Ethnic Minority Businesses In England

ETHNIC MINORITY BUSINESSES IN ENGLAND; REPORT
ON THE ANNUAL SMALL BUSINESS SURVEY 2003
ETHNIC BOOST
Emmy Whitehead, David Purdy and Stella Mascarenhas-Keyes
Small Business Service
March 2006
URN 06/958
1

CONTENTS
Page
Executive Summary 6
1. Ethnic Minority Business ‘Booster’ Sample 12
1.1 Background 12
1.2 Annual Small Business Survey: Methodology 13
2. Ethnic Minorities in England: Policy
and Historical Context 16
2.1 Geographical concentration of Ethnic minorities 16
2.2 Ethnic minority paid employment 16
2.3 EM self-employment / entrepreneurial activity:
our previous understanding 16
2.4 Recent policy developments 18
3. Key Characteristics of businesses led by
Ethnic Minority groups 20
3.1 Proportion of EM businesses in England 20
3.2 Size of Business 21
3.3 Age of business 22
3.4 Industry 23
3.5 Legal form 24
3.6 Financial turnover 25
3.7 Family business 26
3.8 Physical characteristics of main business location 28
3.9 Region 29
Summary 30
4. New Businesses and those without employees 31
4.1 New businesses 31
4.1.1 Rationales for business start-ups 32
4.1.2 Time taken to start trading 33
4.1.3 Advice about starting up 33
4.1.4 Obstacles to starting up the business 34
4.2 Businesses with no employees 35
4.2.1 Reasons for having no employees 35
Summary 36
5. Business operation 37
5.1 Whether or not business exports outside the UK 37
5.2 Innovation 38
5.3 ICT use 40
5.3.1 Level of ICT use in different sectors 43
5.3.2 Level of ICT use among businesses of different ages 44
5.3.3 Level of ICT use for different sized businesses 46
Summary 47
6. Financing the business 48
6.1 Seeking finance 48
6.2 Difficulty in obtaining finance 49
6.3 Impact of difficulties 51
6.4 Reasons for seeking finance 52
6.5 Type of finance sought 53
Summary 54
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7. Business Support 55
7.1 Business advice and support 55
7.1.1 Seeking general business advice 55
7.1.2 Reasons for not using advice 56
7.1.3 Seeking advice about business regulations 58
7.2 Contact with / Use of government services 60
7.2.1 Contact with Government 60
7.2.2 Government responsiveness to business concerns 62
7.2.3 Public procurement 63
7.3 Small Businesses and youth 64
Summary 66
8. Experience and Perceptions 67
8.1 Business objectives and growth 67
8.1.1 Recent and anticipated employment growth 67
8.1.2 Intention to grow the business 68
8.1.3 Means of achieving growth 69
8.1.4 Rationales for growth 70
8.1.5 Rationales for not growing 72
8.1.6 Small business perspectives on growth 74
8.2 Barriers and Obstacles to achieving business objectives 75
8.2.1 Overall incidence of obstacles to business 75
8.2.2 Greatest obstacles to business 77
8.2.3 Effect of greatest obstacle on business 79
8.2.4 Regulations as an obstacle to business 81
8.3 Discrimination 83
8.3.1 Incidence of discrimination 84
8.3.2 Source of discrimination 84
8.3.3 Basis of discrimination 85
8.3.4 Impact of discrimination 86
8.4 Crime 87
8.4.1 Whether crime is a problem 87
8.4.2 Type of crime 88
8.4.3 Effect on business 89
8.5 Disability among business managers 90
Summary 91
9. Conclusion 92
Annexes 95
References 99
3

List of Tables Page
Table 1.1: Breakdown of EM businesses and sole traders. 13
Table 1.2: Breakdown of ASBS sample by Ethnic Group and
employment status. 14
Table 1.3: Weighted breakdown of EM businesses by legal status 15
Table 1.4: Weighted breakdown of EM businesses by employment
Status. 15
Table 3.1: Size of business by EM status. 21
Table 3.2: Size of business by ethnicity and gender. 21
Table 3.3: Age of business by ethnicity and gender. 22
Table 3.4: Industry by ethnic group. 23
Table 3.5: Legal form of the business by ethnicity. 24
Table 3.6: Financial turnover by ethnicity. 25
Table 3.7: Generation in control of the business, by ethnicity. 27
Table 3.8: Regional breakdown by ethnicity. 27
Table 4.1: Respondent’s status before new business started. 31
Table 4.2: Time taken to set up business and start trading .All
businesses trading for less than 4 years. 33
Table 4.3: Main obstacles to starting up (or taking over) new
businesses. All businesses trading less than 4 years. 34
Table 5.1: Whether the business sells outside the UK. 37
Table 5.2: Percentage of businesses selling outside the UK,
by sector. 38
Table 5.3: Product and process innovation: proportion saying
they had introduced in the past year. 38
Table 5.4: Percentage of businesses indicating importance of
product / services innovation. 39
Table 5.5: Importance of product / services innovation. 39
Table 5.6: Importance of processes innovation. 41
Table 5.7: Uses of ICT, by ethnic group. 43
Table 5.9: Level of ICT use in different sectors, by ethnic group. 43
Table 5.10: Level of ICT use in certain industries, by ethnic group. 44
Table 5.11: Any ICT use by age of businesses. 45
Table 5.12: Level of ICT use by age of business, by ethnic group. 45
Table 5.13: Any ICT use by size of business, by ethnic group. 46
Table 5.14: Level of ICT use by size of business, by ethnic group. 46
Table 6.1: Whether finance was sought in the past 12 months. 49
Table 6.2: Difficulty in obtaining finance. 50
Table 6.3: Offered help by first source. 51
Table 6.5: Impact of difficulty raising finance. 51
Table 6.6: Reasons for seeking finance. 52
Table 6.7: Type of finance sought. 53
Table 6.8: Type of finance sought, by sector. 53
Table 7.1: Business advice and information used in past 12 months. 55
Table 7.2: Reasons for not using advice, by age of business. 57
Table 7.3: Sources of advice about regulations used in the past year. 59
Table 7.4: Areas of contact with Government. 61
Table 7.5: Awareness of organisations working with young people. 65
Table 8.1: Past and anticipated job growth. 68
Table 8.2: Intention to grow the business over next 2 to 3 years –
percentage of employers saying “yes”. 69
Table 8.3: Means of achieving business growth, by ethnic group. 70
Table 8.4: Rationales for achieving business growth, by ethnic group. 71
Table 8.5: Top three reasons for not growing, for each ethnic group. 73
Table 8.6: Business perspectives on growth. 74
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Table 8.7: Obstacles to the success of business. 76
Table 8.8: Greatest 5 obstacles to the success of the business. 78
Table 8.9: Effect of the greatest obstacle on business. 80
Table 8.10: Which regulations are obstacles to business. 82
Table 8.11: Sources of discrimination. 85
Table 8.12: Basis for discrimination, by all respondents experiencing
discrimination. 86
Table 8.13: Disability among small business owners. 90
List of Figures
Figure 2.1 Breakdown of adult population and self-employed
population for ethnic minority groups, males and females,
England and Wales, 2001 17
Figure 2.1 Breakdown of adult population and self-employed
population for ethnic minority groups, males and females,
England and Wales, 2001 18
Figure 3.1: Percentage of Family business by ethnicity. Businesses
with employees only 28
Figure 4.1: Rationales for business start-ups p33
Figure 4.2: Sources of advice about starting up the business.
Percentage in each category of all businesses trading for
less than 4 years 34
Figure 4.3: Reasons for employing no staff at time of survey.
Percentage in each category. Businesses without
employees. 36
Figure 7.1: Reasons given for not using external information.
Percentage in each category. Employers not using
external sources of advice 57
Figure 7.2: Percentage of businesses that expressed interest in
public sector work. Businesses with employees only. 65
Figure 8.1: Percentage Incidence of discrimination by ethnicity.
Employers in deprived wards 86
Figure 8.2: Proportion saying discrimination was an obstacle to
the success of their business: Employers in deprived
wards who had experienced discrimination 88
Figure 8.3: Percentage saying crime is a very / fairly big problem.
Businesses with employees only 89
Figure 8.4: Percentage of types of crime reported by small
business employers 90
Figure 8.5: Impact of crime reported by employers who had
experienced crime in the past year.
Percentage in each category 91
5

EXECUTIVE SUMMARY
Background
The government’s main objective in encouraging more enterprise in disadvantaged
communities and under-represented groups is to increase the overall rate of
entrepreneurial interest, business start-up and growth. Despite sustained economic
growth, marked differences in levels of enterprise between and within UK regions
have persisted. There are also substantial variations in levels of entrepreneurial
activity between different minority groups.
The Annual Small Business Survey (ASBS) 2003/04 included a booster sample of
ethnic minority-led businesses. The ASBS (conducted in 2003 and early 2004)
included a boost of ethnic minority businesses in deprived wards. This led to a sample
of responses from ethnic minority businesses of about 1,600. This made it the first
survey of its type to allow for a detailed analysis of different ethnic minority (EM)
businesses in England. Prior to this, ethnic minority businesses had often been
grouped together as a homogenous group1
, considered to be sharing many of the same
issues and concerns. By allowing more robust analysis of ethnic minority sub-groups,
the booster survey should enable better targeting of policy and support.
The Small Business Survey (originally the Omnibus Survey) was first conducted in
2001. The 2003 Survey was the first to use the Small Business Service (SBS) seven
strategic themes as its basis. The primary aim of the ASBS is to gauge the needs of
small businesses (those with fewer than 250 employees), and to look at their concerns
and the barriers they face. It also provides a basis for measuring some SBS targets.
Key findings
The characteristics of all small Ethnic Minority businesses2
Ethnic minority (EM) businesses account for almost one in ten (9.8%) small
businesses with employees in England (section 3.1). Over two-thirds of small
businesses in England have no employees. Ethnic Minority (EM) businesses,
however, are more likely than non-EM businesses to employ people (43.2% compared
with 29.2%). Among businesses that do employ people, EM businesses are more
likely to be micros than non-EM businesses (90.2% compared with 83.0%) (section
3.2).
Among businesses with employees, EM businesses tend to have been trading for less
time than non-EM businesses. Black businesses with employees tend to own the
youngest businesses with two in five (41.2%) trading for three years or less, compared
to 14.6 per cent for all businesses with employees or 20.0 per cent for all EM
businesses with employees (section 3.3).
1
Where clear EM / non-EM differences exist, this survey allows us to be more confident in these
results.
2
The survey asks about 'owners, partners or directors' and we describe businesses with 51+% as
women-led and those with 50+% ethnic minority as ethnic minority-led.
6

