce the regulatory burden on small businesses, particularly those that act as a barrier to start-up and growth, and improve the ability of small businesses to sell to the public sector. There are a number of different regulations for small businesses, for example those related to health and safety, employment, registering for VAT and renting premises. The costs of complying with legislation and controls associated with regulations can bear disproportionately on smaller businesses. Approximately a third (34.1%) of EM businesses and just under half (48.6%) of non- EM businesses thought that regulations acted in a way that placed obstacles in the way of their business’s success. Table 8.10 shows which of these regulations are considered to be obstacles to the success of businesses. The small sample size for some of the individual ethnic groups means that the interpretations of the findings should be treated with some caution.
  • 82. 82 Table 8.10: Which regulations are obstacles to business. Percentage in each category. Businesses with employees only England weighted data .n N=2925. Note-caution over some small sample sizes Note: * n=518 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic community. Minimum wage Health & Safety Env. Regulation s Planning Tax- related Employment protection Information / record keeping Trading Standards Working Time No specific / all regulations Sector specific None Unweighted n Indian 5.2 22.0 6.4 3.3 4.3 5.9 3.9 6.3 3.3 29.3 19.6 3.7 242 3.5 23.1 9.1 9.9 17.1 0.6 4.5 0.1 4.7 16.8 19.7 1.1 86Pakistani 1.3 16.4 2.2 7.4 5.5 5.6 - - 2.2 29.2 27.2 7.4 47Other Asian (incl. Bangladeshi) 1.1 10.6 - - 15.4 5.1 - 5.5 2.5 16.8 26.3 1.3 54Black - 29.5 - 4.1 - 0 - - - 8.1 50.2 6.2 25Chinese Other 3.9 21.3 0.2 8.0 10.0 13 0.7 1.2 2.8 24.8 15.7 9.1 64 Total (EM) Men Women Equal 3.6 2.6 1.6 6.8 19.8 21.8 4.4 22.5 4.3 7.0 - - 5.1 5.6 4.4 4.2 9.0 6.7 4.4 16.6 5.6 3.3 8.5 9.7 2.5 3.7 - 0.6 3.6 4.8 0.3 2.1 3.1 3.5 - 3.7 23.2 24.1 21.4 21.8 21.3 22.2 28.5 15.5 4.7 3.6 15.7 1.9 *512 341 56 115 2.6 29.9 4.0 6.6 4.2 12.2 2.0 0.6 2.8 22.8 17.3 3.9 2413 4.022.8 17.60.8 2.82.111.7 Total (non-EM) Total (All) 2.7 29.2 4.0 6.5 4.5 2925
  • 83. Among businesses with employees: • Overall there is little difference, except for health and safety, between EM and non-EM businesses. • Health and safety regulations were cited as an obstacle by a greater proportion of non-EM (29.9%) than EM (19.8%) businesses. • Within EM businesses the proportion citing health and safety regulations as an obstacle differed substantially. For instance, 29.5 per cent of Chinese businesses but just one in ten (10.6%) of Black businesses mentioned this. Less than five per cent (4.4%) of female-run EM businesses believe health and safety regulations to be an obstacle, compared with 21.8 per cent of male-run EM businesses. • Sector specific regulations were seen as causing barriers to the success of business in 21.3 per cent of EM businesses and 17.3 per cent of non-EM businesses. • Tax-related regulations were cited more often among Pakistani (17.1%), Black (15.4%) and equal-led EM businesses (16.6%) than other businesses. • Over a fifth of (23.2% of EM and 22.8% of non-EM) said that there were no specific regulations that were barriers, just regulations in general. • Less than five per cent of EM and non-EM businesses said that regulations did not act as an obstacle to the success of the business. The ways in which respondents claimed these regulations act as an obstacle to the success of the business are summarised in Table A8.4. As with Table 8.10, some caution should be taken when interpreting the results due to some sample sizes below 50. Among businesses with employees: • Administration time and costs, and costs of compliance (purchasing) are the greatest effects of regulations on businesses. Administration costs were cited by 41.2 per cent of EM businesses and 57.6 per cent of non-EM businesses. • Approximately a third (31.7%) of EM businesses mentioned costs of compliance, compared with 25.9 per cent of non-EM businesses. This was particularly marked among Pakistani businesses (44.6%). • Indian (12.4%) and Pakistani (11.7%) businesses were more likely to mention the time involved in obtaining advice as creating an obstacle than other businesses. 