Boosting enterprise across the population Enabling the enterprise

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BRIEF                                         May 2006                     Issue 5

Boosting enterprise across the population
Enabling the enterprise revolution
The government has set itself targets to ‘encourage more enterprise
in disadvantaged communities and under-represented groups’ and
‘reduce the persistent gap in growth rates between the regions’. It has
focused efforts on trying to build up regional economies, increasing
enterprise in ‘deprived areas’, and boosting the number of women and
ethnic minority entrepreneurs.

To deliver these targets the government has created hundreds      The importance of achieving these targets should not be
of schemes across the UK. However, these schemes have not         under-estimated. If enterprise levels in the UK for women
delivered the step change needed. In fact, on most measures       matched those of men, there would be 1.7 million more
the governments own statistics show that it is actually failing   self-employed women. If enterprise levels for ethnic minority
to achieve its targets.                                           groups matched those of the white population, there would
                                                                  be 29,000 more self-employed people from ethnic minorities.
The government must now recognise that the only way to            And, if the number of businesses per-capita across the UK
drive up enterprise levels across the UK population is to         matched that of London and the South East, there would be
tackle the more fundamental barriers preventing people from       1,000,000 extra businesses.
starting and growing a business. It must:
                                                                  However, CBI analysis forecasts that on current trends, there
n   Ensure that the regulatory and taxation systems enable and    will be 2.6 million more self-employed men than women
    encourage enterprise                                          by 2020. By this time, self-employment levels in the white
                                                                  population overall will have risen to 10.5%, but ethnic minor-
n   Make the necessary investments in infrastructure to ensure    ity self-employment will have fallen to just 5.2%. And, the
    that all regions are fully connected                          North-South gap will have widened further, to the extent that
                                                                  London will have 100,000 more VAT registered businesses
n   Improve access to finance for certain groups                  than Wales, Scotland and Northern Ireland combined.

n   Enhance support to particular groups to facilitate business   These trends are unsustainable if the government wants
    start-up and growth.                                          to achieve its targets. The whole of government, at central,
                                                                  regional and local level must now recognise the importance
                                                                  of boosting enterprise across the UK population. They must
                                                                  all work together if their targets are to be reached.
    enabling the enterprise revolution                                                                                issue 5

    Key CBI recommendations                                     Introduction
n    Improving the transport infrastructure across              This brief is the fifth in a series analysing the progress in
     the UK should be at the top of the government’s            making the UK the best place to start and grow a business,
     development agenda                                         and what action needs to be taken to achieve this target.
n    The government at all levels must work to deliver
                                                                We focus on the record since the Small Business Service
     a planning system that is supportive of local
                                                                (SBS) was set up in 2000. At that time, the SBS was set the
     economic growth
                                                                objective of making the UK the best place in the world to
n    The DTI must look at how it can support the develop-       start and grow a business by 2005. In 2002, the SBS set out
     ment of e-business across the UK regions                   seven strategic themes to drive its work, with specific targets
                                                                connected to each theme.
n    The RDAs must work to ensure that entrepreneurs,
     particularly women and ethnic minorities, have access
                                                                This report analyses progress on the theme of ‘encouraging
     to proper information on different types of finance
                                                                more enterprise in disadvantaged communities and under-
n    The SBS must accredit additional lenders to operate        represented groups’. The government has defined this in such
     SFLG, with a particular focus on those providing finance   a way as to include boosting enterprise in deprived areas, and
     in deprived areas, to women and ethnic minorities          amongst women and ethnic minorities. We also examine the
                                                                government target to ‘reduce the persistent gap in growth
n    The DTI must ensure that the rationalisation of busi-
                                                                rates between the regions’.
     ness support provides a ‘seamless’ and targeted
     support network for businesses across the UK through
                                                                The report is split up into five key sections. There are three
     their life cycle
                                                                sections of recommendations, which are ‘Developing the
n    The DTI must ensure that the one hundred remaining         Infrastructure’, ‘Improving Access to Finance’ and ‘Supporting
     support schemes are sufficiently funded to achieve         Enterprise’. The ‘Current Situation’ then examines the
     their targets                                              picture as it stands at the moment. Lastly a section on the
                                                                ‘Importance of Boosting Enterprise’ which looks at the
n    The RDAs must free up resources to provide support to
                                                                potential of boosting enterprise levels across the UK.
     growing businesses through networks and mentoring
n    The DfES must ensure that enterprise is at the heart       Further recommendations which focus on the barriers to
     of the school curriculum in the UK running across aca-     enterprise in the regulatory environment and the tax system
     demic subjects for all age groups                          are provided in the recent CBI submission to the Budget,
                                                                ‘act now – encourage growth’ and in the forthcoming report
n    HM Treasury should make the cost of child minders
                                                                on ‘better regulation and procurement’.
     tax deductible
n    SBS should work much more closely with government
     departments and local authorities to tackle the key
     barriers preventing more enterprise across the UK