Nine in ten EM businesses with employees are in the services sector. This compares
to approximately seven in ten non-EM businesses (section 3.4).
Financial turnover tends to be lower for EM businesses with employees, which may
reflect the younger age of the business or possibly the sector (section 3.6).
Among businesses with employees, perhaps surprisingly, a slightly lower proportion
of EM businesses are family-owned (63.1%) than non-EM businesses (67.7%).
Chinese businesses are the most likely to be family owned (75%) and Black
businesses are the least likely (39.9%) (section 3.7).
Among businesses with employees, two in five (40.0%) EM businesses are based in
the 15 per cent most deprived wards. This compares with just under a quarter (24%)
of non-EM businesses. Pakistani-led businesses are the most likely to be situated in
these wards (55.8%) and Chinese-led businesses the least (31.4%) (section 3.8). As
people from EM communities are disproportionately represented in inner city areas,
providing the right conditions for the sustained growth of ethnic minority businesses
may be a driver for economic regeneration within these areas.
Less than one in ten (9.0%) of all EM businesses in England are located, or have their
main location, in a rural area. This compares to 41.5% of non-EM businesses (section
3.8)
Starting up in business
For businesses trading for less than 4 years, there is little difference between EM and
non-EM businesses in terms of what they were doing prior to start-up, with the
majority coming from full-time employment (58.9% and 62.2% respectively) (section
4.1). Given that unemployment is higher among many EM groups, it is worth noting
that higher proportions do not make that transition.
The most common reason for business start-up is a wish to be independent and to be
one’s own boss. However, a lower proportion of EM businesses cite this (22.3%) than
non-EM businesses (30.5%). A higher proportion of EM businesses cited difficulties
in finding either the right job or any job as a reason for going into business than non-
EM businesses (15.9% compared with 9.3%). This implies a slight tendency away
from opportunity entrepreneurship towards need (section 4.1.1).
In terms of length taken to start trading, EM businesses tend to take longer. Over one
in ten (11.4%) take over one year, compared with one in twenty (5.4%) non-EM
businesses (section 4.1.2).
On starting up or taking over a business, EM businesses are generally less likely to
seek advice than non-EM businesses, with almost half (49.5%) seeking none. This
compares to approximately a third (34.1%) of non-EM businesses. Where EM
businesses do seek advice, informal sources are more commonly used than banks,
accountants or solicitors (section 4.1.3). Almost a third (32.4%) of new EM
businesses said that they had not faced any real obstacles in starting up, compared
with about a quarter (24.8%) of non-EM businesses. For those who do identify
barriers, access to finance, recruiting staff and competition are more likely to be
mentioned by EM businesses than non-EM businesses (section 4.1.4).
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The main report discusses a number of issues / concerns / business operations which
are very similar among all businesses, irrespective of whether they are EM-led or not.
It also goes into detail about those aspects for which EM businesses as a whole differ
from non-EM businesses. This is particularly the case where, due to smaller sample
sizes for some questions, we can be more confident in reporting on all ethnic
minorities rather than separating out responses for different EM groups. The focus of
the remainder of this summary will be on some of the key differences evident among
different EM businesses.
Business operation
In terms of exporting, among businesses with employees, Black-led businesses are
more likely than other EM businesses to sell outside the UK and are almost as likely
as non-EM businesses to be exporters (19.4% and 21.9% respectively) (section 5.1).
In terms of ICT use, among businesses with employees, Black-led businesses are
generally more likely to use ICT than other EM businesses (section 5.3).
Financing the business
Findings from the survey suggest that among businesses with employees, Black-led
businesses are generally more likely to have difficulties with accessing finance, and
Indian-led and Chinese-led businesses the least likely to experience these difficulties
(section 6.2)
Among businesses with employees, 15.5 per cent of EM businesses tried to obtain
finance on one occasion and 7.6 per cent more than once. Almost two in five (37.1%)
Black-led businesses attempted to obtain finance, compared with only one in ten
(10.2%) of Chinese-led businesses. Multiple attempts also varied across groups, with
over a fifth (22.1%) of Other Asian-led businesses (not Indian and Pakistani)
attempting once, but only a further 3.5 per cent on more than one occasion. Black-led
businesses were the most likely to have attempted to obtain finance on more than one
occasion (17.6%) (section 6.1).
Business support
Among businesses with employees, under half (45.9%) of EM businesses compared
to 51% of non-EM businesses sought general business advice. Other Asian (including
Bangladeshi) businesses were the least likely to have sought advice (27.8%), followed
by Chinese-led businesses (39.1%). A far higher proportion of EM female-led
businesses with employees (53.9%) sought advice than EM male-led businesses
(39.3%) (section 7.1.1).
Among businesses with employees, over half (53.6%) of EM businesses compared to
39.2% of non-EM businesses had not sought any advice about regulations over the
last 12 months. This was highest among Pakistani-led and Other Asian-led businesses
(61% and 60.5% respectively). Almost one in five (19.7%) Chinese-led businesses
sought advice from accountants. This is substantially higher than the EM average of
9.4 per cent (section 7.1.3).
Among businesses with employees, over the last year 58.6 per cent of EM businesses
compared to 63.8% of non-EM businesses had contact with the Government. For over
one in ten (13.3%) contact was related to employee matters. This was highest among
Other Asian-led businesses at over a fifth (23.3%). EM male-led businesses tended to
8

have more contact than EM female-led businesses (60.2% compared with 53.5%)
(section 7.2.1).
In terms of public procurement, among businesses with employees, a similar
proportion of EM and non-EM (18%) businesses had expressed an interest in public
sector work. Just over a fifth (22.6%) of Black-led businesses expressed an interest
compared with 13.8 per cent of Pakistani-led businesses and only 5.6 per cent of
Chinese-led businesses. This is heavily sector related. Of those who had expressed an
interest in this work, over 80 per cent had done some business for the public sector in
the past 12 months (section 7.2.3).
Growth: experience and expectations
Among businesses with employees a fifth (20.6%) of EM businesses compared to
18.4% of non-EM businesses had increased their employment in the last year. This
was higher among EM female-led businesses (29.1%) than male-led (20.2%)
(section8.1.1).
Among businesses with employees, Black-led businesses are significantly more likely
than other businesses to have increased employment in the last year and also expect to
grow again in the next. About a third (32.4%) of Black-led businesses had not grown
in the last year compared with 61.2 per cent of all EM businesses, two-thirds (66.9%)
of Indian-led businesses and three-quarters (75.6%) of Chinese-led businesses
(section 8.1.1).
Among businesses with employees, over six in ten (62.4%) EM businesses intended
to grow their business in some form over the next two to three years. This was
substantially higher among Black-led businesses (92.4%) and lowest among Chinese-
led businesses (44.8%). This is likely to reflect a higher level of confidence among
Black-led businesses, but also can be related to growth in different sectors (section
8.1.2).
The most common means of securing anticipated growth was to increase turnover or
sales. Among all employers who intended to grow, property expansion was
particularly high for Pakistani-led businesses at 38 per cent (compared with 28.2% for
all EM businesses). Approximately a quarter of Pakistani-led businesses (24.6%) and
Black-led businesses (27.3%) looked to grow by entering new markets. Taking on
more staff was mentioned by a fifth (20.9%) of Black-led businesses compared to
about a tenth (11.3%) for all EM businesses (section 8.1.3).
Growth: limits and barriers
Among EM businesses with employees not looking to grow, approximately a quarter
(26.7%) compared to a third (33.2%) of non-ME businesses, said this was because
they were content with their present size. This was the reason for 36.8 per cent of
Chinese-led businesses that were not looking to grow. Pakistani-led businesses were
significantly more likely to say that they had not considered growing (16.9%) than the
EM average (5.5%) or non-EM business average (1.4%) (section 8.1.5).
Among EM businesses with employees, around one in ten (8.9%) EM businesses cite
non-market factors, which may in some way be preventing them from growing. This
was particularly marked, at 18.4 per cent, for Chinese-led businesses (section 8.1.6).
9

In terms of obstacles to growth, among businesses with employees, Black-led
businesses were more likely to have mentioned most obstacles than any other ethnic
groups. However, they were the least likely to cite competition (42.4% compared to a
EM average of 53.6%). Seven in ten (71.4%) Chinese-led businesses felt that
competition was an obstacle (section 8.2.1). It should be noted that Chinese-led
businesses are the most sectorally concentrated. The most cited obstacle amongst
Black-led businesses was obtaining finance (21.7%) (section 8. 2.2).
Among businesses with employees, the main impact of the greatest obstacle was to
reduce sales. This was substantially greater among Chinese-led businesses (50.0%)
and lower among Black-led businesses (18.4%) compared to the average for EM
businesses of 36%. Black-led businesses were, however, more likely to say that they
could not get cash for investment (13.1%) compared to all EM businesses (6.5% on
average) (section 8.2.3).
Approximately a third (34.1%) of EM businesses with employees thought that
regulations presented obstacles to their business’ success. Just less than one in ten
(9.0%) EM businesses mentioned tax-related regulations. However, this was cited
more often among Pakistani-led (17.1%), Black-led (15.4%) and businesses equally
led by men and women (16.6%) businesses. The cost of compliance was an obstacle
particularly cited by Pakistani-led businesses (44.6% compared to 31.7% of all EM
businesses) (section 8.2.4).
Business owners in the 15 per cent most deprived wards were asked whether they felt
they had suffered any form of discrimination. EM businesses were slightly more
likely (14%) than non-EM businesses (11.7%) to say that they had experienced
discrimination. Among businesses with employees, Black-led businesses (16.9%)
were the most likely to feel they had suffered and Chinese-led and Other Asian-led
businesses the least (10.9% and 10.8% respectively). Not all the discrimination
reported was on the basis of race although a lot of it was (section 8.3.1).
Conclusions
Almost one in ten employing businesses in England are majority led by people from
ethnic minority groups. Their size and significance is considerable, and growing3
.
However, up to now, our knowledge of EM businesses has been relatively limited,
with much evidence considering EM businesses as a single, homogeneous group. The
Annual Small Business Survey 2003 ethnic boost takes us forward in terms of what
we now know about businesses led by people of Indian, Pakistani, Other Asian,
Chinese, Black African and Black Caribbean descent.
It should not be forgotten that whatever the ethnicity of a business owner there are a
number of issues which are consistent across all small and medium enterprises. Key to
this report, however, has been the identification of issues where there are differences
among ethnic minority-led businesses that appear to relate to ethnicity.
3
Throughout the UK, there are more than a quarter of a million ethnic minority Small and Medium
Enterprises which contribute over £15 billion to the UK economy per year. Source: SBS Statistics
Team estimates based on SBS's SME Statistics for the UK 2004, the SBS Annual Small Business
Survey 2003, and the ONS Annual Business Inquiry 2003.
10

This research has confirmed and detailed some clear differences in attitude and
approach across businesses led by different ethnic minority communities. It will be
important to continue to research EM businesses in terms of specific groupings as
generational effects lead to changes to the dominant sectors and ways of working.
11

12
1. Minority Ethnic Business ‘Booster’ Sample
1.1 Background
The Annual Small Business Survey (ASBS) 2003/04 included a booster sample of
ethnic minority-led businesses. This made it the first survey of its type to allow for a
detailed analysis of different ethnic minority (EM) led businesses in England. Prior to
this, EM businesses had often been grouped together as a homogenous group,
considered to be sharing many of the same issues and concerns. By allowing more
robust analysis of EM sub-groups, the booster survey should enable better targeting of
policy and support.
The Small Business Survey (originally the Omnibus Survey) was first conducted in
2001. The 2003 Survey was the first to use the Small Business Service (SBS) seven
strategic themes as its basis. The primary aim of the ASBS is to gauge the needs of
small businesses (those with fewer than 250 employees), and to look at their concerns
and the barriers they face. It also provides a basis for measuring some SBS targets.
The 2003 ASBS used the Small Business Service (SBS) key delivery themes as its
basis.
The ASBS (conducted in 2003 and early 2004) included a boost of ethnic minority
businesses in deprived wards. This led to a sample of responses from EM businesses
in England in excess of 1,600. This report covers the analysis of that sample’s
responses to questions around:
• The characteristics of small businesses
• The structure and location of their business
• Whether they employ staff
• How their business operates
o Whether they export
o Whether they innovate
o Whether they use ICT
• Whether and how additional financing has been sought
o Seeking and securing debt or equity finance
• Their experiences of business support
o Their use of business advice and support
o Their contact with government departments or agencies
o Small businesses and youth
• Their experience and perceptions on a whole range of issues, including
o Optimism about the future for their business
o Barriers and obstacles to achieving their business objectives
o Discrimination
o Crime
o Disability issues.
As well as highlighting differences and similarities across ethnic groups, this report
will also highlight some of the key differences between male-led and female-led EM
businesses.