8.3 Discrimination against minority businesses This section of the chapter reports on whether businesses felt that they had suffered any form of discrimination. It should be noted that discrimination was “self-defined” rather than specified. Questions on discrimination were only asked of a specific sub- sample (businesses in the 15 per cent most deprived wards) and therefore the results are not intended to be representative of small businesses as a whole. Respondents were asked whether they had encountered any form of discrimination in the course of running the business in the past two or three years. 83
  • 84. 8.3.1 Incidence of discrimination Figure 8.1: Percentage Incidence of discrimination by ethnicity. Employers in deprived wards 16.9 14.5 13.7 12.9 10.9 10.8 21.3 16.6 11.5 14 11.7 12.1 0 5 10 15 20 25 Black Pakistani Indian O ther C hineseO therAsian EM equal-ow ned EM equal-ow ned EM m ale-ow ned EM total N on-EM totalTotal-all Percent England weighted data. Employers only in deprived wards boost. n=3088 Among employers in deprived wards: • EM businesses were a little more likely to say that they had experienced discrimination than non-EM businesses (Figure 8.1). 14% of EM businesses compared to 11.7 per cent of non-EM businesses said that they had encountered some form of discrimination in the course of running their business in the past two or three years. • A fifth (21.3%) of equal-led EM businesses said they had been discriminated against, compared with 16.6 per cent of female-led and 11.5 per cent of male- led. • Black businesses (16.9%) were the most likely to feel they had suffered some form of discrimination and Chinese and Other Asian the least (10.9% and 10.8% respectively) 8.3.2 Source of discrimination Businesses who said they had encountered discrimination in the past two or three years were asked the sources of discrimination against them (Table 8.11). Sample sizes for different ethnic groups were too small to report on separately. 84
  • 85. Table 8.11: Sources of discrimination. Employers in deprived wards EM % Non-EM % All % Bank / finance provider 9.7 13.6 13.0 Employer 1.9 0.4 0.7 Employee 4.4 2.1 2.4 Customer 47.8 25.9 29.5 Supplier 8.7 4.0 4.8 Landlord 1.8 1.2 1.3 Advisor 1.8 0.3 0.6 Other business owners 4.0 13.6 12.0 Other 33.8 47.5 45.2 Unweighted n 140 242 375 England weighted data. Employers only in deprived wards boost. n=375 EM= 140 non=EM 235 Among employers in deprived wards: • Although the pattern of discrimination is much the same for EM and non-EM businesses, EM businesses tend to report higher levels under most categories. • For both EM and non-EM businesses that felt they had been discriminated against, customers were the most often cited as the source of this. This was higher among EM businesses (47.8%) than non-EM businesses (25.9%). • Almost one in ten (8.7%) EM businesses said it was a supplier who discriminated against them. • For non-EM businesses, bank / finance provider and other business owners each accounted for 13.6 per cent of the discrimination. The figures for EM businesses, perhaps surprisingly, were 9.7 per cent and 4.0 per cent respectively. • “Other” reasons were given by a third of EM businesses and almost half of non-EM businesses. These suggest that experience can be wide and varied. 8.3.3 Basis of discrimination Businesses who had one or more experience(s) of discrimination were then asked what had been the basis of the (most serious) case that they had experienced. 85