 issue 5                                                                           enabling the enterprise revolution

Key reCommendatIonS                                               Better planning
                                                                  The government has a target to ensure that the planning sys-
In order to boost enterprise across the UK population,            tem delivers “sustainable development outcomes at national,
the CBI has identified ten key recommendations.                   regional and local levels through efficient and high quality
                                                                  planning and development management processes”.1

 1     Developing the infrastructure
        Improving the infrastructure across the UK is crucial
                                                                  As well as direct implications for commercial applications
                                                                  and business growth, the planning system is also essential
in enabling development and boosting enterprise. Delivering       in delivering the infrastructure needed to increase enter-
better transport links, a more efficient planning system, and     prise in deprived areas and drive regional economic growth.
supporting e-business will enable all the regions in the UK to    However, the current system is too slow, too uncertain and
boost their development and growth.                               often results in poor decisions. These shortcomings affect not
                                                                  just those businesses applying for planning permission, but
Developing transport links                                        damage the economy and prosperity as a whole by adding
Increasing enterprise in deprived areas across the UK and         otherwise avoidable costs to the provision of property and
boosting regional economic growth cannot take place with-         infrastructure.
out the strengthening of transport links within and between
regions. Taken forward as an integral part of development,        The strength of the government’s commitment to change the
transport improvements can act as a specific catalyst to          system is in little doubt. Some of the positive measures taken
growth. Time and time again, surveys of business opinion          over recent years have even echoed CBI recommendations.
highlight transport as a key factor influencing (and inhibit-     However, business remains highly critical of the current sys-
ing) their competitiveness and regional economic growth.          tem and its operation. More needs to be done to ensure that
                                                                  the planning process supports local economic growth.
Centre for Economics and Business Research work on the
North West shows how future growth in one of England’s            While part of this dissatisfaction arises from the time it inevi-
largest regional economies may be constrained without             tably takes for reform to take effect, it is clear that there are
strategic investment in the transport network.                    significant problems that must be tackled with urgency. There
                                                                  needs to be more support at a local level for economic devel-
The RDAs have an important role to play in this through the       opment, in particular with more joined up work between
development of Regional Spatial Strategies. These incorporate     local planning and economic development functions.
Regional Transport Strategies, and need to be focused on key
actions to deliver regional growth.                               Disappointingly, over recent years, there have also been no
                                                                  significant improvements in the planning process for major
Transport schemes are often critical for boosting the economic    infrastructure projects. Major projects provide a boost directly
prospects of a specific area. A key example is Canary Wharf       and indirectly to enterprise in the surrounding areas. This
and also the transport infrastructure required to stimulate the   is needed if the planning system is to cope efficiently with
large scale development now taking place in the Thames Gate-      approving the significant investment programmes needed
way and other major growth areas. These enable the economy        over the next few decades to boost regional economies.
to benefit from land, labour and other factors that would
otherwise be under-utilised. In most examples of regeneration,    Recommendation: Government at all levels must work
transport is considered to be one of the key drivers.             to deliver a planning system that is supportive of local
                                                                  economic growth.
Recommendation: Improving the transport infrastructure
across the UK should be at the top of the government’s            Supporting e-business
development agenda.                                               The development of e-business is a way to reduce the geo-
                                                                  graphical barriers holding back growth across the UK. It is
                                                                  clear that more UK businesses than ever are using e-business
                                                                  technology. It is helping to drive up commercial and opera-
                                                                  tional value and deliver benefits to customers and employees.

