Business people from ethnic minorities could lead a post-Brexit export surge with more government support, a report from the Federation of Small Businesses (FSB) has found.
Some 250,000 ethnic minority businesses (EMB) contributed £25bn to the UK economy in 2018 but face barriers to their growth, researchers said.
EMBs are more innovative and more likely to export than their white-owned counterparts but less likely to get outside finance or support and advice.
The FSB is calling for a dedicated state equity fund and export vouchers. Many ethnic minority entrepreneurs have family links to Commonwealth countries, such as India and South Africa, which could become bigger trading partners now the UK has left the EU.
Mike Cherry, FSB national chairman, said: “If we unlock opportunities for ethnic minority entrepreneurs, this will benefit the UK as a whole. We know from this research that EMBs are incredibly innovative and the government must harness this by ensuring they are not left out of national strategies and are able to play a vital role as part of a diverse public procurement framework.”
Mr Cherry added that many had supported their communities through Covid-19, which had hit ethnic minorities hardest. “The government should look to target business support, especially as EMBs traditionally have had lower engagement with mainstream support,” he said.
The study, Unlocking Opportunity, used published government and academic surveys, defining EMBs as those where the majority of the owners classify themselves into various ethnic communities. They include UK-born individuals and foreign nationals.
The research was undertaken in association with Aston University’s Centre for Research in Ethnic Minority Entrepreneurship (CREME),
Self-employment is vital to bridge the economic divide. The government’s Race Disparity Audit in 2017 found an employment gap of nearly 12 percentage points between white and non-white groups, as well as lower rates of pay and career progression. On average 15.3 per cent of the UK population is self-employed. Among those of Pakistani heritage it is 25 per cent.
In 2018, 15 per cent of EMBs reported exports in the previous year compared with 14 per cent of other SMEs. The highest intention to export (23 per cent) was among black-led businesses. The government should cover the costs of advice and bureaucracy needed for EMBs to export for the first time to emerging markets, the FSB said.
Some 30 per cent had a recent product or service innovation, 11 percentage points higher than their non-EMB counterparts.
However, they were less successful at raising finance. The FSB suggests a dedicated scheme — similar to the Aspire Fund that provided £12.5m in equity investment to women-owned business.
Khaleelah Jones, 32, who founded digital marketing agency Careful Feet in London, said she had almost given up looking for investors. US-born Ms Jones said the business, which employs nine, is profitable and has its own software, Dime, which automates the running of social media accounts. It makes more than a third of its £350,000 annual revenue in the US.
“I have been to so many meetings where I know they are not interested, I am just there to fill a quota. Often they say I should get my parents and family to invest. They don’t have the money,” Ms Jones said.
“A lot of investment goes on who you know and I don’t have those people in my network. I will keep reinvesting profits in growth but could grow so much quicker.”