  • 86. Table 8.12: Basis for discrimination: Percentage in each category. Employers in deprived wards who experienced discrimination Race Gender Disability Age (too old) Age (too young) Business size Other Unweighted n Total (EM) 55.0 0.4 - - 3.6 36.2 20.8 140 Total (non- EM) 5.1 7.3 0.9 0.9 - 56.4 35.3 2343 Total 13.4 6.2 0.8 0.7 0.6 53.1 23.9 374 England weighted data. n=374 Among employers in deprived wards who had experienced discrimination: • Over half of EM businesses (55.0%) felt they had been discriminated against on the grounds of their race. This was the case for one in twenty (5.1%) of non-EM businesses experiencing discrimination. • Among non-EM businesses, the greatest reason given for discrimination was the size of the business (56.4%). This was also mentioned by just over a third (36.2%) of EM businesses. 8.3.4 Impact on business Businesses who had one or more experience of discrimination were asked whether or not this discrimination had presented as an obstacle to the success of their business. Figure 8.2: Proportion saying discrimination was an obstacle to the success of their business: Employers in deprived wards who had experienced discrimination. 24 23.2 19.8 15.4 14.8 13.6 20.3 11.6 12.8 0 5 10 15 20 25 30 Indian Black O ther Pakistani Chinese O therA sian EM totalN on-EM total Total-all Percentage England weighted data. Unweighted n=3085 Among employers in deprived wards who had experienced discrimination: 86
  • 87. • A higher proportion of EM businesses than non-EM businesses said that discrimination was an obstacle to the success of the business (20.3% compared with 11.6%). • Almost a quarter of Indian and Black businesses cited this as an obstacle. 8.4 Crime A number of questions on crime were asked to half the English sample. These covered perceptions of whether crime is a problem, whether businesses had been subject to any criminal activity, and if so, what type of crime this was and what the effect had been. 8.4.1 Whether crime is a problem Respondents were asked how big a problem crime is in relation to their premises and the area around them. Figure 8.3: Percentage saying crime is a very / fairly big problem. Businesses with employees only 49.6 38.3 36.5 34.8 30.1 27 45.5 38.8 35.4 37.2 31.2 32.1 0 10 20 30 40 50 60 Pakistani IndianO therA sian O ther Black Chinese EM fem ale-ow ned EM equalow ned EM m ale-ow ned EM total N on-EM total Total-all Percent Weighted partial sample: 50 per cent of English employers. N=3013 Among businesses with employees: • A higher proportion of EM businesses (37.2%) than non-EM businesses (31.2%) say that crime is a very or fairly big problem in relation to their premises and the area around them. • Almost half (45.5%) of female-led EM businesses believe crime is a very or fairly big problem, compared with 35.4 per cent of male-led and 38.8 per cent of equal-led EM businesses. • Approximately half of Pakistani businesses (49.6%) believe crime is a very or fairly big problem. • Chinese businesses were the least likely (27.0%) to believe crime was a problem. Respondents were asked whether their business had been a ‘victim of crime’ in the last 12 months. The definition here included incidents in which the respondent, or their members of staff, had been a victim of crime, whilst carrying out the business. Approaching a third (30.5%) of EM businesses (sole traders and employers) had been 87
  • 88. a victim of crime on at least one occasion, compared with 21.2 per cent of non-EM businesses. This was highest among Asian businesses (36.4% of Pakistani, 32.8% of Indian and 35.4% of Other Asian businesses) and lowest among Black businesses (15.2%). However, when looking at only businesses with employees, a slightly higher proportion (34.7% of EM businesses and 35.3% of non-EM businesses) had been a victim on at least one occasion. Approximately a quarter of Indian (23.4%) and Pakistani (25.6%) had been a victim on several occasions. Two out of every five (40.2%) of female-led EM businesses had been a victim on at least one occasion in the last 12 months. 8.4.2 Type of crime Those businesses that had been subject to any kind of criminal activity in the past year were asked some questions about the type of crime and its affect on the business. Figure 8.4: Percentage of types of crime reported by small business employers 1.8 2.7 3 2.1 14.1 5.9 31.8 8.4 29.2 36.7 1 1.6 3.9 5.7 8 14.1 20.4 21.9 27.9 30.8 0 5 10 15 20 25 30 35 40 Arson Theft by staff Fraud Violent crime Vehicle crime Robbery Criminal damage Anti-social behaviour Burglary Theft by others Percentage EM business Non-EM business Weighted partial sample: 50 per cent of English employers who had experienced crime in the past year. n=1243 Among businesses with employees: • Theft by others, criminal damage and burglary were all prominent crimes affecting businesses • EM businesses were much more likely to have experienced anti-social behaviour (21.9%) and robbery (14.1%) than non-EM businesses (8.4% and 88