13
1.2 The Annual Small Business Survey: Methodology
Data build, on behalf of the Small Business Service, conducted the Annual Small
Business Survey. The main survey and most of the boost was carried out during the
latter few months of 2003, and the remainder of the boost during Spring 2004.
Sampling
The Dun and Bradstreet database of enterprises in England was used to randomly
select a sample of businesses for the main survey. The businesses included in the
survey were randomly selected from this sample. The respondent would normally be
the person in control of the business. In businesses with more than one
owner/partner/director, any of these could be interviewed4
.
On top of the main survey, the sample of EM-led businesses was boosted by
surveying two additional groups:
• Ethnic minority-led businesses that had taken part in the Omnibus survey and
had expressed a willingness to undertake further research
• A random sample of businesses in the top 15 per cent of deprived wards
(according to the Index of Deprivation 20005
) was constructed. A screening
process took place to identify the businesses that were considered to be ethnic
minority group-led – where 50 per cent or more of the
owners/partners/directors were from ethnic minorities.
The sample for this extra analysis comprises approximately 260 from the main
survey, 210 followed up from the Omnibus and 1140 from the screening process in
deprived wards. For the boost interviews, non-owners were sometimes interviewed if
they did not have adequate English to take part in the research.
Table 1.1 shows the numbers of Ethnic Minority (EM) sole proprietors, companies
and partnerships that were interviewed in the survey – this includes the main and the
boosted sample.
Table 1.1: Breakdown of Ethnic Minority businesses sample by legal status
EM sole
proprietor
EM partnerships
/ companies
All EM businesses
Indian
Pakistani
Other Asian
Black African
Black Caribbean
Other Black
Chinese
Other
226
131
62
24
27
4
60
67
492
160
82
53
36
11
86
156
718
291
144
77
63
15
146
223
Total 601 1076 1677
Note: Approximately 40 EM partnerships have been double counted (i.e. there is more than one ethnic minority
represented in the EM business).
4
The survey asks about 'owners, partners or directors' and we describe businesses with 51+% as
women-led and those with 50+% ethnic minority as ethnic minority-led.
5
www.odpm.gov.uk/indices

14
Table 1.2 Breakdown of ASBS sample by Ethnic Group and Employment Status.
Ethnic group With employees Without employees
Indian 606 112
Pakistani 249 42
Other Asian 129 15
Black African 67 10
Black Caribbean 43 23
Other Black 14 1
Chinese 129 17
Other 190 33
Total Ethnic Minority 1427 250
Total non-Ethnic
Minority
7428 1465
Response rate
The response rate for the main survey was 86 per cent. A number of strategies were
used to maximise the response rate:
• Businesses were made aware that their views could have an effect on
government policy relating to business.
• An appointment was made to call back at a later date if the business was too
busy at the time of the initial call.
• Evening interviews were made available to businesses that were too busy to
take part during the day.
• Those businesses that seemed reluctant to take part were sent a letter from
SBS that set out the importance of participation in the survey.
Research approach / methodology
Interviews were conducted by telephone using Computer Aided Telephone
Interviewing (CATI) systems. The main survey interviews and most of the boost
interviews were carried out during the period between September and December
2003. The last 200 boost interviews were conducted between March and April 2004.
The average length of interview was 20 minutes.
Questionnaire
The questionnaire was developed to investigate and monitor some SBS key and
supporting measures. Some additional questions were asked in Wales, Scotland and
Northern Ireland. However, this report only focuses on the respondents in England.
Most questions were asked to all respondents, but some questions were asked to just a
random sub-set of the sample in England.
Weighting
The results of the survey were weighted to reflect the business population of the UK.
All records in England were given a weight depending on their size (no employees, 1-
9 employees, 10-49 employees, 50-249 employees), location (deprived ward or not
deprived ward) and ownership (EM or not EM), giving sixteen different weights.
Each weight was equal to our estimate of the England business population in this
category divided by the sample size in this category. The estimate of the England
business population started with SBS SME Statistics size band data; these were then

15
combined with the proportion of businesses of the relevant size in England in
deprived wards, and the proportion of businesses of the relevant size in England that
are EM-led, obtained in the main ASBS survey. By weighting the data in such a way,
the findings presented throughout this report are representative of EM businesses as a
whole.
Table 1.3 Weighted breakdown of EM businesses by legal status
Ethnic Group Sole proprietor Partnerships/companies All
Indian 40,563 49,956 90,518
Pakistani 18,279 13,248 31,527
Other Asian 7,463 7,426 14,889
Black African 3,070 12,349 15,419
Black Caribbean 7,427 7,112 14,539
Other Black 337 1,332 1,669
Chinese 7,320 10,063 17,383
Other 10,985 22,577 33,562
Total 95,443 124,063 219,506
Table 1.4 Weighted breakdown of EM businesses by legal status
Ethnic group With employees Without
employees
All
Indian 38,458 52,061 90,518
Pakistani 14,227 17,300 31,527
Other Asian 8,069 6,820 14,889
Black African 4,902 10,517 15,419
Black Caribbean 4,025 10,513 14,539
Other Black 824 845 1,669
Chinese 11,002 6,381 17,383
Other 13,713 19,849 33,562
Total 95,220 124,286 219,506

16
2. Ethnic Minorities in England – Policy and Historical Context
This section sets out the background to policy interest in Ethnic minority (EM)
entrepreneurs and established EM-led business. It starts by covering historical
developments that have shaped both the labour market position of EM groups and the
nature of the EM business population.
For the purposes of brevity, for the remainder of this report where we mean
businesses led by Black African, Black Caribbean or Other Black, these have been
shortened to “Black businesses”. This is the same for each of the different ethnicities
of the business e.g. Chinese businesses refer to those businesses led by Chinese
people.
2.1 Geographical concentration of ethnic Minorities
Seventy per cent of all ethnic minorities in England are concentrated in just five areas:
London, West Midlands Metropolitan County, West Yorkshire Metropolitan County,
Greater Manchester Metropolitan County and Leicester Unitary Authority. London
alone accounts for almost half of the England’s ethnic minority population, with over
2 million people from ethnic minority groups – equivalent to 29 per cent of its
population (Source: ONS Census 2001, Table KS06).
2.2 Ethnic minority paid employment
Minority ethnic groups tend to be underrepresented in the labour market. This is the
case in both the public and private sector relative to their share of the total population
of working age. The proportion of people in employment that are from ethnic
minority groups is 7 per cent, whereas their share of the total population of working
age is 9 per cent (LFS Autumn 2004). The difference in employment rates between
Whites and ethnic minorities is approximately 17 percentage points with some groups
showing far greater differences. The differences between different ethnic groups can
be as large as those between the ethnic minority average and the White average. It is
therefore important to look at separate minority groups wherever possible. Labour
market disadvantages are higher among some ethnic groups than others, notably
Bangladeshis and Pakistanis. Their employment rates are particularly low, at 42 per
cent and 45 per cent respectively (LFS Autumn 2004).
Reports such as the Ethnic Minorities and the Labour Market have suggested an
element of discrimination to account for some labour market differences. Research
using the LFS and other large surveys shows that, having controlled for a large
number of socio-economic characteristics including age, educational attainment and
place of residence, differences in labour market outcomes remain. Even when ethnic
minorities are employed, in general their occupational attainment and earnings are
lower than their White counterparts. Again, disadvantage is higher among some
groups than others.
2.3 EM Self-employment / entrepreneurial activity: our previous understanding
In later sections, this report provides valuable new information on EM businesses.
However, the research does not start from scratch. There is a range of information that
has shaped our understanding before now.

Attitudes: Findings from the UK GEM 2003 survey show that both Blacks and
Indian sub-continent Asians have more positive attitudes towards entrepreneurship.
The SBS Household Survey, however, shows that many people who are considering
entrepreneurship do not actually follow this through. This is particularly the case for
Black businesses.
Total Entrepreneurial Activity: The findings from the UK GEM 2003 survey show
that Indian, Other Asian and Black communities are more entrepreneurial than any
other groups in the UK. They are three times more likely to be involved with some
form of informal investment activity than their White counterparts, and their levels of
Total Entrepreneurial Activity (TEA) are nearly twice as high. It should be noted that
the GEM measure of TEA also includes those people who said they were actively
involved in creating a new business.
Self-employment: In terms of self-employment, ethnic minorities as a whole have a
very similar rate to the White population (11%) (LFS, England and Wales). The
current gap between the self-employment rate of ethnic minorities and the working
age population is 1.6 percentage points. There is, however, some variation between
different minority groups. The rate of self-employment is far higher among Asian or
Asian British groups (14%) than Black or Black British (7%). The Pakistani
population currently has the highest self-employment rate of all ethnic groups despite
having one of the lowest employment rates.
Figure 2.1 Breakdown of adult population and self-employed population for
ethnic minority groups, males and females, England and Wales, 2001
0%
1%
2%
Mixed
Indian
Pakistani
Bangladeshi
OtherAsian
Black
Caribbean
Black
African
Otherblack
Chinese
Otherethnic
group
Males as % of all adult males
Males as % of all male self-employed
Females as % of all adult females
Females as % of all female self-employed
Source: Office for National Statistics, Census 2001, England and Wales only
Gender: When comparing the proportion of ethnic groups in self-employment to their
representation in the population as a whole, there are also important differences. For
example, Chinese and Indian men and women are relatively over-represented in self-
employment (Figure 2.1).
Sector: Half of the self-employed people born outside the UK and from ethnic
minority communities are active in the Distribution, Hotel and Restaurant sector,
compared to one in six in the UK-born self-employed people. Some researchers have
17