                                                                  In particular, broadband can help businesses reduce unit
                                                                  costs through instant and ‘always-on’ access to customers
                                                                  and suppliers, as well as increasing knowledge of customer
                                                                  purchasing interests and satisfaction.

    enabling the enterprise revolution                                                                                  issue 5

CBI studies of retail and manufacturing supply chains high-       Building on the SFLG scheme
light how SMEs can increase efficiencies, market reach and        The Small Firms Loan Guarantee is a scheme which is sup-
product development through broadband networks. Case              ported by business, and shown to work. Since its introduction
studies show how enriched content and applications help           over two decades ago, the scheme has facilitated growth and
SMEs to trade with a growing number of firms for a greater        created employment in 70,000 businesses where no other
range and higher quality of product and services and to           financing alternatives were available.
advance up the e-business ladder. Barriers to SME take
up continue to be availability and price, but others such as      Last year, the recommendations of the Graham Review into
security also exist.                                              the scheme were implemented. This included limiting the
                                                                  scheme to start-ups and early stage businesses. With this
Recommendation: The DTI must look at how it can support           change of focus, is it clear that the scheme has a potentially
the development of e-business across the UK regions.              strong role to play in deprived areas, where access to other
                                                                  financing alternatives may be limited.

    2   Improving access to finance
        The CBI has identified two key recommendations
                                                                  In the Budget 2006, the Chancellor announced that the SBS
                                                                  will work to accredit a number of additional lenders to oper-
that the government should take forward to improve access         ate SFLG. The CBI believes that these new lenders should
to finance for certain communities.                               include lenders which can focus on providing finance in
                                                                  deprived areas, to women and ethnic minorities.
Providing better information
Access to finance is crucial if entrepreneurs are going to        Recommendation: The SBS must accredit additional lenders
start a business, and if these businesses are to grow. External   to operate SFLG, with a particular focus on those providing
finance is particularly important for these businesses, which     finance in deprived areas, to women and ethnic minorities.
lack retained profits to re-invest.

A recent study by ACCA2 showed that self-employed women
at start-up spend less time engaged in activity related to
                                                                   3      Enhancing support
                                                                           The evidence shows that good quality support to
acquiring finance, start businesses with lower investment         businesses improves their survival and growth prospects.
and are more likely to use credit card debt as a source of        Ensuring that the business support network is able to deliver
start-up capital.                                                 this is therefore crucial to driving up enterprise levels across
                                                                  the UK.
Evidence also suggests that there are issues relating to access
to finance for ethnic minority businesses. Obtaining finance      Ensuring business support reflects demand
is more frequently cited as a problem for ethnic minority         The CBI has welcomed the commitment by government to
owned businesses.                                                radically rationalise the number of business support services.
                                                                  The number will be cut from the current ,000 to no more
The CBI therefore supports the work being done by the             than 100 by 2010. This follows the publication in January
Ethnic Minority Business Forum in building up an evidence         of an earlier ‘Enabling the Enterprise Revolution’ report on
base, and ensuring finance initiatives to support small busi-     ‘improving government services for small and growing busi-
nesses reflect the needs of ethnic minority entrepreneurs.        nesses’, which argued that the number of business support
                                                                  schemes should be cut to free up resources for those schemes
It is clear that debt finance is still the most used type of      that are effective and add value.
finance for many entrepreneurs. However, many people
believe that a lack of collateral will prevent an entrepreneur    A recent study by the IPPR showed the ‘limited extent’ to
from accessing this finance. It is important that this myth       which business support was reaching business in deprived
should be shattered.                                              communities. A survey by the SBS has also shown that
                                                                  ethnic minority businesses are less likely to seek any form
Recommendation: The RDAs must work to ensure that entre-          of support or advice.5
preneurs, particularly women and ethnic minorities have
access to proper information on different types of finance.

 issue 5                                                                           enabling the enterprise revolution