  • 89. 5.9% respectively). Violent crime was also more prominent among EM businesses (5.7% compared with 2.1% for non-EM businesses). • Theft by staff, fraud and arson were less widespread, at less than 5.0 per cent of businesses 8.4.3 Effect on business Businesses who had experienced crime in the last 12 months were asked what effect this had had on the business. Figure 8.5: Impact of crime reported by employers who had experienced crime in the past year. Percentage in each category Impact of crime reported by employers 14.2 0.1 0.4 6.3 11.1 4.1 3.1 16 5.9 43 4.9 0.4 1.8 2.4 3.9 6.6 9.2 11.2 18.4 38.5 0 10 20 30 40 50 Other Recruitment problem Staff absence Uncertain Insurance Income loss, closure Loss of custom Cost of security Fear Cost of repair EM businesses Non-EM businesses Weighted partial sample: 50 per cent of English employers who had experienced crime in the past year. N=1242 Among employers who had experienced crime in the past year: • The most widely cited effect of the experience of crime is the costs of repair / replacement (43.0% of non-EM businesses and 38.5% of EM businesses). • The effect of fear on staff working behaviour was much more widely reported among EM businesses (18.4%) than non-EM businesses (5.9%), as was the loss of custom through fear of crime (9.2% compared with 3.1%). • Costs of security were mentioned by at least one in ten businesses (this was lower among EM businesses at 11.2% than non-EM businesses at 16.0%). 89
  • 90. • Less than one in twenty (3.9%) of EM businesses were affected by increased insurance premium compared with over one in ten (11.1%) of non-EM businesses. 8.5 Disability In order to establish the broad incidence of disability, respondents were asked whether they had any long-standing illness, disability or infirmity, which had troubled them over a period of time, or that was likely to affect them over a period of time. Where the respondent was part of a team, the question was extended to cover all the managers in the business. Table 8.13: Percentage Incidence of Disability among small businesses. All business and businesses with employees All businesses Businesses with employees Indian 7.2 7.1 Pakistani 6.9 5.0 Other Asian (incl. Bangladeshi) 8.2 11.3 Black 10.7 6.7 Chinese 2.1 0.5 Other 14.4 8.2 Total (EM) Men Women Equal 8.1 8.5 9.2 6.7 6.1 6.1 8.5 5.0 Total (non-EM) 9.4 8.8 Total 9.3 8.5 Unweighted n 6678 5582 England weighted data. • EM businesses report slightly lower levels of disability than non-EM businesses. • Businesses with employees tend to report slightly lower levels of disability than all businesses. This is more apparent within certain ethnic groups. For instance one in ten (10.7%) of all Black businesses reported disability, compared with 6.7 per cent of Black employers. Only Bangladeshi and Other Asian business employers reported a higher level of disability (11.3%) than all businesses within this ethnic group (8.2%). • Nearly one in ten (9.6%) of EM and non-EM (9.7%) sole traders had a disability of some kind. 90