18
concluded that the problems that ethnic minority businesses face may be more sector-
related as opposed to being products of ethnic grouping (Rutherfoord and Blackburn,
2000).
Earlier research indicates that as well as being concentrated in particular sectors such
as transport, catering and retail, EM businesses generally have different needs relating
to finance, networking, markets, motivation, and training and therefore have different
support needs.
Networks and generations
Earlier research studies suggest that many EM businesses rely heavily or completely
on co-EM markets i.e. they supply and trade with businesses led by people from the
same ethnic group. This can lead to a strong informal network of support. This finding
was re-iterated in recent SBS research around ICT usage and ethnic minority
businesses6
. This showed that EM businesses base their assessment of the potential
of ICT on the views and experiences of those within their EM-based network.
Although subsequent generations of business owners in EM communities have tended
to follow in the same line of business as their parents, a number of studies have
referred to the increasing likelihood for many later generation ethnic entrepreneurs to
set up in businesses in sectors that are different to their parents. One example of this is
in the Asian communities where second-generation entrepreneurs are seen to be
moving away from traditional clothes and retail sectors into the services and
professions. The National Employment Panel7
found that there is also a generational
difference in the motivation behind EM business start-ups, with many first-generation
businesses being established out of necessity. Today EM businesses are more likely to
start up in order to take advantage of a market opportunity.
2.4 Recent policy developments
EM enterprise is still a relatively young area of public policy.
Ethnic minority groups make a significant contribution to the UK economy. Through
influencing and joint working, the Government has a wide reaching, and potentially
major, role in affecting the employability (including self-employment) of ethnic
minorities as well as employers’ interest in locating in the areas they predominantly
live.
The 2002 Cross Cutting Review of Government Services for Small Business aimed to
ensure that the services provided by Government to small businesses were delivered
to provide maximum benefit to the economy and society. Leading on from this, the
Small Business Service developed the Government Action Plan for small business.
The plan is structured around seven strategic themes – each one of which has an
associated range of actions and initiatives aimed at achieving the Government’s
objectives for small and medium sized enterprises.
6
Ethnic Minority Businesses and ICT. Focus Group Research, 2004.
http://www.sbs.gov.uk/content/analytical/EMB_and_ICT.pdf
7
“Enterprising People Enterprising Places: Measures to increase Ethnic Minority Employment and
Business Growth” (May 2005), National Employment Panel

19
The Acton Plan identifies the need for greater “sector-consciousness” in business
support to reflect both the sectors in which EM businesses are currently concentrated
(clothing, retail, catering) and those in which they are emerging (IT, arts and cultural
industries).
The Public Service Agreement targets relevant to enterprise in under-represented
groups: ‘Help build an enterprise society in which small businesses of all kinds thrive
and achieve their potential, with an increase in the number of people considering
going into business, an improvement in the overall productivity of small business, and
more enterprise in disadvantaged communities”.
The SBS administers the Ethnic Minority Business Forum (EMBF). The EMBF was
set up in 2000 to advise government on the right help and advice required by EM
businesses in order to grow and succeed. In their annual report, a number of
recommendations are made (and updated) in the areas of business support, access to
finance, ICT and e-commerce, procurement and regeneration. All of these have
significant crosscutting implications for other government departments. To give just
one example, the Office of the Deputy Prime Minister is particularly interested in
regeneration and local authority procurement.
The EMBF, in liaison with SBS, is considering the unique role EM businesses play in
regeneration programmes. The aim will be to move towards a strategic statement or
framework that will address the pivotal role of ethnic minority business in
regeneration programmes.
Other government departments also play a role in this agenda. One significant
example would be the Department for Work and Pension’s Welfare to Work agenda.
DWP also plays a key role in delivering the recommendations from the above-
mentioned Cross Cutting Review and the SBS comprehensive review of business
start-ups.

20
3. Key Characteristics of businesses led by different ethnic minority
communities
Prior to the ethnic minority boost of the Annual Small Business Survey, research told
us that:
• Sector based differences are apparent when looking at business needs.
• Ethnic minority businesses face different needs in terms of accessing finance,
business support and training.
• Ethnic minority businesses tend to be concentrated in particular sectors.
• Self-employment rates among ethnic minorities as a whole are very similar to
the White population, but there is some variation between different minority
ethnic communities.
The boost of ethnic minority businesses carried out as an extension of the 2003 ASBS
allow us to explore some of these issues further, and to look, for the first time, at
specific EM groups, rather than treating them in a homogenous way.
For the purposes of this report, Ethnic minority (EM) businesses have been
categorised as those with at least 50 per cent of owners/partners/directors from an EM
group, as defined by the census categories. Businesses without such a majority or
those that could not be classified have been coded as non-EM businesses. In most
cases of EM businesses, control lies with one ethnic group. However, in about 40
cases more than one ethnic group was involved e.g. Pakistani and Indian. As sample
sizes of these businesses are too small to report on separately, they have been counted
as both a Pakistani and Indian business8
.
Where sample sizes allow, the breakdowns of findings among individual ethnic
groupings will be shown. However, for some analysis, it is only possible to show the
differences between EM businesses, and non-EM businesses. Some of the analyses
are carried out on all business, and others on those with employees. This is
highlighted in tables and texts as appropriate. The report focuses only on businesses
in England. For full UK results, refer to the main report of the Annual Small Business
Survey 20049
.
3.1 Proportion of EM businesses in England
EM businesses make up 6.8% of all Small and Medium Enterprises (SMEs) in
England.
Turning to businesses with employees, EM businesses make up 9.8 per cent of SMEs
in England. EM women-led businesses account for 1.0 per cent of all businesses with
employees (or 9.9% of EM businesses). EM women are equal owners in 2.5 per cent
of all businesses (25.4% of EM businesses) and EM male-led businesses account for
6.3 per cent of all businesses (or 64.7% of EM businesses).
8
This will be indicated where appropriate beneath the tables in this report to explain apparent
discrepancies in unweighted sample sizes
9
www.sbs.gov.uk/analytical/publicationsbytheme.php

21
3.2 Size of business
Of all EM businesses in England, 56.8 per cent have no employees, 39.0 per cent have
between 1-9 employees (micro businesses), 3.7 per cent have between 10-49
employees (small) and less than one per cent (0.5%) has between 50-250 employees
(medium).
Table 3.1: Percentage of businesses in each employment size band by ethnicity
and gender. All Businesses
Zero 1-9
(micros)
10-49
(small)
50-250
(medium)
Unweighted
n
Total (EM)
Men
Women
Equal
56.8
52.1
64.9
62.6
39.0
43.4
31.4
33.3
3.7
3.9
3.6
3.5
0.5
0.6
0.1
0.5
1607
1092
163
352
Total (non-EM) 70.8 24.0 4.5 0.7 5071
Total (All) 69.9 25.0 4.4 0.7 6678
England weighted data. n=6678
• A higher proportion of EM (43.2%) businesses have employees than non-EM
businesses (29.2%).
• Female-led (64.9%) and equal male/female-led (62.6%) EM businesses are
more likely to have no employees than male-led EM businesses (52.1%).
For each of the subsequent tables within this report, EM male-led, female-led and
equal-led businesses will be separated out. This will help identify whether female EM
business have different needs, and should help to further inform policy thinking. We
know from analysis of self-employment data that there can be considerable
differences between genders in the same EM group. Where sample sizes allow, a
breakdown of responses will also be shown for different ethnic groups.
Table 3.2: Percentage of businesses in each employment size band by ethnicity
and gender. Businesses with employees only
1-9
(micros)
10-49
(small)
50-250
(medium)
Unweighted
n
Indian 87.3 11.2 1.5 594
Pakistani 94.5 4.6 0.9 241
Other Asian (incl.
Bangladeshi)
87.7 10.6 1.8 126
Black 90.2 8.3 1.5 117
Chinese 95.4 4.1 0.6 122
Other 89.4 8.6 2.0 172
Total (EM)
Men
Women
Equal
90.2
90.7
89.5
89.1
8.7
8.1
10.1
9.5
1.2
1.2
0.4
1.4
*1358
940
132
286
Total (non-EM) 82.2 15.3 2.6 4224
Total (All) 83.0 14.6 2.4 5582
Note: * n=1372 for the cumulative total of the different ethnic groups as it includes double counting
where owners/partners/directors are from more than one ethnic community

22
Among businesses with employees:
• EM businesses are more likely to be micros than non-EM businesses (90.2%
compared with 82.2%).
• Almost all of Chinese (95.4%) and Pakistani (94.5%) businesses with
employees are micros (often employing family members).
• Approximately one in ten Indian (11.2%), Other Asian (10.6%) are small
businesses, compared with Black (8.3%) and less than five per cent of
Pakistani (4.6%) and Chinese (4.1%) businesses.
3.3 Age of business
Table 3.3 shows among businesses with employees, the number of years that firms
had been trading.
Table 3.3: Percentage of business of different ages by ethnicity and gender.
Businesses with employees only.
3 years or
less
4-10 years More than 10
years
Unweighted n
Indian 12.5 33.2 54.3 594
Pakistani 20.5 35.9 43.6 241
Other Asian
(incl.
Bangladeshi)
20.9 32.6 46.5 126
Black 41.2 38.4 20.4 117
Chinese 31.1 25.8 43.0 122
Other 18.0 30.7 51.3 172
Total (EM)
Men
Women
Equal
20.0
19.6
29.3
17.5
32.6
32.8
30.5
33.1
47.3
47.6
40.3
49.4
*1358
940
132
286
Total (non-EM) 14.1 17.6 68.3 4224
Total (All) 14.6 19.1 66.3 5582
where owners/partners/directors are from more than one ethnic community.
For businesses with employees
• A fifth (20.0%) of EM businesses had been trading for less than four years,
compared with 14.1 per cent of non-EM businesses.
• EM female-led businesses are, on average, younger than EM male-led
businesses, with almost one in three (29.3%) being three years old or less,
compared with 19.6 per cent of EM male-led. However, Black employers tend
to own the youngest businesses with 41.2 per cent trading for three years or
less.
• Just under a third of EM businesses (32.6%) had been trading for between 4
and 10 years, whilst almost half (47.3%) had been trading for over 10 years.
Among non-EM businesses, 68.3 per cent had been trading for over 10 years.
• Only a fifth (20%) of Black businesses had been trading for over 10 years
(compared to the EM average of 47.3%).