In taking forward this recommendation, the government             Recommendation: The RDAs must free up resources to
should ensure that it works closely with entrepreneurs and        provide support to growing businesses through networks
potential entrepreneurs across the UK. In particular, it should   and mentoring.
engage with bodies such as the Ethnic Minority Business
Forum and PROWESS.                                                Changing attitudes across the UK population
                                                                  The number of people saying that they have the skills,
Initiatives must reflect business demand, and should not be       knowledge and experience to start a new business varies
the result of a top-down, planning methodology. They should       significantly across regions, with Wales, Scotland and
not duplicate what is already being successfully provided by      Northern Ireland lagging behind (Exhibit 1). It is no
the private sector, and must instead fill a gap or address a      coincidence that these areas are also responsible for the
market failure.                                                   lowest business start-up rates in the UK.

Recommendation: The DTI must ensure that the rationalisa-         Encouraging people across the UK population to be more
tion of business support provides a ‘seamless’ and targeted       entrepreneurial needs to start at an early age. Therefore,
support network for businesses across the UK through their        ensuring that enterprise is at the heart of the education sys-
life cycle.                                                       tem, for all age groups, is fundamental if the UK is to develop
                                                                  a more entrepreneurial culture. The CBI outlined how this
However, the CBI has concerns that the government will use        could be achieved in another ‘Enabling the Enterprise Revo-
this ‘rationalisation’ of business support scheme numbers         lution’ report on ‘Building an Enterprise Culture’.
to cut the amount of resources used for business support
purposes. The priority must be to close schemes to free up        The CBI supports work to encourage enterprise in education.
resources for those that are effective and add value.             Recent government actions, such as the implementation of
                                                                  the recommendations of the Davies Review, the establish-
When the DTI rationalised the number of national busi-            ment of Business and Enterprise Colleges and the work of
ness support schemes and launched ten ‘business support           Enterprise Advisors are all steps in the right direction.
solutions’, the business community supported the initiative
as these schemes were seen to add value. They also believed       The government has also recently announced that a Schools
that these would be well funded by the government. However,       Enterprise Education Network (SEEN) will be created, as part
the recent closure of one of these schemes, ‘The Grant for        of the £60m roll out of enterprise education to all pupils at
Investigating an Innovative Idea’ throws this commitment          key stage . Twenty three enterprise summer school pathfind-
into doubt.                                                       ers will also be set up to be delivered by Young Enterprise to
                                                                  1000 pupils across the UK in summer 2006.
Recommendation: The DTI must ensure that the one
hundred remaining schemes are sufficiently funded to              The CBI has also been active in this area. It was one of the
achieve their targets.                                            founders of Enterprise Insight, which is running a national
                                                                  campaign to promote the spirit of enterprise to young people
Improving networks and mentoring                                  and those who influence them.
The problem is not just that fewer women and ethnic minori-
ties start-up a business, but that a high number of these         The number of people saying that they have the skills,
businesses fail or do not grow significantly. GEM 2005 shows      knowledge and experience to start a new business also varies
that not only do women entrepreneurs have a lower turnover        significantly between different ethnic groups (Exhibit 2).
in their first year of trading, they forecast much lower growth   People who are Chinese or Bangladeshi are less likely to
for the next three years than men.                                believe that they have the skills, knowledge or experience to
                                                                  start a business. They are also less likely to know someone
While the government is therefore right to encourage more         who has started a business in the last two years, and have
start-ups, it is important that these new businesses are          a higher fear of failure.6 The work of the Ethnic Minority
encouraged to thrive and grow. The evidence clearly shows         Business Forum in ensuring that the enterprise agenda for
that those entrepreneurs who are supported by their peers         young people reflects the needs of ethnic minority young
are more successful. A number of Business Links have recog-       people should therefore be supported.
nised this, and are developing women’s networks for example.
However, much more in this area could be done, particularly       It is absolutely crucial that right across the education system,
by the Regional Development Agencies.                             enterprise should not just be seen as a separate academic
                                                                  subject, or a particular form of business studies. Enterprise
                                                                  education is about being creative and taking risks as well as

                       enabling the enterprise revolution                                                                                                                                                                         issue 5

                       exhibit: 1                                                                                                              exhibit: 2                                 Ex 2: I have the skills, knowledge etc
                                  skills, have the skills, knowledge etc
                       Those with Ex 1: Iknowledge and experience                                                                              Those with skills, knowledge and experience
                       to start a business by region                                                                                                          Ex 2: I have group
                                                                                                                                               to start a business by ethnic the skills, knowledge etc                                                                                         E
                   Ex 1: I have the skills, knowledge etc