  • 91. Summary • Approximately three-fifths of EM and non-EM businesses aim to grow over the next 2 to 3 years (section 8.1.2). • Confidence in growth is highest among Black businesses (section 8.1.2) • EM businesses are less concerned than non-EM businesses about regulations and taxation acting as barriers, and more about staffing, premises and obtaining finance (section 8.2.1). • Over half of EM businesses cited competition as an obstacle to the success of the business. This is seen as the main obstacle to business success among all businesses but was less so for Black businesses. For Black businesses the main obstacle was obtaining finance (section 8.2.1). • EM businesses were slightly more likely than non-EM businesses to say they had experienced discrimination (section 8.3.1). There were also more likely to say that discrimination was an obstacle to the success of the business (section 8.3.4). • Crime was seen as a problem by a higher proportion of EM businesses than non-EM businesses. This was particularly the case for Pakistani and female- led EM businesses (section 8.4.1). • About a third of all ethnic businesses compared to about a fifth of non-EM businesses had been a victim of crime on at least one occasion in the last twelve months. Among businesses with employees only, an equivalent proportion (approximately a third) had been a victim of crime in the past 12 months (section 8.4.1). • EM businesses were more likely to experience robbery and anti social behaviour than non-EM businesses (section 8.4.2). • The greatest effect of crime on businesses was costs of repair / replacement. Working behaviour was affected by fear for a greater proportion of EM businesses than for non-EM businesses (section 8.4.3). 91
  • 92. 9. Conclusion Almost one in ten employing businesses in England are led by people from ethnic minority (EM) groups. Their size and significance is considerable, and growing. However, up to now, our knowledge of EM businesses has been relatively limited, with much evidence relating to EM businesses as a single, homogeneous group. The Annual Small Business Survey 2003 ethnic booster takes us forward in terms of what we now know about businesses led by people of Indian, Pakistani, Other Asian, Chinese, Black African and Black Caribbean descent. This section concludes on the analysis of the booster survey in four parts. The first two are brief reflections on issues consistent across businesses whatever the ethnicity of those leading the business; and issues where there seems a differentiation between ethnic minority and all other businesses. Key to this report, however, has been the identification of issues where there are differences among ethnic minority businesses that appear to relate to the particular ethnicity of those leading the business. After concluding on this aspect of the work, suggestions are offered for future analytical activity. 1) Issues consistent across businesses irrespective of ethnicity Although the booster survey allows for more detailed analysis of issues facing businesses led by people from different ethnic groups, we should not forget that business above all share many of the day to day challenges in starting, running or growing a business. Finding a market for goods or service is a fundamental concern. EM businesses are concentrated in certain areas, size bands and sectors. It may be difficult to fully isolate these factors from factors associated with their ethnic background; however, we have found evidence of key differences that go beyond sector and area. Some of the main issues are identified below. 2) Issues where there seems a differentiation between ethnic minority and other businesses It would be naïve to suppose that there might be a sudden change of approach by policy makers and some business support providers to focus on the particular needs of different EM businesses. Their treatment as a homogenous group can still be useful in picking up a considerable number of people in under-represented groups and disadvantaged communities. These and other significant issues are outlined below: • Among businesses with employees, financial turnover tends to be lower for EM businesses than for non-EM businesses. They are generally smaller. • Among businesses with employees, EM businesses tend to be younger (more recently established) and more innovative than non-EM businesses. • EM businesses with and without employees are more likely than non-EM businesses to be found in the most deprived areas in England. EM businesses are therefore potentially significant to addressing the problems in such areas. • Difficulties in accessing finance are more likely to be reported by EM businesses with and without employees. They also express different reasons for seeking this finance. Among businesses with employees, insufficient time for seeking out external advice was mentioned by a higher proportion of EM 92
