Businesses led by ethnic-minority entrepreneurs contribute at least £74 billion a year to the UK according to a new report published today. The report by OPEN, a London-based think-tank that focuses on migration and diversity issues, was commissioned by MSDUK, a Leicester-based membership organisation that champions diversity and inclusion in public and private-sector supply chains.
Minority businesses make up a sixth of the 6 million businesses registered in the UK and employed nearly 3 million people in 2019–20.
Since Companies House does not collect data on the ethnicity of corporate officers, the report’s estimates of minority businesses’ numbers, employees and gross value added are derived using artificial intelligence (AI) tools to predict owners’ ethnicity on the basis of their name – performed by Gyana, a minority data-science company – cross-checked and refined with human expertise at OPEN.
Minority Businesses Matter also provides a first-of-its-kind analysis of the economic contributions made by minority businesses: to combating the coronavirus crisis, to exports, innovation and the levelling up deprived areas, among other things, as well as to national wealth and local jobs.
The report, sponsored by EY, reveals that eight of the UK’s 23 tech unicorns – private start-ups valued at $1 billion (£740 million) or more – were co-founded by minority entrepreneurs. In addition, 23 of the UK’s top 100 fastest-growing companies in 2019 were co-founded by minority entrepreneurs, including the No1, Bulb Energy.
Yet the contribution and unique challenges encountered by minority entrepreneurs are often overlooked by policymakers, the wider business community and the public.
The report finds that minority entrepreneurs succeed against the odds, identifying consistent challenges when establishing and scaling up their businesses. These include direct and indirect discrimination; disconnection from key financial, business and political networks; and disproportionate levels of doubt. While these challenges hold many minority businesses back, minority entrepreneurs also have particular strengths, notably their drive to succeed, determination to overcome challenges and diversity of skills, perspectives, experiences and contacts.
Minority Businesses Matter provides practical recommendations to help realise the untapped potential of the UK’s minority businesses. These include:
The report’s findings and recommendations spotlight the disproportionate challenges the UK’s minority entrepreneurs face. Its publication comes at a time of growing global support for the Black Lives Matter movement and its efforts to highlight structural racism and the unique challenges minority communities have faced throughout the Covid pandemic. At the same time, the report stressed that stronger support for minority entrepreneurs would provide a significant boost to the UK’s economic output.
Minority Businesses Matter identifies six specific contributions made by minority businesses. These include:
While minority businesses would benefit from a range of measures to help businesses in general, such as more generous coronavirus-crisis support measures, the report focuses on laying out recommendations to tackle the three main challenges of discrimination, disconnection and doubt.
The case for enhanced supplier diversity is compelling. Just as recruiters often limit their horizons to hiring people from similar social backgrounds who look like them, purchasing managers at big companies often restrict their procurement options to a small number of established larger suppliers with whom they have longstanding relationships. This does not just deny opportunities to promising smaller minority businesses. It also deprives larger mainstream businesses of the benefits of a more diverse, resilient, innovative and cost-competitive supply chain. A study by the Hackett Group, a leading US enterprise benchmarking firm, found that “on average, supplier diversity programmes add $3.6 million to the bottom line for every $1 million in procurement operation costs.”
More broadly, tackling discrimination in business life requires changes in people’s mindsets, corporate processes and power structures.
From doubt to self-confidence
Philippe Legrain, Founder and Director of OPEN, said: “Against the odds, minority businesses make a huge contribution to the UK, providing valuable products and services, creating good jobs and boosting national wealth. They are helping to tackle the coronavirus crisis and can help build a fairer, more innovative and more environmentally sustainable Britain in its aftermath. So addressing the challenges that still hold minority businesses back is both an economic and an ethical priority.”
Mayank Shah, Founder and CEO of MSDUK, said: Immigrants move to the UK in search of a better future for themselves and their families, which makes them work harder and seize every opportunity to succeed. This report shows that the UK economy is much better off thanks to the contribution that ethnic minorities make at a local, regional and national level, a fact obscured until now by the lack of data on the ethnicity of business owners in the UK.
This report by OPEN for MSDUK highlights, for the first time, groundbreaking data on the economic contribution of ethnic minority businesses and backs it up with personal stories of many inspirational entrepreneurs. It offers reasons to celebrate the successes of many ethnic minority businesses, while also challenging all of us to address the barriers they face and the disparities that exist between different communities.”
Martyn Fitzgerald, Senior Researcher, OPEN said: “You cannot fail to be inspired by the stories in this report. The paths of these minority entrepreneurs are as varied as the companies they founded, and all are testament to the social and economic enrichment that their businesses have brought to our country. My research for this report revealed to me just how many minority businesses there are and the enormous contribution they make. We would be far less without them.”
Dr Gordon Sanghera, CEO, Oxford Nanopore Technologies said: “Put simply, being a minority business founder is not easy – and while things are improving, we still have a long way to go in creating a more diverse and inclusive community across all sectors, but especially in science and technology. While the pandemic has exacerbated differences in society in so many ways, medically and economically, in the life sciences businesses we have actually seen some progress; it’s encouraging to see how many minority founders are leading efforts in domestic and international scientific work to fight Covid – a testament to the contribution of minority entrepreneurs to this country.”
Ellenor McIntosh, Co-founder, Twipes said: “There’s such an abundance of great ideas and budding business founders out there – some already scaling a company and others just starting off – but we need to do better in providing adequate funding and support. The business community needs to first acknowledge the entrepreneurial strengths of minority founders – which this report will boost further – and then wrap its hands around entrepreneurs seeking funding, advice, guidance and business connections that will in turn enable them to grow their businesses.”
Susie Ma, CEO and founder, Tropic Skincare said: “My background and my upbringing especially has hugely contributed to my success, there’s no doubt about it. I was born in Shanghai, so Mandarin is my mother tongue – that gave me the ability to have important conversations around sourcing packaging with small scale Chinese suppliers when Tropic was first starting out. I don’t believe my ethnicity got in the way of me being able to achieve my dreams and would love for that to be the case for all minority business leaders too.”