                                                                                                                                                                                                                                                    Source: GEM 2005
                                                                                                                          Source: GEM 2005

                                    UK                                                    50.7                                                                                  White                                       50.7
                       %                                                             49.5                                                                                                                                                                                                UK
                            North East                                                                                                                                          Mixed                                                    64.2
             UK                                                 50.7                 49.6                                                                 White                                           50.7                                                                     England
                            North West                                                                                                                                         Indian                                                58.8
     North East                                            49.5                          50.3                                                             Mixed                                                    64.2                                                         North East
                       Yorks & Humbs                                                                                                                                         Pakistani                                            53.1
     North West                                            49.6                                                                                                                                               58.8                                                             North West
                             East Mids                                                           52.2                                                    Indian
                                                                                                                                                                        Bangladeshi                         27.5
Yorks & Humbs                                                  50.3                                                                                                                                                                                                         Yorks & Humbs
                            West Mids                                                               53.5                                               Pakistani                                           53.1
                                                                                                                                                                              Chinese                  17.6
                                                                       52.2                                                                                                                                                                                                 East Midlands
      East Mids                   East                                                            52.4                                                                                   27.5
                                                                                                                                                  Bangladeshi                                                                51.5
                                                                             53.5                                                                                   Other Asian                                                                                             West Midlands
     West Mids                   London                                                           52.26                                                                        17.6
                                                                                                                                                       Chinese                                                                                                                         East
                                                                        52.4                                                                                    Black Caribbean                                                           65.5
           East             South East                                                     51.1
                                                                                                                                                   Other Asian                                            51.5                                                                      London
                                                                        52.26                                                                                      Black African                                           46.6
          London            South West                                                                        55.1
                                                                                                                                               Black Caribbean                                                      65.5                                                       South East
     South East                                                  51.1                49.6                                                                           Other Black                                                                                        87
                                  Wales                                                                                                                                                                                                                                        South West
                                                                                                                                                  Black African                                       46.6
     South West                                                       45.9          55.1
                              Scotland                                                                                                                                             0                 20            40              60              80                        100     Wales
                                                           49.6                                                                                    Other Black                                                                      87
           Wales              N Ireland                     44.4                                                                                                                                                                                                                   Scotland
       Scotland                                    45.9
                                           40              45                       50                   55          60                                            0              20            40           60             80              100                                    N Ireland
       N Ireland                           44.4

                       40                 45              50                   55                       60