23
When turning to look at sole traders, there are some significant differences for some
ethnic groups. Only 9.2% of Other Asian (including Bangladeshi) businesses had
been trading for less than four years compared with 20.9% of Other Asian employers.
Black sole traders also tend to have been trading for longer than Black employers
(87% of sole traders being at least four years old, compared with 59.2% of businesses
with employees).
3.4 Industry
Respondents were asked what their business actually did. The responses were
concentrated in four blocks of business type, which align with the Standard Industrial
Classification (SIC92) as follows:
Primary sector: agriculture, hunting, forestry and fishing.
Production industries: mining and quarrying; manufacturing; and electricity, gas and
water supply.
Construction
Service sector businesses: include retailing, hotels and restaurants, transport and
communications, financial services, business services, education, health and social
work, and other services
Table 3.4: Percentage of businesses in different Industries by ethnicity.
Businesses with employees only
Primary Production Construction Services Unweighted
n
Indian - 9.8 3.9 86.3 594
Pakistani - 7.0 1.1 91.9 241
Other Asian
(incl.
Bangladeshi)
- 2.1 - 97.9 126
Black - 8.5 0.8 90.7 117
Chinese - - 0.1 99.9 122
Other - 7.4 6.7 85.9 172
Total (EM)
Men
Women
Equal
- 6.8
7.3
7.7
5.1
2.8
2.2
-
5.4
90.4
90.5
92.3
89.5
*1358
940
132
286
Total (non-EM) 2.6 16.8 10.6 69.9 4224
Total (All) 2.3 15.8 9.9 72.0 5582
where owners/partners/directors are from more than one ethnic community.
Among business with employees:
• The majority of EM businesses are in the services sector (90.4%). This
compares to 69.9 per cent of non-EM businesses.
• The proportion of businesses in the services sector is particularly high among
Chinese businesses (almost 100%) and other Asian businesses (97.9%)

24
• Black and Indian businesses are more likely to be in the production sector
(8.5% and 9.8% respectively) than other ethnic businesses (average for EM
businesses is 6.8%).
Turning to sole traders, the only main difference within ethnic groups is among Black
sole traders, with a quarter being in the production sector, compared with 8.5 per cent
of Black employers.
3.5 Legal form of the business
Respondents were asked about the legal form in which their business was organised.
Three categories were offered:
- Company
- Partnership
- Sole proprietor
Table 3.5: Percentage of businesses of different legal forms by ethnicity:
Company Partnership Sole
proprietor
Unweighted
n
Indian 35.3 25.6 38.8 594
Pakistani 20.1 24.6 54.4 241
Other Asian
(incl.
Bangladeshi)
33.6 18.3 47.8 126
Black 59.5 8.5 30.3 117
Chinese 19.0 26.5 53.7 122
Other 50.0 17.7 30.3 172
Total (EM)
Men
Women
Equal
36.1
31.1
31.1
50.5
21.1
15.8
14.1
37.4
42.1
52.6
51.1
11.7
*1358
940
132
286
Total (non-EM) 63.9 18.7 17.3 4224
Total (All) 61.1 18.9 19.7 5582
• EM businesses are more evenly spread across legal forms than non-EM
businesses
• Approximately a third (36.1%) of EM businesses were companies, compared
with almost two-thirds (63.9%) of non-EM businesses.
• EM businesses are more likely to be partnerships than non-EM businesses
(21.1% and 18.7% respectively).
• About two-fifths (42.1%) of EM businesses said they were sole-proprietors.
This is much higher than the non-EM figure of 17.3 per cent.
• Over half of both EM male-led (52.6%) and EM female-led (51.1%)
businesses are sole proprietors, and approximately one third (31.1%) are
companies.

25
• Slightly over half of Pakistani (54.4%) and Chinese (53.7%) businesses are
sole proprietors, compared to 30.3 per cent of Black and Other businesses.
• The proportion of partnerships was higher among Indian (25.6%), Pakistani
(24.6%) and Chinese (26.5%) businesses and lowest among Black businesses
(8.5%).
• Black (59.5%) and Other (50%) are significantly more likely to be registered
as a company compared to the average for EM businesses (36.1%)
In addition, 56.8 per cent of the overall sample of EM businesses (excluded from the
above breakdown) had no employees.
3.6 Financial turnover
Research commissioned by the London Development Agency on Black and Minority
Ethnic (BME) businesses in London found that turnover is lower among BME micro
businesses than similar size non-BME businesses in London and also across the UK.
This is supported by findings from the ASBS 2003 (see Table 3.2). The LDA research
estimated, however, that if London’s BME owned businesses achieved the turnover
by employment and / or enterprise seen across all UK enterprises, total revenues
would increase by almost £10bn and at least 50,000 jobs created.
All respondents in the ASBS 2003 were asked to provide the financial turnover of
their business in the previous 12 months.
Table 3.6: Percentage of businesses of different financial turnovers by ethnicity.
Under
£56K
£56K -
£250K
£250K -
£1.5m
£1.5m
–
£2.8m
More
than
£2.8m
Not
given
Unweighted
n
Indian 10.4 15.4 20.4 5.4 0.1 48.3 594
Pakistani 18.8 15.7 10.0 3.0 - 52.5 241
Other Asian
(incl.
Bangladeshi)
6.6 26.9 6.2 5.3 - 55.0 126
Black 17.0 23.2 14.1 6.5 - 39.2 117
Chinese 10.7 32.9 1.6 0.6 - 54.2 122
Other 9.5 22.4 12.3 12.1 - 43.7 172
Total (EM)
Men
Women
Equal
11.7
12.0
5.6
13.6
19.7
21.2
15.0
17.7
14.1
13.8
8.0
17.1
5.3
6.0
1.3
4.8
-
-
-
-
49.2
46.9
70.0
46.8
*1358
940
132
286
Total (non-EM) 6.9 18.8 30.1 9.7 0.4 34.1 4224
Total (All) 7.4 18.9 28.6 9.3 0.3 35.6 5582
• Financial turnover tends to be lower among EM businesses.
• Over one in ten (11.7%) of EM businesses have a financial turnover of less
than £56k. This compares with 6.9 per cent of non-EM businesses.
• A further fifth of EM businesses (19.7%) earn under £250k.

26
• Almost a fifth (19.4%) of EM businesses have a turnover of more than £250k.
This compares to 40.2 per cent of non-EM businesses.
• Almost a fifth (18.8%) of Pakistani businesses and 17.0 per cent of Black
businesses have a turnover of less than £56k.
• Among Asian businesses substantial differences can be identified. A quarter
(25.9%) of Indian businesses have a turnover of £250k or more, compared
with 13.0 per cent of Pakistani businesses and 11.5 per cent of other Asian
businesses.
• Only 2.2 per cent of Chinese businesses have a turnover of £250k or more.
(Chinese businesses are more likely to be in the hotel/catering sector which
has lower turnover per business than other sectors)
It should be noted that almost half of businesses surveyed did not provide the
financial turnover of their company, so there is likely to be some non-response bias.
Perhaps, unsurprisingly, sole traders tend to have a lower turnover than employers.
Approximately a third (36.5%) of all EM sole traders have a turnover of less than
£56k, compared to 11.7 per cent of employing EM businesses. This difference is
particularly marked among Black (44.4%), Indian (39.2%) and Pakistani (38.6%)
businesses.
Table A3.1 excludes those who did not provide the financial turnover of their
company. In this instance, among businesses with employees, almost a quarter
(23.1%) of EM businesses have a turnover of less than £25k compared with 10.5 per
cent of non-EM businesses. This is even higher among Pakistani businesses at 39.6
per cent. One in ten (10.3%) EM businesses that gave a figure for turnover, said they
had a turnover of between £1.5 million and £2.8 million. This compares with 14.7 per
cent of non-EM businesses.
Respondents were asked whether they expected the turnover of their business to
increase, decrease or stay the same over the next 12 months. Approximately half of
businesses with employees (47.7% of EM businesses and 51.6% of non-EM
businesses) believed their business turnover would increase. Over half of female-led
EM businesses (55.2%) believed this. Black respondents were the most likely to
expect their turnover to increase (72.3%), and Chinese the least likely (31.4%).
3.7 Family businesses
Respondents were asked whether the business was a family-owned one. For the
purposes of this survey, a family business is defined as one which is majority owned
by members of the same family.

Figure 3.1: Percentage of Family business by ethnicity. Businesses with
employees only
75
65.3 65.2 61.8 58.3
39.9
87.9
56.2
45.1
63.1 67.7 67.3
0
10
20
30
40
50
60
70
80
90
100
C
hinese
Indian
Pakistani
O
therAsian
O
ther
Black
EM
equal-ow
ned
EM
m
ale-ow
ned
EM
fem
ale-ow
ned
EM
total
N
on-EM
totalTotal-all
Percent
• Approximately two-thirds of businesses are family owned businesses. A lower
proportion of EM businesses are family-owned (63.1%) than non-EM
businesses (67.7%).
• The proportion of family-owned businesses varied between different ethnic
groups.
• Almost nine in ten (87.9%) EM equal-led businesses are family owned.
• Three-quarters (75.0%) of Chinese businesses are family owned, the highest
proportion of ownership among EM communities
• Black businesses are the least likely to be family owned (39.9%).
Table 3.7 presents information on the generation in control of the business.
Table 3.7: Percentage of each generation in control of the business, by ethnicity.
1st
1st
and 2nd
, or 2nd
2nd
and 3rd
or 3rd
Unweighted n
Indian 74.4 24.9 0.6 400
Pakistani 71.9 25.7 2.4 161
Other Asian
(incl. Bangladeshi)
76.6 23.4 - 82
Black 87.4 11.2 1.4 47
Chinese 79.5 19.2 1.3 92
Other 79.3 15.8 2.2 112
Total (EM)
Men
Women
Equal
76.1
74.3
74.4
79.4
22.3
24.4
18.9
19.5
1.3
1.2
6.7
0.3
*873
557
63
253
Total (non-EM) 55.2 29.2 10.4 2717
Total (All) 57.2 28.5 9.5 3590
NB – Note of caution over small sample sizes
Note: * n= 894 for the cumulative total of the different ethnic groups as it includes double counting
27

28
• It is much more likely among EM-led businesses that business control is with
the first generation.
• In over three-quarters of family-led EM businesses (76.1%) control of the
business lies with the first generation. This compares to just over half (55.2%)
of non-EM family-led businesses.
• Black businesses are the most likely to be controlled by someone in the first
generation (87.5%) and Pakistani businesses the least (71.9%).
• The proportion of EM businesses that are run by the 2nd
and 3rd
generation
jointly, or by just the 3rd
generation is very low (1.3%). However, one in ten
(10.4%) non-EM businesses are controlled by this generation.
3.8 Physical characteristics of the main business location
There was particular interest in looking at the booster sample in relation to the areas
in which respondents or their businesses were based. The Index of Multiple
Deprivation (IMD)10
calculates an overall measure of deprivation within local
authority wards by looking at income, employment, health deprivation and disability,
education, skills and training, housing and geographical access to services. The Office
of the Deputy Prime Minister (ODPM) has calculated a revised Index which will be
used in subsequent sweeps of the ASBS. This new version was not used due to timing
of its release.
• Forty per cent of EM employing businesses are based in the 15 per cent most
deprived wards. This compares with 23.9 % of non-EM businesses.
• Male-led EM businesses are more likely to be based in these wards (44.3%)
than either female-led (34.6%) or equal-led (31.1%) EM businesses.
• Among all EM businesses, Pakistani businesses have the highest proportion in
a disadvantaged area (55.8%), and Chinese the least (31.4%).
• Among each EM group, sole traders are more likely to be within the 15 per
cent most deprived wards than employers. Almost two-thirds (65.8%) of
Pakistani sole traders are located in these areas.
People from ethnic minority communities are disproportionately represented in inner
city areas that account for nearly all of the 15 per cent most deprived wards. This
means that providing the right conditions for the sustained growth of EM businesses
should provide a powerful driver for economic regeneration within these areas.
Through the Phoenix Fund a range of initiatives such as Community Development
Finance Initiatives, the Development Fund, a network of volunteer mentors and City
Growth Strategies have sought to encourage entrepreneurship in disadvantaged areas.
People living in deprived communities face all of the general challenges associated
with starting and growing a business. On top of this, they may also come across
further difficulties specific to where they live or their background. Government
activity to encourage more enterprise in these disadvantaged communities and under-
represented groups is important to both ensure equality of opportunity and also to
10
The IMD was produced by the Department for Transport, Environment and the Regions in 2000.