  • 93. businesses that had not sought advice. This was highest among young businesses, and we know that a higher proportion of EM businesses fall into this age group. The SBS Government action plan for small business identifies the need to encourage more enterprise both in disadvantaged communities and also in under-represented groups. Not all EM groups can be considered under-represented nor do they live in deprived areas. However, we know that EM communities are considerably more likely to be economically disadvantaged and have fewer opportunities in the labour market. Therefore, in terms of supporting different EM groups, policies and initiatives need to reflect on the role of enterprise for communities as a whole. 3) Issues where there are differences among ethnic minority businesses that appear to relate to the particular ethnicity of the owner/partners/directors • The relative ‘newness’ of businesses is particularly noticeable for African and Caribbean-led businesses with employees. Although the age of the business respondent was not collected, the above finding may suggest that there are issues around the age Black people go into enterprise or their chances of survival when they do. • Accessing finance varied across the ethnic groups, with a much higher proportion of Black businesses with employees seeking finance on numerous occasions compared with say Chinese businesses. Findings on businesses with and without employees also suggest that Black businesses may be more likely to have difficulties in obtaining this finance. Black businesses with employees cited obtaining finance as one of the biggest obstacle to the success of the business. It is not clear, however, from the survey questions where the problem may lie for Black entrepreneurs, both those with and without employees – more limited sources for finance outside of banks, less well developed business cases, discriminatory behaviour of lenders based on postcode or ethnicity, etc Further research is needed here. • Among businesses with employees, reticence to seek, or low demand for, business advice seems particularly the case among other Asians, including Bangladeshis, and less so among Black businesses. EM female-led businesses were more likely to seek general business advice than EM male-led businesses. We know from previous research that EM groups tend to make use of more informal sources of advice and base their decisions on trust. However, it would appear that there are a number of other factors at play. The importance of a recognised and respected relationship between the adviser and the community may be more prominent for some groups than others. • In terms of seeking advice about regulations, a number of differences between EM businesses with employees have emerged. Pakistani and Bangladeshi businesses were the least likely to get any advice. Black businesses were the most likely. Trade / Business Associations were the most common sources of advice for all EM businesses apart from Chinese, for whom accountants were used more often. Advice about regulations was sought from Business Link by a greater proportion of Black businesses than other EM businesses. • In terms of employment growth, among businesses with employees, Black businesses were the most likely to say that employment had grown in the last year and that it was expected to grow in the next. Black businesses were also 93
