Ethnic minority businesses (EMBs) are a vital part of the UK economy and society. They contribute over £25 billion to the GDP, employ over one million people, and provide essential goods and services to diverse communities. Recent research suggests EMBs contribution to GDP could increase fourfold to £100 billion with the right kind of business support. Beyond their economic impact, EMBs provide employment opportunities and foster social inclusion for ethnic minority communities who face exclusion from wider labour markets.
Yet EMBs are often overlooked and undervalued by policymakers, practitioners, and researchers. The role of ethnic minority businesses in ‘Levelling Up’ is interesting. EMBs are often located in the most deprived areas; they’re ‘resilient’; they often employ workers from marginalised communities; and for some, they offer a route to social mobility. Yet they are often distant from key business support networks, discouraged from securing finance, and struggle to grow. EMBs would seem to be ideal candidates for a strong role in levelling-up, yet they rarely figure in the prevailing policy discourse. They are often seen as a homogeneous group, rather than a diverse and dynamic population with different needs, aspirations, and potentials. EMBs continue to be subject to stereotypes and prejudices that limit their opportunities and growth. I reflect below on shifting perspectives and the work to be done to move towards a more evidential approach to ethnic minority business policy and practice
There are three critical caveats to consider before proceeding:
- First, although ethnic minorities tend to higher than average rates of self-employment, the businesses they establish are often the result of necessity rather than the pursuit of entrepreneurial opportunities. It is surprising that successive governments’ occasional sorties into EMB policy take the form of boosterist attempts at business start-up rather than promoting growth in established firms.
- Second, there is a dubious connection between ethnic minority business policy and ethnic minority entrepreneurship; general economic measures are much more influential.
- Third, there is space for meaningful collaborations to support EMBS despite the severity of structural constraints. Academics, policy-makers and practitioners all have important roles to play.
Shifting Perspectives: Diverse and Evolving EMBs
Few now consider EMBs a homogenous group solely defined by their ethnic origin. The nature of entrepreneurial ventures and their context – rather than ethnicity – is increasingly seen as the principal concern of the growing discourse on ethnic minority enterprise. This is a welcome departure from early research in the U.S. which emphasised ‘ethnic resources,’ – the cultural norms and values supposedly unique to each ethnic group that foster entrepreneurial tendencies. While initially appealing, the focus on ethnic characteristics was misguided. It overlooked critical socio-economic factors that influence entrepreneurial decisions, such as the state of the labour market, the economic opportunities available, the geographical location of the migrant community, and the sectors in which they establish their businesses.
It is a moot point whether the increasingly sophisticated and nuanced debate on ethnic minority entrepreneurship is percolating through to burgeoning policy initiatives in mainland Europe and the UK. There is a ‘bifurcation’ between contemporary scholarship on ethnic minority entrepreneurship – which emphasises context and complexity – and ‘agency-centric’ prescriptions issuing forth from policy makers. Initiatives tend to focus on individual skills and support rather than addressing racism, inequality, and structural barriers.
Closing the Gap: Research and Policy
The gap between academic research and policy development needs to be bridged to promote effective support for EMBs. Researchers have made significant progress in understanding the complexities of minority entrepreneurship , but translating these findings into practical policies can be challenging. Policymakers need evidence-based approaches that account for the diverse experiences of ethnic minority entrepreneurs. Greater collaboration and communication between researchers and policymakers can promote research and meaningful impact. Engaged research institutes like the Enterprise Research Centre and Centre for Research in Ethnic Minority Entrepreneurship (CREME) offer a valuable means of facilitating such collaboration. CREME pursues diverse forms of engagement with practitioners to support EMBs, including: stakeholder consultation, action research and new venture creation. It has developed a variety of innovative approaches to engage with, and make a difference to, stakeholders, ranging from the banking sector to newly arrived migrant communities. We can also find examples of research-informed interventions in mainland Europe, Canada, and the US.
Addressing Structural Constraints
Another way to improve policy is by tackling the structural constraints that EMBs face. These include limited access to markets, financing, and supply chains. Tackling these barriers requires systemic change of a kind that has been conspicuously lacking in the UK’s fitful approach to enterprise policy. The UK’s ‘deficit’ model, which focuses on ameliorating perceived shortcomings in the skills of ethnic minority entrepreneurs, does not augur well. Nonetheless, it is by pursuing structural polices to enhance market opportunities, facilitate access to finance, and foster connections with established businesses that we can create an enabling environment for EMBs to develop. It is important to recognise that these businesses operate in a wide range of sectors, from retailing to more advanced industries, and tailored support should be provided accordingly.
Inclusivity in Support Networks
Ethnic minority businesses often find themselves detached from mainstream support networks, which hinders their growth and development. Policy initiatives should focus on integrating ethnic minority businesses into these networks, ensuring that they have greater access to the resources and opportunities available. By fostering relationships with larger companies and developing partnerships, steps can be taken to promote market opportunities for EMBs. It is essential to recognise the diverse needs and aspirations within the ethnic minority business community, including women, young entrepreneurs, and new migrants. Inclusivity in policy design and implementation is key to ensuring a fair and supportive environment for all ethnic minority businesses.
Moving Forward: Engaged Policy for EMBs
To advance policy for EMBs, it is crucial to engage in meaningful collaboration between researchers, policymakers, and business owners themselves. This engagement can help bridge the gap between research findings and practical policy measures. By actively involving ethnic minority business owners in policy discussions, we can gain a deeper understanding of their unique challenges and aspirations. Additionally, policies should address the broader market constraints that impact minority businesses and promote a more inclusive and supportive business ecosystem.
Ethnic minority businesses have a vital role in social mobility, levelling up and in the UK economy generally, but they face many challenges and barriers. It is essential to develop a more supportive policy environment. This involves bridging the research-policy gap, tackling structural inequalities, and fostering inclusive support networks. By collaborating with researchers, policymakers, and business owners, we can develop evidence-based, effective, and responsive policies that address the diverse needs of EMBs. This will create a more inclusive and enabling environment for EMBs and small firms in general.
Photo Credit: Cytonn Photography on Unsplash
About the author
Professor Monder Ram OBE is the Director of Centre for Research in Ethnic Minority Entrepreneurship (CREME), based in Aston Business School, Aston University. He has extensive experience of working in, researching and acting as a consultant to small and ethnic minority businesses. He is a leading authority on small business and ethnic minority entrepreneurship research and has published widely on the subject.