29
correct for specific market failures. Encouraging a thriving small business sector in
such areas and groups should lead to increased economic and social benefits.
The rurality definition is taken from that developed for the Countryside Agency11
. A
business is classed as either rural or non-rural according to the characteristics of the
ward in which it is located, in terms of population density, the economically active
population, public transport to work, employment in agriculture / forestry / fishing,
employment in primary production (mining / energy / water) and ethnicity.
• There is a small EM business presence in rural areas. With respect to all
businesses, less than one in ten (9.0%) of EM businesses in England were
located, or had their main location, in a rural area (compared to 41.5% of non-
EM businesses).
• When looking at employers only, the figures are 8.3 per cent (5.7% male-led,
9.3% female-led and 14.4% equal-led) and 35.1 per cent respectively.
• A third of all Chinese employers are based in rural areas.
• 9.5% of EM sole traders are based in a rural area
3.9 Region
Table 3.8: Percentage of businesses in each region by ethnicity. Businesses with
employees only
EM businesses Non-EM
businesses
All
All Male-
led
Female-
led
Equal-
led
North East 1.1 0.9 0.1 2.1 6.1 5.6
North West 12.8 13 7.8 14.0 15.0 14.7
Yorks and
Humber
7.5 8.5 3.9 6.3 17.7 16.7
East Midlands 8.2 7.0 5.5 12.3 6.7 6.8
West Midlands 15.6 17.0 15.4 12.0 7.6 8.3
East 6.4 5.1 3.8 10.9 10.3 9.9
London 36.6 37.3 53.2 28.5 12.2 14.6
South East 10.1 9.8 7.9 11.9 14.2 13.8
South West 1.7 1.5 2.4 1.9 10.3 9.5
• Over a third (36.6%) of EM-businesses are based in London and 15.6 per cent
based in the West Midlands, compared to 12.2 per cent and 7.6 per cent of
non-EM businesses respectively.
• The North East and South West have the lowest proportion of EM-businesses
(1.1 % and 1.7%).
• Over half of female-led EM businesses (53.2%) are based in London.
11
This was developed by the Social Disadvantage Research Centre for the Department of Social Policy
and Social Work at Oxford University in 2000.

30
Summary
• Almost one in ten (9.8%) of businesses with employees in England are led by
ethnic minorities (section 3.1)
• EM businesses are more likely to be employers than non-EM businesses, and
the majority (90.2%) of EM employers are micros (section 3.2).
• EM businesses with employees tend to have been trading for less time than
non-EM businesses (section 3.3)
• The majority of EM businesses with employees are in the services sector
(90.4%) (Section 3.4).
• A higher proportion of EM businesses with employees are sole proprietors
than non-EMs (section 3.5).
• EM businesses with employees tend to have a lower financial turnover than
non-EM businesses (section 3.6).
• EM businesses with employees are less likely to be family-owned than non-
EM businesses. Among ethnic communities, family-owned businesses with
employees are highest among Chinese businesses and lowest among Black
businesses (section 3.7).
• It is much more likely for EM-led businesses with employees to retain
business control in the first generation (section 3.7).
• 40 per cent of EM businesses with employees are based in the 15 per cent
most deprived wards (section 3.8).
• There is only a small EM business presence in rural areas. Less than one in ten
(9.0%) of all EM businesses in England were located, or had their main
location, in a rural area (compared to 41.5% of non-EM businesses) (section
3.8)

31
4. New Businesses and those without employees
This chapter looks specifically at businesses that have been trading for less than four
years, and those that have no employees.
4.1 New businesses
Background
One of the SBS strategic themes is to encourage a more dynamic start-up market. This
is considered important in contributing to the process of ‘productive churn’, where
more efficient and innovative new businesses will displace those that are less
effective, which will lead to an overall rise in productivity levels in the economy as a
whole.
Many new businesses captured by the survey may not have developed to the stage of
taking on employees. This section therefore focuses on all businesses that have been
trading for less than four years. Respondents who had started a business or taken over
one in the past three years were asked what they were doing before they decided to
start-up / start running the business.
Table 4.1:Respondent’s status before new business started – Percentage in each
category of all businesses trading for less than four years
EM Non-EM All
Full-time employment 58.9 62.2 62.2
Part-time employment 6.1 2.4 2.7
Self-employed 20.5 25.3 25.0
In education / training 7.5 0.6 1.1
Unemployed, on benefit 3.2 2.1 2.2
Unemployed, not on benefit 2.4 4.9 4.8
Something else 3.9 2.2 2.4
Unweighted n 251 678 929
For all businesses trading for less than four years:
• There is little difference between EM and non-EM businesses in terms of
activity prior to start-up
• Almost three in five respondents from new EM business (58.9%) had been in
full-time employment before setting up in business. This is slightly lower than
among non-EM business respondents (62.2%).
• A fifth (20.5%) of EM respondents had been self-employed compared to a
quarter (25.3%) of non-EM respondents.
• New EM business respondents were more likely than non-EM respondents to
have been in education / training prior to starting their business. This is still
low, however, at 7.5 per cent.
4.1.1 Rationales for business start-ups
Respondents in new businesses were asked about their motivation for starting or
taking over the business. A number of reasons were given. Figure 4.1 only
includes those mentioned by over five per cent of the sample.

Figure 4.1: Rationales for business start-ups
9.4
6.5
1.3
30.5
11.6 11.6
7.4
1.9
5.6 5.2
1.3
18.2
22.3
17.5
11.3
2.1 1.5
12.7
14.8
12
15.5 14.6
0
5
10
15
20
25
30
35
Independence,ow
n
boss
D
evelop
ideas,hobby,skill
M
akem
oney
etc
Careerprogression
Saw
gap
in
m
arket
H
ard
to
find
any
job
H
ard
to
find
rightjobPreventclosureFam
ily
tradition
SocialenterpriseSom
ething
else
Percentage
EM business
Non-EM business
England weighted data. All respondents starting up a new business.
Figure 4.1: Rationales for business start-ups Percentage in each category of all
businesses trading for less than 4 years
For all businesses trading for less than 4 years:
• Overall there is not a large difference in rationale for business start-up for EM
and non-EM businesses
• The most frequently cited reason for business start-up by all new businesses
was a wish to be independent and to be one’s own boss (22.3% of EM
businesses and 30.5% of non-EM businesses).
• Making money and developing ideas were also mentioned as reasons by about
15 per cent of businesses, both EM and non-EM businesses
• Continuing family tradition or preventing closure was mentioned by a higher
proportion of non-EM businesses (although still relatively low at 5.2%) than
EM businesses. This is interesting as EM businesses are thought to be more
family-orientated than non-EM businesses.
• A higher proportion of EM businesses cited difficulties in finding the right job
(6.5% compared to 1.9%), or any job (9.4% compared to 7.4%) as reasons for
going into business. This implies a slight tendency away from opportunity
entrepreneurship towards need.
4.1.2 Time taken to start trading
Respondents were asked how long it had taken them to set up the business from the
original business idea to the time they started trading.
32

Table 4.2: Percentage time taken to set up business and start trading. All
businesses trading for less than 4 years
6 months
or less
6 months
– 1 year
1 year
– 2
years
More
than 2
years
Uncertain Unweighted
n
Total
(EM)
70.1 17.6 6.8 4.6 0.9 208
Total
(non-EM)
83.2 9.1 4.3 1.1 2.3 461
Total (All) 82.2 9.8 4.5 1.3 2.2 669
For all businesses trading less than 4 years:
• EM businesses tend to take longer to start trading than non-EM businesses
• Although the majority of businesses take six months or less to start trading,
there is a lower proportion of -EM businesses in this ‘quicker’ category than
non-EM businesses (70.1% compared with 83.2.1%).
• 11.4% of EM businesses took over a year to start trading, compared with 5.4
per cent of non-EM businesses
Numbers are too small to give reliable figures for individual EM businesses, but
figures suggest that Asian and Chinese businesses take less time to start trading than
Black businesses.
4.1.3 Advice about starting up (or taking over) the business
Managers of new businesses were asked whether or not they had sought any advice
before starting up (or taking over) their business, and where they had sought it.
Figure 4.2: Sources of advice about starting up the business. Percentage in each category
of all businesses trading for less than 4 years
10.1 9
4.1
49.5
13.2
24.1
17.9
7.3
34.1
16.2 12
18.3
0
10
20
30
40
50
60
Friends,family,
informalonly
Publicsupport
agency
Accountant
Bank
Solicitor/lawyer
Nothing
Percent
EM business
Non-EM business
33

34
Among businesses trading for less than 4 years:
• EM businesses are generally less likely to seek advice than non-EM
businesses (Figure 4.2). Where they do, informal sources and public sector
agencies are more commonly used.
• Just over a third (34.1%) of non-EM businesses and half (49.5%) of EM
businesses had not sought any advice at all. Almost 1 in 5 (18.3%) EM
businesses had only sought informal advice.
• EM businesses are much less likely to seek advice from an accountant
(10.1%) or the bank (9.0%) than non-EM businesses (24.1% and 17.9%
respectively).
• Just over 1 in 10 (12.0% of EM and 13.2% of non-EM) businesses had
taken advice from a public service/support agency when starting up in
business.
4.1.4 Obstacles to starting up the business
Respondents were asked what had been the main obstacles to starting up or taking
over the business.
Table 4.3: Main obstacles to starting up (or taking over) new businesses.
Percentage in each category of all businesses trading less than 4 years
EM Non-EM All
Obtaining finance 23.0 20.7 20.9
Cash flow 6.3 11.2 10.8
Recruiting staff 4.4 1.2 1.5
Regulations 3.2 5.1 4.9
Competition 9.9 7.3 7.4
Other 20.7 13.9 14.4
No opinion 7.7 15.7 15.1
None 32.4 24.8 25.3
Unweighted n 236 678 914
Weighted data. n= 914
Among businesses trading less than 4 years:
EM businesses are less likely to cite any barrier than non-EM businesses. Almost
a third of EM businesses (32.4%) and a quarter of non-EM businesses (24.8%)
said that they had not faced any real obstacles in starting up.
• Barriers mentioned are similar for EM and non-EM businesses: access to
finance, recruiting staff and competition are, however, more likely to be
mentioned by EM businesses than non EM-businesses.
• The most commonly cited obstacle to starting up, or taking over, the business
was obtaining finance (23.0% of EM and 20.7% of non-EM businesses).
• Recruiting staff and competition were seen as issues for a higher proportion of
EM businesses, whereas cash flow and regulations were seen as obstacles for a
higher proportion of non-EM businesses
• 20.7 per cent of EM businesses and 13.9 per cent of non-EM businesses cited
‘other’ problems. These were too varied or individualistic to include.

