APPG for Entrepreneurship Digest: April 2021
/In this month’s APPG for Entrepreneurship Digest, we look at what the recent Sewell Report on Race and Ethnic Disparities says about entrepreneurship.
The Commission on Race and Ethnic Disparities final report, published last week, has certainly sparked debate. Set up in the wake of last year’s Black Lives Matter’s protests, the Sewell review looked at the impact race and ethnicity plays across a range of fields, one of which was entrepreneurship.
Some of the stats in the report were stark.
Aspiring Asian and ethnic minority entrepreneurs were twice as likely to cite difficulties in accessing finance as the reason they gave up on their idea compared to white British entrepreneurs.
Black-owned businesses turned over £10,000 per annum less than White owned-businesses.
Female ethnic minority entrepreneurs were more than twice as likely (33%) to report making no profit in 2019 compared to white female entrepreneurs (15%).
Only 38 Black entrepreneurs, in a sample of 3,784, received venture capital funding in the past 10 years.
The last stat comes from Extend Ventures research. Their Diversity Beyond Gender report is an essential resource on this topic and contains even more sobering stats.
The report identified a range of barriers that ethnically diverse entrepreneurs face. This includes a lack of communication between high street banks and entrepreneurs with many fearing rejection. The report argued that “there is work here for high street banks and lending institutions in making themselves more accessible to these community groups who currently do not consider lending to be a viable access route for them”.
The report’s key recommendation on entrepreneurship was focused on the fact that seed capital for entrepreneurship was concentrated at elite or ‘tier 1’ universities. However, many universities are recognised for promoting small businesses and operate in areas with large ethnic minority populations, but lack the large endowments that research-focused elite institutions have.
To correct for this, they have proposed pilot schemes with HSBC UK to provide these institutions with better funding to “1) bolster their offer of support to aspiring entrepreneurs; and 2) further enable them to nurture entrepreneurial talent.”
The idea is that these pilots can act “as a model for other banks and financial institutions to emulate in collaboration with universities as a way to nurture talent, encourage innovation, and offer support to aspiring entrepreneurs from underrepresented and low-income backgrounds across the UK.”
The reception for this idea has been mixed, with some suggesting it was overly simplistic. A working group on enterprise and employment, led by the British Business Bank, said that their 11 evidence-based recommendations, including greater access to capital for aspiring and existing minority ethnic entrepreneurs and mandatory reporting by employers on ethnic pay gaps, were ignored.
Still, we think enterprise education is important and a few years back we published a report looking at the way it is taught at higher education. One of our key findings was that too few university students are exposed to enterprise education. Breaking down silos and ensuring that enterprise is embedded in the curriculum, rather than being treated as a bolt-on extra will be key to delivering the ambition of ‘enterprise for all’.
One area where I would have liked to have seen more thinking was on the need to intervene at an earlier age. My colleague Anton Howes emphasises the importance of upstream innovation policies, e.g. inspiring more people to become entrepreneurs. Researching my report, Educating Future Founders, I learnt about a range of positive schemes to get young people interested in entrepreneurship at an early stage. Many of which, such as the Prince’s Trust Enterprise Challenge and Ultra Education, serve a diverse range of students and introduce a wider range of people to the idea of entrepreneurship.
From our advisers
New research from Enterprise Nation, in partnership with Starling bank, found that Bounce Back Loans have been used to adapt and grow businesses. Almost a third of recipients have used the funds to invest in their businesses with 27% of them introducing new products and services, 13% bringing in new technology and 24% using the funds to increase marketing efforts.
In Parliament
There was a debate in the Lords on the National Security and Investment Bill. The Bill would require people investing in UK businesses in strategic industries to file for approval by the Secretary of State.
Lord Vaizey of Didcot believes that UK nationals should be exempt, as UK investors investing in UK businesses are unlikely to pose a great national security risk. He also believes that investors from allied countries, he named Australia, Canada, the US and New Zealand, should be exempt. Baroness Noakes disagreed and said that investors from the UK and allied countries should still have their deals reviewed by the Secretary of State in case the larger investing company uses their money to buy and kill new innovative technologies to “avoid disruption in lucrative markets”.
Lord Leigh of Hurley believes that people who are investing very small amounts should also be exempt. He said that many entrepreneurs, who may start businesses in strategic industries, raise their first round of investment from friends and family. Sometimes these people will want to put in amounts as small as £1000 into companies and they may be deterred by the paperwork burden and wait-time.
In the commons, Ruth Edwards MP praised the super-deduction, she said it was “setting the stage for our future economy” while Mel Stride MP fears that it does this by just pulling forward future investment into a more recent time period.
Lord Sarfraz praised the whole budget and said it was “one of the most start up friendly budgets in years''. He said that the future fund for breakthrough technologies will encourage people to invest in diverse founders and that there are several refreshing ideas around R&D tax credits, the EMI scheme, and pension fund asset allocations.
Also in the Lords, Baroness Doocey said that much of the tourism industry has “fallen through the cracks”. She said that touring coach operators, English language schools, and events organisers have not been eligible for measures taken to support hospitality and leisure, even though they have been just as impacted by the pandemic. She asked the government to address these anomalies and target support to these businesses.