The Contribution and Challenges of Ethnic Minority Businesses in the UK.
Businesses led by ethnic-minority entrepreneurs contribute at least £74 billion a year to the UK, according to a new OPEN report by Philippe Legrain and Martyn Fitzgerald published today.
Yet the contribution and unique challenges of minority entrepreneurs are often overlooked by policymakers, the wider business community and the public.
This landmark report aims to change that.
1 million businesses, 3 million jobs, £74 billion contribution
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, the registrar of UK companies, does not collect data on the ethnicity of corporate officers, the report’s estimates of minority businesses’ numbers, employees and gross value added (GVA) are derived using artificial intelligence (AI) tools to predict owners’ ethnicity on the basis of their name. This was performed by Gyana, a minority data-science company, and cross-checked and refined with human expertise at OPEN.
The £74 billion economic contribution consists of the following:
The MSDUK-OPEN Top 100 Minority Businesses 2019-20
The report also compiles the first-ever list of the Top 100 minority businesses in the UK.
Britain’s most successful minority entrepreneurs are Mohsin and Zuber Issa. Their father came to the UK from India to work in textiles and then ran a petrol station, and they were born in Blackburn, where they founded EG Group, the country’s biggest independent petrol-station and retail-forecourt operator, which also has extensive international operations.
EG is the UK’s second-biggest minority business, with a global turnover of £17.6 billion. And last year, together with TDR Capital, itself a minority business, the Issa brothers also bought Asda Stores, a supermarket chain with a turnover of £22.9 billion, which makes it the UK’s largest minority business. (It does not feature in the Top 100 for 2019-20, because it was not yet minority-owned then.)
8 out of 23 unicorns
The report also 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.
Six specific contributions
The report also identifies six specific contributions of minority businesses: to combating the Covid crisis, technological progress, innovation, exports, environmental sustainability and the “levelling up” of deprived areas.
- Combating the coronavirus crisis: Minority businesses have developed rapid, accurate, low-cost Covid tests, sourced life-saving personal protective equipment, kept elderly people safe in care homes, enabled the NHS to provide online GP consultations, delivered meals to families during lockdown and developed a virtual events platform.
- Tech progress: Minority-founded businesses in tech include DeepMind, the world’s leading AI company now owned by Alphabet, as well as the tech unicorns mentioned above.
- Innovation: More broadly, 20.8% of minority-led SMEs – and 24.3% of black-led ones – engaged in process innovation in 2018, compared with 14.8% of white-led ones. Minority SMEs are also much more likely to engage in product or service innovation (30.3%) than others (18.5%).
- Exports: Minority businesses can also play a crucial role in boosting exports in a post-Brexit environment. The Top 100 had £18.5 billion in foreign sales in 2019–20, more than UK exports to Japan (£14.7 billion) in 2019 – and much more than exports to Australia (£12 billion) or Canada (£11.5 billion). Minority SMEs in every UK region are more likely to export than others.
- Environmental sustainability: Britain’s leading retail energy supplier that relies exclusively on renewable energy, Bulb Energy, was co-founded by a minority entrepreneur. Minority start-ups are also helping to provide eco-friendly solutions to issues such as biodegradable wet wipes and waste-water treatment.
- Levelling up: Minority businesses can help the government achieve its top post-Covid priority of “levelling up” deprived areas outside London, notably because 21 of the 39 Top 100 businesses in England located outside London are based in deprived areas, as are four of the five Scottish businesses in the Top 100 and one of the two Welsh ones.
Challenges and strengths
The contribution of minority businesses is all the more remarkable because minority entrepreneurs face huge challenges, notably discrimination, disconnection from mainstream business networks and 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.
While successful minority entrepreneurs may work around or overcome the particular challenges they face, many more fail to realise their potential because of them.
Those setbacks and failures are not just personal tragedies and injustices; they are also missed opportunities for the UK. Addressing those three challenges therefore ought to be a top priority.
While minority businesses would benefit from a range of measures to help businesses in general – notably more generous covid-crisis support – the report’s 10 recommendations focus on addressing the three specific challenges of discrimination, disconnection and doubt, as well as the overarching issue of lack of data.
As the Black Lives Matter movement has highlighted, tackling racial and ethnic discrimination is a critical and hugely complex issue that requires deep-seated changes across society. At a practical level, the following business-focused recommendations would make a big difference.
- Large businesses – starting with FTSE 100 companies and multinationals with UK operations – should make public their annual spending on procurement from minority businesses and commit to establishing or enhancing their supplier-diversity programmes.
- Government and public-sector bodies should also take the lead in integrating supplier diversity into their procurement strategies.
More broadly, tackling discrimination in business life requires changes in people’s mindsets, corporate processes and power structures.
- In addition to providing anti-racism training to try to change perceptions of people from minorities, government, businesses and other organisations need to put in place rigorous processes to systematically address discrimination in their recruitment, promotion, procurement, investment and other business decisions.
Addressing minority businesses’ disconnection from sources of information, advice, capital, contacts and support requires a three-pronged approach, involving mainstream business organisations, minority ones and all levels of government.
- While many of them have made big improvements, mainstream business organisations – such as the CBI, the Institute of Directors and the Federation of Small Businesses (FSB) – need to make a bigger effort to attract minority businesses, cater to their specific needs and represent their interests more effectively.
- At the same time, organisations such as MSDUK need to do more to provide specific information and advice to minority entrepreneurs, connect them to potential clients, partners, investors, mentors and other useful contacts and highlight their contribution and challenges to a wider audience, including policymakers.
- Government decision-makers at all levels need to take more account of the interests of minority businesses in framing policy, regulations, funding and support programmes.
While self-confidence is a personal thing, more needs to be done to help address the doubt that many minority entrepreneurs feel about their potential.
- Schools, universities and other education and training providers need to do more to equip young people from minorities with the self-confidence and skills to succeed.
Many of the entrepreneurs we interviewed noted the low expectations that education providers and careers advisers had of them, a bias that many people from minorities may internalise.
That needs to change, including through better training for education staff and better procedures – such as online aptitude tests – to assess young people’s potential, including as entrepreneurs.
- In addition to acting as role models, successful entrepreneurs – especially minority ones – ought to play a bigger role in mentoring the next generation of minority business founders.
- Greater community support is needed for minority entrepreneurs, notably black ones.
Black community organisations have a crucial role to play. And networks such as MSDUK can also help provide this community support.
Last but not least, there is an overarching need for much better data about minority businesses.
- To better gauge the performance, problems and policy needs of minority entrepreneurs, corporate officers should be required to provide their ethnicity and country of birth in Companies House filings.
That information would provide the basis for much-needed additional research on minority businesses.
Philippe Legrain, Founder 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 at 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, co-founder and 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.”
Download the full report (pdf).