• Other obstacles, such as the economy and taxation were mentioned by fewer
than two per cent of businesses and have therefore not been included in the
above table
4.2 Businesses with no employees
A lower proportion of EM businesses have no employees than non-EM businesses in
England (56.8% and 70.8% respectively). These businesses have been excluded from
much of the report as they significantly outweigh those with employees. However, the
following section looks at these businesses and identifies the rationales for not
employing staff.
4.2.1 Reasons for having no employees
Where applicable, respondents were asked to provide the main reason(s) that they had
no employees at the time of the survey.
Figure 4.3: Reasons for employing no staff at time of survey. Percentage in each
category. Businesses without employees.
52.5
16.3 15.6
10.9
0.6
4.9
48
27.8
2.1
10.6 12.3
8.1 8.8
18.4
0
10
20
30
40
50
60
Insufficient
work
Prefer to
work on own
Use family Too
expensive
Use casual
staff
Employment
regulations
Something
else
Percentage
EM business
Non-EM business
Among all businesses without employees:
• Around half of businesses (52.5% of EM and 48% of non-EM businesses) said
that there was not enough work to require employees.
• A further 27.8% of non-EM businesses and 18.4% of EM businesses said they
preferred to work alone.
• Use of family, and high expense of staff were cited by a higher proportion of
EM businesses (16.3% and 15.6%) than non-EM businesses (2.1% and
10.6%).
• Employment regulations, although not a major reason given, were mentioned
by a lower proportion of EM businesses (0.6%) compared to non-EM
businesses (8.1%).
35

36
Summary
• The majority of respondents from new (EM and non-EM) businesses had been
in full-time employment before setting up in business (section 4.1).
• The majority of respondents from new (EM and non-EM) businesses had been
in full-time employment before setting up in business (section 4.1).
• A higher proportion of respondents from EM businesses cited difficulties in
finding the right job, or any job as reasons for going into business (section
4.1.1).
• EM businesses tend to take longer to start trading than non-EM businesses
(section 4.1.2).
• EM businesses were less likely to have sought advice about starting the
business than non-EM businesses (section 4.1.3).
• The most commonly cited obstacle to starting up / taking over the business
amongst both EM and non-EM businesses was obtaining finance (section
4.1.4).
• Around a half of all businesses with no staff, both EM and non-EM, said there
was not enough work to require employees (section 4.2.1)

37
5. Business Operation
This chapter looks at the way businesses tend to operate. This includes whether or not
they export outside the UK, whether businesses are innovative, and whether ICT is
used within the running of the business. Business operation among EM businesses is
compared with that of non-EM businesses.
5.1 Whether or not the business exports outside the UK
Respondents were asked whether their business sells outside the UK.
Table 5.1: Percentage of businesses that export or are wholly domestic by
ethnicity. Businesses with employees only
Exporter Wholly
domestic
Unweighted
n
Indian 13.0 87.0 606
Pakistani 10.2 89.8 249
Other Asian
(incl.
Bangladeshi)
8.3 91.7 129
Black 19.4 80.6 118
Chinese 2.6 97.4 129
Other 19.5 80.5 190
Total (EM)
Men
Women
Equal
12.6
13.6
8.1
11.9
87.4
86.4
91.9
88.1
*1409
974
139
296
Total (non-EM) 21.9 78.1 6019
Total (All) 21.0 79.0 7428
Among businesses with employees
EM businesses are less likely to export than non-EM businesses. 12.6 per cent
of EM businesses with employees sell outside the UK, compared with 21.9 per
cent of non-EM businesses.
• Female-run EM businesses are less likely to be exporters than male-led EM
businesses.
• Almost a fifth of Black and ‘Other ethnic group’ businesses (19.4% and 19.5%
respectively) sell outside the UK. Chinese businesses are the most likely to be
wholly domestic (97.4%).
For businesses with employees, we have seen that the majority of EM businesses are
in the services sector (Chapter 2). When comparing EM and non-EM businesses in
both services and in production, Table 5.2 shows that there is a wider gap in
proportions exporting within the services sector (11.5% of EM businesses export
compared to 20.4% of non-EM businesses), than within production (32.3% of EM
businesses compared with 40.1% of non-EM businesses). Within the services sector,
Black businesses are more likely to export (17.9%) and Chinese the least (2.6%).

38
There are too few EM businesses within the construction and primary sector to report
on these differences.
Table 5.2: Percentage of businesses selling outside the UK, by sector and
ethnicity. Businesses with employees only
Production Services Unweighted
n
Indian 33.1 11.3 585
Pakistani 42.4 7.9 238
Other Asian
(incl.
Bangladeshi)
32.9 7.7 126
Black 36.8 17.9 116
Chinese - 2.6 121
Other 35.6 19.7 166
Total (EM)
Men
Women
Equal
32.2
30.1
27.1
43.5
11.5
12.6
6.5
10.8
*1337
927
132
278
Total (non-EM) 40.1 20.4 3718
Total (All) 39.8 19.3 5055
England weighted data. n= 5055Note: * n=1352 for the cumulative total of the different ethnic groups
as it includes double counting where owners/partners/directors are from more than one ethnic
community
Even among businesses who do sell outside the UK, the vast majority of their sales
are within the UK. EM businesses are more likely than non-EM businesses to have
customers or markets that are mostly within the local town or county (59.8% and
39.8% respectively). This is even higher among female-led EM businesses (68.6%).
Just over half of non-EM businesses (55.4%) state that their customers and markets
are mostly in the regions and the UK, compared with a third (36.9%) of EM
businesses. Almost one in nine (89.6%) of Chinese businesses mostly serve their local
town or county, compared with less than a third (30.5%) of Black businesses.
5.2 Innovation
A random 50 per cent of employers were asked whether they had introduced new or
significantly improved products or services, or processes, in the past 12 months.
Table 5.3: Product and process innovation: percentage saying they had
introduced in the past year – Businesses with employees only
Yes –
products
or
services
Yes –
processes
Unweighted
n
Total (EM) 45.1 47.3 117
Total (non-
EM)
39.0 32.0 2078
Total (All) 39.2 32.5 2195
England weighted data of random 50 per cent of employers. n=2195

39
• EM businesses are generally more likely to be innovative than non-EM
businesses
• Almost half of EM businesses had introduced new products or services
(45.1%), or processes (47.3%) in the past 12 months, compared to 39.0 per
cent and 32.0 per cent of non-EM businesses. This supports the findings from
GEM 2003 that EM businesses tend to be more innovative.
There could, however, be a link to sector and age of business. Businesses from the
services sector and businesses that have been trading for 3 years or less tend to be
more innovative than the average. The majority of EM businesses are in the services
sector, and one in five (20.0%) have been trading for less than four years (section
3.3).
Whether or not businesses had introduced innovative processes or products / services,
they were asked questions about how important process and product innovation is to
the success of the business (Table 5.4 and Table 5.5).
Table 5.4: Percentage of businesses indicating importance of product / services
innovation. Employers making innovation only
Very
important
Important Neither important
or unimportant
Unimportant Very
unimportant
Unweighted
n
Total (EM) 39.1 18.5 13.7 21.5 7.3 117
Total (non-
EM)
32.1 28.2 12.8 21.8 5.1 2078
Total (All) 32.3 27.9 12.9 21.8 5.1 2195
England weighted data of employers making product / services innovation. n=2195
Among employers making product/services innovation:
• A higher proportion of EM businesses (39.1%) than non-EM businesses
(32.1%) see innovation as very important. Over half of all EM (57.6%) and
non-EM (60.3%) businesses felt that having new products or services were
important or very important to the success of the business.
Numbers are too small to give reliable figures for male-led and female-led EM
businesses, but they suggest that EM male-led businesses are more likely to feel that
new products and services are important to the business than EM female-led
businesses.
Table 5.5: Percentage of businesses indicating importance of processes
innovation – Businesses with employees only
Very
important
Important Neither
important or
unimportant
Unimportant Very
unimportant
Unweighted
n
Total (EM) 29.8 24.5 18.3 21.7 5.6 117
Total (non-
EM)
24.4 26.0 16.3 27.7 5.6 2078
Total (All) 24.5 26.0 16.4 27.5 5.6 2195
England weighted data of employers making process innovation. n=2195

40
• A slightly higher proportion of EM businesses (54.3%) said that new
processes were important or very important than non-EM businesses (50.4%).
• New products and services were felt to be slightly more important than new
processes.
• Almost a third of businesses felt both were unimportant or very unimportant.
Again, due to the small sample size of EM male-led and EM female-led businesses, it
is not possible to give reliable figures. However, numbers suggest that more EM
female-led businesses believe new processes are important to the success of the
business.
5.3 ICT usage among EM businesses
Background
As was discussed in Chapter 1, the Ethnic Minority Business Forum (EMBF) was
established by Government in July 2000 to provide independent, strategic advice to
Government as to policies and practices, which would impact positively on EM
businesses. In its first annual report (2001), the Ethnic Minority Business Forum
(EMBF) highlighted five specific areas of interest, one of which was ICT and e-
commerce. It recommended that there should be research undertaken to establish the
actual extent of ICT take-up within EM businesses in comparison with non-ethnic
businesses. Research in 2001 confirmed anecdotal evidence that ICT take-up and
skills among EM businesses are at lower levels than among White-led businesses
(Foley and Ram 2001). Some further focus group research conducted in February-
April 2004 explored some of the reasons for this lower take-up of ICTT
12
.
An ICT pilot project in the North West during the second half of 2004 and running
into 2005 look to map local ICT initiatives, identify any take-up by EM businesses,
engage with consultants, stakeholders and best practice businesses, and follow a
number of EM businesses, case studies and ICT champions in the area.
Many of the sectors or markets that EM businesses operate in can generally be
characterised as displaying lower than average levels of ICT usage. However, the
ASBS 2003 boost of EM businesses allows for comparisons to be made between EM
businesses and non-EM businesses in the same sectors to see whether lower take-up
still exists among minority businesses, even allowing for sectoral concentrations (see
section 5.3.1).
In the ASBS 2003, all respondents were asked how their business use technology such
as computers and the Internet. Table 5.7 gives the responses of businesses with
employees.
12
Ethnic Minority Businesses and ICT. Focus Group Research, 2004.
http://www.sbs.gov.uk/content/analytical/EMB_and_ICT.pdf

41
Table 5.6 Uses of ICT, by ethnic group Businesses with employees only
Accounts
%
Record
keeping
%
Email
communi
cation
%
Business
website
%
Internet –
govt
interactions
%
Purchasing
%
Sales via
internet
%
Sales via
other e-
networks
%
Research
%
Designing
products
%
Word
processing
%
Don’t use
%
Unweighted
n
Indian 35.1 44.8 26.4 9.3 2.9 6.3 5.6 4.2 20.9 3.3 29.9 21.3 501
Pakistani 25.2 30.3 22.4 3.4 1.5 6.6 6.6 3.3 18.5 1.0 15.1 35.9 193
Other
Asian (incl.
Bangladesh
i)
20.8 28.5 16.7 5.6 1.7 1.9 2.4 3.0 10.3 2.6 20.5 47.8 104
Black 62.3 54.9 46.8 18.6 3.5 3.0 14.4 0.6 35.2 12.3 40.2 13.4 107
Chinese 9.4 11.6 3.7 3.5 0.6 0.4 0.5 1.7 6.9 1.9 8.9 65.8 106
Other 39.4 35.8 39.0 30.1 5.1 1.0 2.3 0.1 29.1 4.3 34.1 26.6 136
Total (EM)
Men
Women
Equal
32.2
32.2
25.7
34.5
36.6
36.5
45.3
33.4
26.0
26.7
30.1
22.5
11.0
9.1
13.8
14.9
2.5
2.7
0.7
2.9
4.0
4.2
-
5.1
5.0
6.0
0.2
4.2
2.7
3.9
0.1
0.4
20.6
20.6
22.3
20.1
4.1
4
3.8
4.5
25.8
24.3
29.8
28.5
31.6
33.1
19.9
32.1
*1126
789
111
226
Total (non-
EM)
44.5 36.1 37.8 22.6 4.0 6.6 7.8 1.0 28.6 9.4 25.6 15.3 3899
Total (All) 43.4 36.2 36.7 21.6 3.8 6.4 7.6 1.1 27.8 8.9 25.6 16.8 5025
England weighted data. Employers only. Excludes “Don’t know” and “Unwilling” n=5025
Note: * n=1147 for the cumulative total of the different ethnic groups as it includes double counting where owners/partners/directors are from more than one ethnic
community.

