ETHNIC MINORITY BUSINESSES IN ENGLAND; REPORT
ON THE ANNUAL SMALL BUSINESS SURVEY 2003
ETHNIC BOOST
Emmy Whitehead, David ...
CONTENTS
Page
Executive Summary 6
1. Ethnic Minority Business ‘Booster’ Sample 12
1.1 Background 12
1.2 Annual Small Busin...
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 u...
List of Tables Page
Table 1.1: Breakdown of EM businesses and sole traders. 13
Table 1.2: Breakdown of ASBS sample by Ethn...
Table 8.7: Obstacles to the success of business. 76
Table 8.8: Greatest 5 obstacles to the success of the business. 78
Tab...
EXECUTIVE SUMMARY
Background
The government’s main objective in encouraging more enterprise in disadvantaged
communities a...
Nine in ten EM businesses with employees are in the services sector. This compares
to approximately seven in ten non-EM bu...
The main report discusses a number of issues / concerns / business operations which
are very similar among all businesses,...
have more contact than EM female-led businesses (60.2% compared with 53.5%)
(section 7.2.1).
In terms of public procuremen...
In terms of obstacles to growth, among businesses with employees, Black-led
businesses were more likely to have mentioned ...
This research has confirmed and detailed some clear differences in attitude and
approach across businesses led by differen...
12
1. Minority Ethnic Business ‘Booster’ Sample
1.1 Background
The Annual Small Business Survey (ASBS) 2003/04 included a ...
13
1.2 The Annual Small Business Survey: Methodology
Data build, on behalf of the Small Business Service, conducted the An...
14
Table 1.2 Breakdown of ASBS sample by Ethnic Group and Employment Status.
Ethnic group With employees Without employees...
15
combined with the proportion of businesses of the relevant size in England in
deprived wards, and the proportion of bus...
16
2. Ethnic Minorities in England – Policy and Historical Context
This section sets out the background to policy interest...
Attitudes: Findings from the UK GEM 2003 survey show that both Blacks and
Indian sub-continent Asians have more positive a...
18
concluded that the problems that ethnic minority businesses face may be more sector-
related as opposed to being produc...
19
The Acton Plan identifies the need for greater “sector-consciousness” in business
support to reflect both the sectors i...
20
3. Key Characteristics of businesses led by different ethnic minority
communities
Prior to the ethnic minority boost of...
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 e...
22
Among businesses with employees:
• EM businesses are more likely to be micros than non-EM businesses (90.2%
compared wi...
23
When turning to look at sole traders, there are some significant differences for some
ethnic groups. Only 9.2% of Other...
24
• Black and Indian businesses are more likely to be in the production sector
(8.5% and 9.8% respectively) than other et...
25
• Slightly over half of Pakistani (54.4%) and Chinese (53.7%) businesses are
sole proprietors, compared to 30.3 per cen...
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 ...
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...
28
Among businesses with employees:
• It is much more likely among EM-led businesses that business control is with
the fir...
29
correct for specific market failures. Encouraging a thriving small business sector in
such areas and groups should lead...
30
Summary
• Almost one in ten (9.8%) of businesses with employees in England are led by
ethnic minorities (section 3.1)
•...
31
4. New Businesses and those without employees
This chapter looks specifically at businesses that have been trading for ...
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
1...
Table 4.2: Percentage time taken to set up business and start trading. All
businesses trading for less than 4 years
6 mont...
34
Among businesses trading for less than 4 years:
• EM businesses are generally less likely to seek advice than non-EM
bu...
• Other obstacles, such as the economy and taxation were mentioned by fewer
than two per cent of businesses and have there...
36
Summary
• The majority of respondents from new (EM and non-EM) businesses had been
in full-time employment before setti...
37
5. Business Operation
This chapter looks at the way businesses tend to operate. This includes whether or not
they expor...
38
There are too few EM businesses within the construction and primary sector to report
on these differences.
Table 5.2: P...
39
Among businesses with employees:
• EM businesses are generally more likely to be innovative than non-EM
businesses
• Al...
40
• A slightly higher proportion of EM businesses (54.3%) said that new
processes were important or very important than n...
41
Table 5.6 Uses of ICT, by ethnic group Businesses with employees only
Accounts
%
Record
keeping
%
Email
communi
cation
...
For businesses with employees:
• EM businesses are less likely to use ICT than non-EM businesses. This applies
for almost ...
Table 5.7 Level of ICT use by ethnicity. Businesses with employees only
Do not use
%
1-3
%
4+
%
Unweighted
n
Indian 21.4 6...
• For businesses with employees, within the Services sector non-use is
significantly higher among EM businesses (33.8% com...
Table 5.11: Any ICT use by age of businesses. Businesses
with employees only.
3 years or
less
%
4 – 10
years
%
More than 1...
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 si...
Summary
• Among businesses with employees, EM businesses are less likely to sell
outside the UK than non-EM businesses. (S...
6. Financing the business
This chapter identifies which businesses attempt to access finance, and whether they
experience ...
Ethnic Minority Businesses In England
Ethnic Minority Businesses In England
Ethnic Minority Businesses In England
Ethnic Minority Businesses In England
Ethnic Minority Businesses In England
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Ethnic Minority Businesses In England

  1. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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

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