  • 94. the most confident in terms of any growth, with more than nine in ten saying they intended to grow the business over the next two to three years. This compares with less than half of Chinese businesses. However, it should be remembered that all results relating to Chinese businesses are heavily biased towards the restaurant/catering sector. Employment growth in the last year was higher among EM female-led businesses than EM male-led businesses. • The most likely way for businesses with employees to achieve growth was to attempt to increase turnover or sales. However, a number of other ways were mentioned and these varied across EM groups. Black businesses were more likely to say they would take on more staff and enter new markets. Pakistani businesses were also likely to want to enter new markets, but also to expand their premises. Indian and other Asian businesses hoped to increase the product range. EM female-led businesses were more likely than EM male-led businesses to seek growth by entering new markets. Future activities This research has confirmed, and detailed, some clear differences in attitude and approach across different ethnic minority businesses. It will be important to continue to research EM businesses in terms of specific groupings as generational effects lead to changes to the dominant sectors and ways of working. It should be recognised that conducting an EM business boost is a resource intense activity, but is also extremely valuable. Although a boost of ethnic minority businesses was not undertaken in the 2004 and 2005 Annual Small Business Survey, this is something that may be revisited in subsequent years. This would then allow for comparisons to be made over time and across groups. Some further suggestions for research are given below: - Further research should be undertaken to explore the link between deprived areas and EM businesses, particularly in terms of the contribution that EM businesses may make in regenerating certain urban areas. - Further investigation is needed around the issues facing different EM groups before starting a business. The SBS Household Survey or the Global Entrepreneurship Monitor (GEM) may be vehicles for exploring this. - Some initiatives to support EM businesses may be well intentioned, but until specific needs right across people from different ethnic groups are recognised, business support will fall short of its good intentions. Research should continue to explore the most appropriate means of delivering business to a diverse customer base. - Some further gender specific research looking at different EM groups is also needed. 94
  • 95. 95 Annexes Table A3.1: Financial turnover, by ethnic group: Businesses with employees only Under £56K £56K - £250K £250K - £1.5m £1.5m – £2.8m More than £2.8m Unweighted n Indian 20.1 29.7 39.5 10.5 1.1 349 Pakistani 39.6 33.0 21.1 6.3 - 128 Other Asian (incl. Bangladeshi) 14.6 59.8 13.8 11.3 - 66 Black 27.9 38.1 23.2 10.7 - 74 Chinese 23.4 71.8 3.6 1.3 - 60 Other 16.9 39.8 21.8 21.4 - 96 Total (EM) Men Women Equal 23.1 22.5 18.8 25.6 38.8 40.0 50.1 33.3 27.7 26.0 26.7 32.1 10.3 11.4 4.4 9.0 0.1 0.1 - - *756 534 56 166 Total (non- EM) 10.5 28.5 45.7 14.7 0.5 3047 Total (All) 11.4 29.3 44.3 14.4 0.5 3803 England weighted data. n=3803. Excludes ‘Not givens’. Note: * n= 773 as it includes double counting where owners/partners/directors are from more than one ethnic community Table A8.1 Employment growth among employers Employment increased Employment stayed the same Employment decreased Uncertain Unweighted n Indian 17.8 68.6 11.8 1.9 594 Pakistani 24.6 56.4 13.3 5.6 240 Other Asian (incl. Bangladeshi) 21.4 58.6 12.2 7.8 126 Black 31.3 50.1 12.5 6.2 117 Chinese 12.0 71.3 14.3 2.5 122 Other 25.7 67.5 5.2 1.5 172 Total (EM) Men Women Equal 20.6 20.2 29.1 18.1 64.9 65.5 62.5 64.5 11.2 10.9 7.8 13.1 3.3 3.3 0.7 4.3 *1357 939 132 286 Total (non- EM) 18.2 64.4 16.2 1.2 4224 Total (All) 18.4 64.5 15.7 1.4 5581 England weighted data. n=5581 Note: * n=1371 as it includes double counting where owners/partners/directors are from more than one ethnic community.
