Explore the ScaleUp Annual Review 2022

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Ethnic and minority owned scaleups

This year the Centre for Research in Ethnic Minority Entrepreneurship (CREME), based at Aston University, published Time to Change: a blueprint for advancing the UK’s ethnic minority businesses in partnership with NatWest Group. “There is a real synergy between the findings of the report and the remit of the ScaleUp Institute,” says Professor Monder Ram, centre director of CREME and one of the report’s co-authors.


What is the current size and scope of ethnic minority businesses in the UK?

There are 250,000 black and ethnic minority businesses (EMBs) contributing some £25bn to the UK economy. The entrepreneurial aspirations of black and ethnic minority communities have always been disproportionately high. Using Global Entrepreneurship Monitor data, we see that they are almost twice as likely to start a business than other communities but after startup – in the data, the first 42 months – the position flips: non-EMB entrepreneurs are then twice as likely to own and run an established business than their ethnic minority counterparts. However – and this is the big caveat – black and ethnic minority firms that do survive have a strong ambition to grow and are more likely to grow; they are disproportionately involved in export activity; and are likely to be more productive than their non-EMB counterparts.

Government policy and interventions for EMBs have been focused on startups but there’s never been a problem with startups. The problem is how they scale up and achieve durability and growth.

Are they operating to their full potential?

We estimate that the contribution of EMBs could increase £100bn if these firms were to achieve the same growth rate as their non-EMB counterparts.

EMBs also represent a massive resource for levelling up and inclusive growth. They act as role models and tend to employ individuals in the community who find it difficult to get jobs elsewhere. Not only do they make an economic contribution but also an unmeasured social contribution, so there’s a huge opportunity to place minority businesses as critically important actors in levelling up.

How can their potential be realised?

We drew upon a rigorous appraisal of existing research and international best practice and made ten evidence-based recommendations to help unlock the potential of ethnic minority entrepreneurs and maximise their economic contribution.

We have to tackle perceptions of unequal treatment to increase EMBs’ engagement with bank finance. We need to monitor engagement with diverse suppliers to facilitate EMBs’ access to procurement opportunities. We must develop more sustainable and quality business support to help EMBs realise their growth potential.

We have to improve access to business support by establishing trust-based relationships with ethnic minority communities. That means fostering local networks of support through partnership working to strengthen support for EMBs, including EMB communities in the policy formulation process to enhance the relevance of support, and creating local community hubs to better engage with EMBs and ease their access to finance and business support.

At a broader policy level, we need to develop a UK-wide policy on inclusive entrepreneurship that sets out a clear vision for achieving inclusive growth, as well as creating a UK-wide mechanism for promoting and supporting EMBs to provide long-term leadership on this agenda. Finally, we must gather better data on entrepreneurial diversity to foster evidence-based policy-making.

A key area in your report is access to finance for EMBs. What are the issues and how is the broader finance ecosystem addressing them?

Some ethnic subgroups are discouraged from trying to access finance, believing that they will not be able to gain funding. Our findings about discouragement were particularly pronounced and quite worrying. This has a knock-on effect to the wider UK economy.

The banks have stepped up and have been pro-active on this agenda. Many banks are responding and engaging and developing initiatives to support EMBs. This is a positive.

It’s challenging to say something definitive about the wider financial ecosystem because the research is really underdeveloped. In debt finance, we have regular surveys conducted by UK Finance; in areas of equity finance there is very little to go on. There is clearly plenty of scope for collaboration between different funding organisations; the challenge is to identify which institution can orchestrate and bring these different parties together.

We identified a key role for Community Development Finance Institutions (CDFIs); they are well established and well liked. I have been impressed and surprised by their level of outreach and the breadth of their customer base.

Are there any particular characteristics that mark out those ethnic minority businesses that are achieving strong and durable growth?

It is striking that the spread of very successful EMBs is now across sectors – from retail and property to manufacturing and pharmaceuticals. The traditional confines have been broken.

How important are role models for EMBs?

Successful entrepreneurs are role models but it’s equally important to have role models within banks and in the wider business support ecosystem to champion this agenda. 

A scaleup ecosystem has business support institutions that are responsive and receptive to the rhythms and needs of talented entrepreneurs – and that will be facilitated by having appropriate representation. There’s a huge win-win to be had here. Having senior people of colour in a bank, for example, has a really important effect in making minority entrepreneurs feel that they are naturally a part of the bank’s ecosystem. In the wider business environment, the appointment of Inez Brown as chair of the West Midlands IoD is one good example.

Have you been encouraged by the response to the report – and what needs to happen next?

We wanted to produce actionable research with this report. The ten recommendations we set out all have an audit trail – you can trace either the evidence or the good practice to each one. If these recommendations were implemented in full, they could move the dial significantly.

The response to the report has been very positive. Lots of organisations want to run with it. We have consensus on the evidence and what we need to do – and that’s real progress. 

But it needs total buy-in to all recommendations at all levels. At present, it is unclear how this fits in with the government’s enterprise policy agenda and framework at a national and at a regional level. The business support environment is in a state of flux. My fear is that this agenda will not be uppermost. We need to keep the momentum going.

I’m very positive about this agenda. It is a vehicle for promoting productivity and competitiveness – the things that we need to sustain the economy – and in doing this properly then we will move in a positive direction towards the goal of levelling up, tackling inequality, and opening up opportunity.

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