For businesses with employees:
• EM businesses are less likely to use ICT than non-EM businesses. This applies
for almost every mechanism. Almost a third (31.6%) of EM businesses do not
use ICT at all, compared to 15.3 per cent of non-EM businesses.
• Accounts, record keeping, email communication, word processing, and
research are the five most common uses of ICT among all businesses (EM and
non-EM) with employees. EM businesses, however, are significantly less
likely than non-EM businesses to use ICT for accounts (32.2% compared with
44.5%), email communication (26.0% compared with 37.8%) and research
(20.6% compared with 28.6%).
• Black businesses are generally more likely to use ICT than other EM and also
non-EM businesses. For instance, three in five (62.3%) use ICT for
accounting, over half (54.9%) for record keeping, almost half (46.8%) for
email, and approximately a third (35.2%) for research.
• ICT usage is lowest among Chinese businesses. Even for the most common
uses mentioned above, only about one in ten, or less, of Chinese employers
said they used ICT. This is particularly apparent for record keeping (11.6%)
accounting purposes (9.4%) and email communication (3.7%).
ICT use tends to be lower among EM sole traders. The main exception, however, is
among Chinese sole traders. They are more likely to use ICT than Chinese employers.
This is the case for accounts, record keeping, email communication, research and
word processing. It should be noted, however, that this is based on a low sample size
(n=44).
Although most businesses use ICT to some extent, the level of use varies across
ethnic groups. Level of use has been categorised as low usage (1-3 uses) and high
usage (4+).
42

Table 5.7 Level of ICT use by ethnicity. Businesses with employees only
Do not use
%
1-3
%
4+
%
Unweighted
n
Indian 21.4 63.1 15.4 498
Pakistani 36.3 55.9 7.8 191
Other Asian (incl. Bangladeshi) 48.1 43.5 8.4 103
Black 13.4 47.0 39.6 107
Chinese 67.0 30.8 2.1 105
Other 26.7 50.0 23.3 135
Total (EM)
Men
Women
Equal
31.9
33.4
20.5
32.1
52.4
50.4
67.1
52.4
15.7
16.2
12.5
15.5
*1118
783
109
226
Total (non-EM) 15.5 59.0 25.4 3863
Total (All) 17.0 58.4 24.6 4981
England weighted data. Excludes “Don’t know” and “Unwilling”. n=4981
For businesses with employees:
• EM businesses are less likely than non-EM businesses to use ICT (68.1%
compared with 84.4%).
• Chinese are the least likely to use any ICT (only 32.9% do) and Black
businesses are the most likely (86.6%).
• Almost two in five Black businesses (39.6%) use ICT for 4 or more
applications. This is higher than either the average for EM businesses (15.7%)
or non-EM businesses (25.4%).
5.3.1 Level of ICT use in different sectors
ICT usage may be dependent on the sector the business is in, as some, for instance
catering, have less need for ICT than others. Chinese businesses are more likely to be
in the sectors where less use of ICT is made.
Table 5.9 Level of ICT use in different sectors, by ethnicity. Businesses with
employees only
Primary
%
Production
%
Services
%
Construction
%
Do not use
EM
Non-EM
*
14.9
17.6
10.8
33.8
16.2
*
18.8
1-3 uses
EM
Non-EM
*
58.5
55.3
63.9
51.5
58.4
*
55.9
4+ uses
EM
Non-EM
*
26.6
27.1
25.4
14.6
25.4
*
25.3
England weighted data. n=3485 (EM=959. Non-EM=2526)
* Indicates sample size too small to provide breakdown
43

• For businesses with employees, within the Services sector non-use is
significantly higher among EM businesses (33.8% compared with 16.2% of
non-EM businesses).
Turning to look at certain industries which EM businesses are more likely to be
involved in (retail, hotel and restaurants, and health and social work), the general
trend of higher ICT use among non-EM businesses is more marked. Sector is a key
factor for some ethnic groups having lower usage, but within these sectors usage is
still lower than for equivalent non-EM businesses.
Table 5.10 Level of ICT use in certain industries by ethnicity.
Retail
%
Hotels /
restaurants
%
Health /
social work
%
Do not use
EM
Non-EM
51.1
21.4
70.2
39.6
14.0
15.2
1-3 uses
EM
Non-EM
43.2
62.5
28.2
52.2
70.3
71.1
4+ uses
EM
Non-EM
5.7
16.1
1.6
8.2
15.7
23.7
• Just over half (51.1%) of EM businesses in the retail industry do not use ICT,
compared with 21.4 per cent of equivalent non-EM businesses.
• Among the hotel and restaurant sector, non-use is higher still, with 70.2 per
cent of EM businesses not using ICT compared with 39.6 per cent of
equivalent non-EM businesses.
• In the hotel and restaurant sectors, just under three in ten (28.2%) of EM
businesses are low users, compared with over half (52.2%) of non-EM
businesses. There is a lower proportion of high ICT users amongst both EM
and non-EM businesses (1.6% and 8.2% respectively).
• The majority of businesses in health and social work use ICT. There is
generally much less of a difference between EM and non-EM businesses in
this sector. However, only 15.7 per cent of EM businesses in this sector are
high ICT users, compared with almost a quarter (23.7%) of non-EM
businesses.
5.3.2 Level of ICT use among businesses of different ages.
Table 5.11 shows the proportion of EM and non-EM businesses with employees that
use ICT in relation to the number of years they have been trading.
44

Table 5.11: Any ICT use by age of businesses. Businesses
with employees only.
3 years or
less
%
4 – 10
years
%
More than 10
years
%
Total (EM) 70.6 65.2 69.1
Total (non-EM) 89.1 85.2 83.3
Total (All) 86.7 82.1 82.4
• 70.6 per cent of EM businesses that have been trading for less than four years
make use of ICT, compared with 89.1 per cent of non-EM businesses that
have been trading for a similar time.
Table 5.12: Level of ICT use by age of business, by ethnic group. Businesses with
employees only
3 years or
less
%
4 – 10 years
%
10 years +
%
Do not use
EM
Non-EM
29.4
10.9
34.8
14.8
30.9
16.7
1-3 uses
EM
Non-EM
52.8
47.3
49.4
64.0
54.4
60.1
4+ uses
EM
Non-EM
17. 8
41.7
15.7
21.3
14.7
23.2
• The proportion of high ICT users (4+ uses) is larger amongst younger firms.
This is more apparent for non-EM businesses (with 41.7% of businesses who
have been trading for 3 years or less being high users, compared with 21.3%
of those who have been trading for 4-10 years).
• Amongst EM businesses there does not appear to be a marked difference
between age of business and high ICT use.
45

5.3.3 Level of ICT use for different sizes of business
Table 5.13 shows the level of ICT use by businesses of different sizes.
Table 5.13: Any ICT use by size of business by ethnicity.
Micro
%
Small
%
Medium
%
Total (EM) 65.8 87.6 99.7
Total (non-EM) 81.9 95.6 99.9
Total (All) 80.3 95.2 99.9
Among businesses with employees only:
• 65.8 per cent of EM micros use ICT, compared with 81.9 per cent of non-EM
micros.
• ICT usage appears to be associated with business size – smaller businesses are
less likely to use ICT than larger ones.
• For all business sizes, EM businesses use ICT less than non-EM businesses.
Table 5.14 reports the proportion of businesses of different sizes that use ICT.
Table 5.14: Level of ICT use by size of business and ethnicity.
1-9 (micro)
%
10-49 (small)
%
50+
(medium)
%
Do not use
EM
Non-EM
34.2
18.1
12.4
4.4
0.3
0.1
1-3 uses
EM
Non-EM
51.4
59.8
61.9
57.1
62.1
45.9
4+ uses
EM
Non-EM
14.4
22.1
25.7
38.5
37.6
53.9
• Over half of all businesses are low ICT users.
• Larger businesses are more likely to be high ICT users. For instance, 37.6 per
cent of EM medium businesses use ICT for four or more mechanisms,
compared with 25.7 per cent of EM small businesses, and 14.4 per cent of EM
micro businesses.
• Approximately a third (34.2%) of EM micros do not use ICT at all. This
compares with 18.1 per cent of non-EM micros.
46

Summary
• Among businesses with employees, EM businesses are less likely to sell
outside the UK than non-EM businesses. (Section 5.1)
• Among businesses with employees, EM businesses are more likely to be
innovative than non-EM businesses (section 5.2)
• Among businesses with employees, EM businesses are less likely than non-
EM businesses to use ICT in their business. This is the case across all business
sizes, ages and sectors. Sector is a key factor for some ethnic groups having
lower usage of ICT, but within these sectors usage is still lower than for
equivalent non-EM businesses (section 5.3)
• Among businesses with employees, Black businesses are more likely to use
most ICT packages than other ethnic and non-EM businesses. Chinese are the
least likely to use ICT (section 5.3)
• Among businesses with employees, ICT usage appears to be correlated with
business size – smaller businesses appear less likely to use ICT than larger
ones (section 5.3.3).
47

6. Financing the business
This chapter identifies which businesses attempt to access finance, and whether they
experience any difficulties in getting the required money. How this impacts on the
business is also addressed. Reasons for seeking finance, including which sources were
approached, are also discussed.
Background
Access to finance is seen as a perennial problem for all small businesses. The Ethnic
Minority Business Forum (EMBF) is concerned that difficulties in accessing finance,
for whatever reason, are major barriers to EM business success. While access to
finance can be a problem for any business, there are certain issues facing EM
businesses that can lead to greater difficulties for them. One example is that it is
against the Islamic religion for Muslims to obtain finance at interest. Some EM
business managers have problems understanding what finance is available and also
the language used by providers. In other cases, specific sectors that have a high
proportion of EM businesses are ineligible for certain types of finance. It is important
for EM businesses to be able to access the finance they need to survive and grow,
without facing disadvantages inherent in their EM status.
We have seen that EM businesses are more likely than White businesses to be located
in deprived areas (Chapter 3). Analysis of data on self-employment in these areas
suggests that potential entrepreneurs and businesses are more likely than the general
population to have problems accessing bank finance (Bank of England, 2002)13
.
Government is increasing the levels of investment in the most deprived areas of
England through the Bridges Community Development Venture Fund and supporting
the growth of Community Development Finance Institutions throughout the UK.
6.1 Seeking finance
Respondents were asked whether they had tried to obtain finance for their business in
the past 12 months (Table 6.1).
13
Ram, M, Smallbone D. & Deakins D. 2002 Ethnic Minority Business In the UK: access to finance
and business support, British Bankers Association
48

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