EXECUTIVE SUMMARY
‘Black. British. In Business & Proud’ is the only study in the UK that considers the complete entrepreneurial lifecycle for Black business owners in Britain. From ideation to a sustainable business model, we had c.1000 respondents take part in the survey this year at different stages of entrepreneurship. This year’s report identified three key themes:
- Mistrust of Formal Institutions,
- Barriers and Low Visibility of Black - People
- The Importance of Family, Community & Networks
- Accessing Finance and Knowledge
Our study this year, Black. British. In Business & Proud: United in Purpose, set out to check progress against the challenges discovered in 2021 and measure the positive effects of our recommendations in action. Barriers identified last year were extensive; some were intersectional, proving particularly challenging for Black women, while others were felt prominently in certain industries, such as presenting as a Black hair-and-beauty business. Entrepreneurs in this industry expressed that their products and services were not being valued by financiers.
Disappointingly, this year's survey revealed experiences of discrimination remain high for Black entrepreneurs, with two in three (67%) Black business owners being negatively affected – higher in fact than the 2021 findings, where just over half (51%) had been negatively affected by their experiences of discrimination. The devastating effects of this key statistic signal implications far beyond the numbers.
There is also a low level of trust in institutions and the government – exemplified by some of the evidence uncovered in the Gray report earlier this year following the ‘Partygate’ scandal.
RACIAL INJUSTICE
We tend to think of systemic issues with race as something that is a social issue further afield, with the UK further ahead in terms of progress.
There is, of course, a wealth of research that illustrates race discrimination as a major driver of economic disparities for members of the Black diaspora in other countries within the West. For instance, the overtly racially discriminate practice of ‘redlining’ in the US designed by the US government-sponsored Home Owners' Loan Corporation and the Federal Home Loan Bank Board.
Maps were created that categorised residential areas considered ‘desirable’, and areas were not sanctioned for lending if “inhabited by negroes”. This act of racial discrimination was only tackled as recently as 1968, following the introduction of the Fair Housing Act.
However, the UK also presents some equally shocking barriers for social mobility where Black minorities are concerned. Homelessness has grown massively in ethnic minority communities, from 18% to 36% in the last two decades – double the presence of ethnic minorities in the population5. In the UK, 2016-18 data from the Resolution Foundation briefing also showed that people of Black African ethnicity held the lowest typical wealth (in current prices, £23,700 family wealth per adult) – less than an eighth of the typical wealth held by a person of white British ethnicity (£197,000). We also know that less than 1% of venture capital investment has been awarded to Black entrepreneurs in the last 10 years.
THE PICTURE THIS YEAR
This year, we delved deeper and refined our questions during in-person interviews and roundtable discussions to try and understand why there continues to be a lack of trust in government and financial institutions. We also measured the effects that distrust in institutions and the government has on Black entrepreneurs, business management, growth and access to funding.
As a result of Black business owners’ experiences of racial trauma – historic, current or vicarious – and recurring events such as racial discrimination and daily micro-aggressions, many Black entrepreneurs are operating without support from any formal institutions, and in many cases, they are working on their own without a business partner or team. Informal support networks, such as family and social media groups, remain a leading choice in the Black business community, but without formal guidance, support and funding, we can see why Black businesses led by a solopreneur are struggling to sustain an annual turnover of over £20,000.
Many Black business owners just aren’t in a position to feel that accessing funding will provide them with a fair and indiscriminate experience. Black business owners may also experience cultural hesitation about taking on debt compared to white ethnic groups, possibly as a result of being denied finance historically, experiencing higher rates of rejection when applying for loans than their white counterparts, higher rates of economic deprivation and unequal opportunities.
GROWTH POTENTIAL
30% of the larger micro-businesses surveyed, those with an annual turnover of
£100k or more, accessed a bank loan or other bank funding to help their business, compared to 17% of businesses with a turnover of less than £100k.
The median amount Black entrepreneurs said they took to set up their business was
£2,000, with around half (48%) stating they took under £5,000. This raises two questions: First, is the modest request in line with their business needs and growth potential, or does the Black business community err on the side of caution, anticipating bias in the assessment process? Second, are Black business owners accurately making a decision about the amount of loan they request if they have not previously been able to access formal support and guidance in the financial sector?
What this means to us when we translate it into action is that we need to identify places and spaces for earlier intervention and continuous support throughout the lifecycle of a business. The development of such support must be delivered in partnership with financial and governmental institutions, education providers and ethnic minority-led organisations with strong positions within the Black business community. By creating an ecosystem whereby each business owner receives exactly what they need to achieve their potential, we can begin to address the way structural inequity has delayed progress.
It is clear from our conversations with the Black business community that they have seen some positive action from the early-stage delivery with our partners. Six in 10 Black business owners are aware of at least one of the seven initiatives that have been rolled out by Lloyds Bank in the last year, but we understand that more needs to be done.
Our objectives during this edition of our three-year research project are to:
1. Better understand the impact of previously identified barriers faced by Black entrepreneurs and the positive impact early action can have, allowing us to customise tools for their growth.
2. Use the report as a means of highlighting the voices of the Black entrepreneurial community to impact long-term systemic change through collaboration
Read more about our initiatives and actions in sections seven and eight.