  • 96. Table A8.2: Rationales for not growing, by ethnic group. All employers who did not intend to grow Happy at present size Want to stay independent Too complicated to hire staff Want to reduce hours worked Looking to retire / close down Regulations inhibiting Haven’t considered it Too costly / avoid debt Too risky Insufficient resources Market won’t support Other Indian 23.6 5.1 4.6 13.9 2.8 4.7 2.7 2.6 13.5 14.7 9.6 Pakistani 27.5 0.2 2.6 16.4 - 16.9 - - 4.8 17.3 3.9 Other Asian (incl. Bangladeshi) * * * * * * * * * * * * Black * * * * * * * * * * * * Chinese 36.8 5.9 - 14.5 - 5.4 4.7 - 25.9 7.4 3.8 Other 18.3 3.3 10.8 15 2.2 1 1 1.5 15.8 22.8 0.5 Total (EM) Men Women Equal 26.7 25.5 * 23.9 1.1 * 0.6 3.9 3.3 * 6.7 4 1.7 * 11 13.8 14.2 * 13.3 2.2 1.6 * 4.2 5.5 5.7 * 4.4 3.1 3.8 * 0.6 1.5 1.8 * 1 14.4 14.4 * 15.3 14.1 15.2 * 13.7 7.4 8.1 * 7.1 Total (non- EM) 33.2 0.8 3.6 1.8 20.3 4.5 1.4 3.5 2.9 13.6 13.6 7.9 Total (All) 32.6 0.8 3.6 2 19.6 4.3 1.8 3.5 2.8 13.7 13.6 7.8 England weighted data. n=1764 * Sample sizes were less than 50 and therefore too small to be included in this table 96
  • 97. Table A8.3.Greatest obstacle to the success of the business. Businesses with employees only The economy Obtaining finance Cash flow Taxation Recruiting staff Keeping staff Transport issues Regulations Availability / cost of premises Competition Shortage of managerial staff No opinion Unweighted n Indian 7.4 6.3 6.7 7.4 12.1 2.9 2.6 9.7 5.0 22.4 2.8 5.5 549 Pakistani 5.7 5.7 9.2 6.9 10.2 2.2 6.1 7.1 8.2 21.6 2.2 7.1 217 Other Asian (incl. Bangladeshi) 8.0 5.5 2.2 9.8 14.0 1.1 4.0 6.5 6.0 25.1 1.6 10.3 119 Black 3.8 21.7 9.2 7.6 12.7 6.9 2.1 12.2 5.2 11.2 1.9 4.1 112 Chinese 7.6 3.2 2.5 2.8 18.0 0.6 - 1.0 6.3 40.6 2.3 8.8 107 Other 16.0 5.3 8.2 7.9 11.9 0.8 0.9 10.1 3.4 16.4 1.8 5.0 162 Total (EM) Men Women Equal 8.6 6.8 6.4 13.9 6.8 6.7 13.4 4.5 6.7 6.4 2.7 9.0 7.5 6.9 17.3 5.3 13.3 14.0 9.3 13.2 2.6 1.8 0.3 5.5 2.6 3.4 1.2 1.3 8.4 8.5 6.1 8.9 5.5 5.7 7.5 4.1 21.6 24.1 21.8 15.1 2.3 2.6 1.5 1.8 6.1 4.6 8.1 9.2 1253 *1266 863 123 267 Total (non-EM) 13.2 3.1 10 10.1 9.8 0.9 2.5 16.3 3.0 16.6 2.1 4.5 4076 Total (All) 12.8 3.5 9.7 9.9 10.2 1.1 2.5 15.6 3.2 17.1 2.1 4.6 5329 England weighted data. Excludes “unwilling” and “don’t know”. N=5329 Note: * n=1266 as it includes double counting where owners/partners/directors are from more than one ethnic community 97
  • 98. 98 Table A8.4: Percentage of ways in which regulations act as an obstacle to business. Businesses with employees only Understanding regulations Obtaining advice on compliance Time involved in obtaining advice Cost of obtaining advice Costs of compliance Costs of employees Competition from businesses who don’t comply Admin time and costs Other Unweighted n Indian 4.8 2.6 12.4 1.4 25.8 3.9 2.4 44.7 17.4 225 Pakistani 7.2 4.7 11.7 0.1 44.6 0.7 11.1 31.2 14.6 79 Other Asian (incl. Bangladeshi) 14.1 8.7 1.7 - 16.9 5.3 2.9 45.3 21.9 45 Black 18.4 - 7.8 6.1 39.6 0.8 2.8 56.6 8.6 49 Chinese 25.4 1.4 9.0 0.7 17.5 - 2.9 35.9 27.3 22 Other 8.9 2.4 2.4 10.3 42.1 3.1 1.2 40.0 15.2 58 Total (EM) Men Women Equal 10 5.2 20.4 17.7 3.1 3.4 5.9 1.3 8.6 11.3 4.3 3.5 3 3.4 7.7 0.2 31.7 31.2 31.2 33.2 2.8 2.3 4.3 3.6 4.4 6.4 - 1.2 41.2 38.3 45.3 46.5 17.5 17.6 9.7 20.3 471* 318 48 105 2238 2709 Total (non- EM) 10.3 3.1 9.3 3.7 25.9 5.9 3.1 57.6 8.4 9.056.4Total (All) 10.3 3.1 9.2 3.7 26.3 5.7 3.2 England weighted data. Employers only. N=2709. Note of caution over some small sample sizes Note: * n=478 as it includes double counting where owners/partners/directors are from more than one ethnic community
  • 99. List of References Business Link and Companies House Awareness and Understanding, 2004. Report prepared by Databuild Enterprising People Enterprising Places: Measures to increase Ethnic Minority Employment and Business Growth 2005, National Employment Panel Ethnic Minority Businesses and ICT Focus Group Research, 2004. http://www.sbs.gov.uk/content/analytical/EMB_and_ICT.pdf Ram, M, Smallbone D. & Deakins D. 2002 Ethnic Minority Business In the UK: Access Finance and Support British Bankers Association Rutherfoord, R. & Blackburn, R. 1997 The diversity of Ethnic Minority Small Firms: Issues for Business Support Providers National Small Firms Policy and Research Conference, vol 2 pp 1075-1092. Leeds; ISBA 99