Entrepreneurs from the UK’s ethnic minorities do less well than their white counterparts, despite putting in more time and money and being better qualified, a new report has found.
It also showed that small businesses run by black men have been worse hit by the Covid-19 pandemic than other groups.
Meanwhile, the report concluded that black business owners have a median turnover of just £25,000, £10,000 less than white business owners.
The report is a joint effort from the British Business Bank and Oliver Wyman, a management consultancy.
The study found that entrepreneurs from black, Asian and minority ethnic (BAME) backgrounds were on average younger and more highly qualified than their white counterparts.
However there were differences within different BAME groups.
Two in five black entrepreneurs reported spending three or more days per week developing their business ideas, and 38% of them spent more than £1,000 on the projects.
For white entrepreneurs the same figures were 19% and 22%.
One business owner said that visitors sometimes assumed his staff were in charge.
“My ethnicity does surprise people sometimes. Because I’m black Caribbean, they think the [white] guy that works with me is the boss… I guess there’s a subconscious bias there…” he told the report’s authors.
Oliver Wyman’s head of inclusion and diversity Roianne Nedd, who co-authored the report, said that encouraging diversity in corporations is a vital step to ensuring that the entrepreneurs come from a wider variety of backgrounds.
“The more senior you become in an organisation is fertile ground to take those skills and build successful businesses.
“It means that corporates have a much bigger responsibility to think about diversity within their organisations … because they could be nurturing the entrepreneurs of the future,” she told the PA news agency.
Even aside from monetary outcomes, the report found that only half of black entrepreneurs meet their “non-financial aims”, compared with around 70% of white entrepreneurs.
The report was produced by Oliver Wyman for the British Business Bank as part of a £96,000 contract that was awarded this summer.
It concluded that only 37% of entrepreneurs are women, and women face additional challenges when setting up a business.
While the median productivity among Asian and other minority ethnic women was only £5,000 per year, white men saw their productivity reach £30,000 on average.
It also showed that businesses in the North East, Scotland and Northern Ireland have been worst hit by the Covid-19 pandemic.
Black men-run businesses were the most likely to report taking “drastic action” to save their businesses in response to the crisis, at 70%.
The report speculated that black people have faced worse health consequences during the pandemic, and that the impact on business may have been a knock-on effect from that.
British Business Bank chief executive Catherine Lewis La Torre said that during the pandemic, the Government’s Future Fund which provides loans to start-ups, has reached many businesses run by people from ethnic minorities.
“That’s an automated platform, there’s no pitch you need to do to a group of venture capitalists.
“It’s been pretty good at reaching entrepreneurs and businesses with diverse teams – 65% of the funding has gone to management teams that are exclusively BAME or mixed-ethnicity teams.”
She said the fund could contain lessons for the future, and the bank would look at that closely.
The British Business Bank has been commissioned to put together a working group on access to capital for entrepreneurs as part of the Prime Minister’s Commission on Race and Ethnic Disparities.