Are ethnic minority businesses more outward-looking and lucrative?

In an era of Brexit and an uneven economy due to COVID-19, we need ethnic minority entrepreneurs, and their £74 billion contributions, even more

For those that think supporting diversity in the business world is a social, rather than an economic imperative – you couldn’t be more wrong. In the UK, a place where entrepreneurialism defines the business landscape, and where small-to-medium businesses, (SMEs) account for over 99% of all businesses, it’s ethnic minority firms that are more innovative, according to a new report.

The contents of the “Minority Businesses Matter” report, which includes interviews with minority entrepreneurs, will be a good way to convince people that D&I has business value.

Co-authored by the ex-economic adviser to European Commission President José Manuel Barroso, Philippe Legrain, he is also the founder of OPEN, a migration and diversity think-tank involved in the report.

The ethnic-minority business economy

The report’s mission is to enlighten British businesses, business advice organisations, and policymakers about the importance of the ethnic-minority business economy and achieves this goal by providing “a data breakdown of the economic contribution of minority businesses in terms of GVA, employment, and turnover.”

From the outset, the report shows their “economic contribution” to be significant, where businesses led by ethnic-minority entrepreneurs contribute at least £74 billion a year to the British economy. They are also big employers and count around 3 million Brits as employees.

Ethnic-minority businesses are also more outward-looking than SMEs led by other people, according to the report. Despite the climate of uncertainty caused by Brexit, they are more likely to export internationally than other SMEs in every region of the country.

Last year, “The Top 100 Minority Businesses” featured in the report managed £18.5 billion in foreign sales. Back in 2018, 15% exported overseas compared with 13.9% of other SMEs.

The contributions of ethnic-minority entrepreneurs aren’t only at SME level; in fact, eight of the UK’s 23 “tech unicorns” were co-founded by ethnic-minorities. Also, 23% of the UK’s fastest-growing companies in 2019 were also co-founded by minorities.

Bulb Energy, a renewable energy supply company, was the UK’s fastest-growing business that year and was co-founded by ex-Barclays energy trader, Amit Gudka.

Supporting the ascent of ethnic minority businesses could have some other macro-benefits too, such as helping ‘level-up’ the national economy following COVID-19, the report suggests. Twenty-one of the 39 ethnic minority businesses based outside London featured in the report are located in deprived areas including in Scotland and Wales. The growing success of such businesses and the creation of more like them in these areas could well increase prosperity across the country and stem the effect of a London-centric economy.

While the negative economic impact of COVID-19 on the BAME community, including the fact they have been more at risk of dying from the virus, has been well-covered, what’s given less credit is the work of ethnic minority businesses in helping fight the pandemic, adds the report. In this regard, the report details the work of minority businesses involved in developing low-cost COVID-19 tests and sourcing vital PPE.

Despite their evident success in launching and scaling businesses in the UK, the report also outlined the barriers ethnic-minority entrepreneurs face, including factors that directly relate to their race and ethnicity. Many entrepreneurs in the research reported facing direct and indirect discrimination, “disproportionate levels of doubt” and lack of access to “financial business and political networks.”

Considering that significant numbers of ethnic-minority entrepreneurs have overcome barriers, including discrimination and lack of access to resources in the business world, their success is even more striking. It is based on a “drive to succeed” and a “determination to overcome challenges,” according to the report.

However, what the report infers, and what many others believe, is that ethnic minorities in business shouldn’t have to struggle to overcome inequality barriers to achieve their success, even though many have developed skills such as fortitude, endurance, and determination in the process.

Barriers to equality: the report’s recommendations

The report goes further than highlighting the economic contributions and barriers faced by ethnic minority entrepreneurs and outlines “practical recommendations” for the Government and other organisations to follow to create a more equitable business environment.

They recommend that business advice and networking organisations such as the Federation of Small Businesses (FSB) “make a bigger effort” to attract minority businesses, address their needs, and better represent their interests. They also make a call to action for organisations actively involved in furthering minority interests to advise minority entrepreneurs better, and “connect them to potential clients, partners, investors, mentors, and other useful contacts.”

At the corporate level, including among FTSE 100 firms and multinationals, the report advises big businesses to diversify their supply chain through supplier diversity programs and publish their spending figures on procurement from minority-led businesses to encourage transparency and hopefully enact change.

Supply chain diversity requires active effort from businesses, as supply chain bias can be as embedded as hiring bias within organisations, added the report. But bringing minority businesses into the supply chain fold isn’t just a good CSR move for big firms, it can also increase their bottom line, according to a study by The Hackett Group, a US enterprise benchmarking firm, that found that “on average, supplier diversity programmes add $3.6 million to the bottom line for every $1 million in procurement operation costs.”

While racism is seen by many as a systematic issue in society, the report advises that organisations, including businesses, tackle it with a similarly systematic approach. This includes providing “anti-racism training” and addressing discrimination issues across all levels of their businesses, including in recruitment, promotion, procurement, and investment. It also calls on the government to actively consider the interests of minority businesses when considering policies including funding, support programmes, and business regulations.

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.”

If ethnic minority entrepreneurs are already beating the odds stacked against them, and are finding success despite the coronavirus crisis and post-Brexit Britain’s economic tensions, imagine how much more they could achieve if businesses and other organisations did more to make the playing field a little fairer.
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