                   learning key life-skills such as negotiation and team building.                                                            Cross-government work
                              Ex that should be part of all academic
                   It is something5: Start-ups in Deprived Areassubjects                                                                                Ex 6: % females who are self-employed
                                                                                                                                              The SBS has an important role in trying to boost enterprise
                   right across the curriculum.                                                                                               across the UK population. It is their ambition to ‘encourage                                                                     Ex 7: %
              Ex 5: Start-ups in Deprived Areas                                                                                              Ex 6: % females who are self-employed
                      61000                                                                                                                   more enterprise in disadvantaged communities and under-
                   Recommendation: The DfES must ensure that enterprise                                                                       represented groups’. However, if it is to deliver this, it needs
                   is at the heart of the school curriculum in the UK running                                                                 to recognise the importance of improving the infrastructure
                   across academic subjects for all age groups.
                            59500                                                                                                             of the UK. It therefore needs to work much more closely with
                                                                                                                                                  4.0                                                                                                                                 28.0
                                                                                                                                              other relevant departments.
          59500    Childcare opportunities for self-employed                                                                                     3.9
                Over recent years, the government has increased the support                                                                   However, it is clear that the SBS alone cannot deliver the step-
                                                                                                                                                               3.8                                                                                                                    27.5
                available to employees with children. However, for many                                                                       change needed. Each central government department, RDA
                potential entrepreneurs, the costs of child minding in con-                                                                       local
                                                                                                                                              and3.8 authority should be looking at what they can do to
                trast to employer provided childcare are a disincentive to                                                                                      levels. Enterprise should be at the top of the
                                                                                                                                              boost enterprise3.7
                                                                                                                                                                                                                                                                                   % 27.0
                self-employment. These costs are also a barrier to business
                         56500                                                                                                                agenda across government.
                growth for self-employed parents.
          56500                                                                                                                                                        3.6
                                                                                                                                              Recommendation: SBS should work much more closely with
                At the present time, a child minder does not count as a
                        55000                                                                                                                 government departments and local authorities to tackle the key
                                 2000      2001     2002     2003    2004
                legitimate business expense. Therefore, for example, whilst                                                                   barriers preventing more enterprise across the UK population.
          55000 a chauffeur is tax deductible, the cost of a child minder is                                                                                                  2000       2001        2002         2003      2004            2005
                   2000       2001    2002      2003     2004
                not. The rules as they stand are a clear barrier to enterprise.                                                                  3.5                                                                                                                                  26.0
                                                                                                                                                        2000       2001           2002      2003          2004       2005

            The CBI believes that the government should therefore look
            at how it can support entrepreneurs who have young children.
            We suggest that it should look to introduce a simple system
                  Ex 9: Self-employment rate
            that enables child minders to be tax deductible. The CBI
      Ex 9: would be happy to work with the government to further
            Self-employment rate
            explore this issue.
                            white     black or      Asian or
                                                               black British               Asian British
                       white                 Asian or
                   Recommendation: HM Treasury should make the cost of
                               black or
                               black British Asian British
      9            child minders tax deductible.



 %                           5


                      issue 5                                                                                                                                                                                   enabling the enterprise revolution

                     CUrrent SItUatIon                                                                                                                                               Deprived areas
                                                                                                                                                                                     The government has also expressed its determination to
                     Regional Differences                                                                                                                                            encourage enterprise in deprived communities. In fact, it has
                     The government has a public service agreement to “make                                                                                                          a target to ‘reduce the gap between start-up rates in the most
                     sustainable improvement in the economic performance of all                                                                                                      and least deprived areas’.11 It has worked through the Busi-
                     English regions by 2008, and over the long term reduce the                                                                                                      ness Link network, the New Deal projects and other projects
                     persistent gap in growth rates between the regions”.7 How-                                                                                                      supported by the Phoenix Fund. It also set up 2,000 Enter-
                     ever, as a recent study by the OECD shows, only Mexico has                                                                                                      prise Areas in the most deprived areas across the UK, and
                     a worse regional distribution of GDP per capita than the UK.8                                                                                                   directed European structural funds towards specific projects.

                     While the number of VAT registered businesses does not                                                                                                          The Local Enterprise Growth Initiative (LEGI) announced
                     provide a comprehensive picture of business numbers, they                                                                                                       in Budget 2005 aims to provide investment in deprived
                     do provide a useful indication, and are often used by the                                                                                                       areas to ‘support locally developed and owned proposals’.12
                     government. VAT registered businesses in the UK have                                                                                                            LEGI will be worth £50m per year from 2006-07, rising to
                     increased by 12% since 1997.9 However, regional increases                                                                                                       £150m per year by 2008-09. This follows the publication in
                     vary from just % in Wales and 5% in Scotland to 16% in                                                                                                         July 2005 ‘Enterprise and economic opportunity in deprived
                     the South East and 18% in London (Exhibit ).                                                                                                                   areas: Local Enterprise Growth Initiative – Next Steps’ which
                                                                                                                                                                                     outlined the steps needed during implementation of the first
                     The latest data also indicates that these regional divisions will                                                                                               phase of LEGI to ensure it is a success for the long-term. Last
                     continue, with big differences in the start-ups per 10,000                                                                                                      year, the RDAs also attracted around £750m of investment
                     adults each year (Exhibit ). Wales, Scotland, Northern Ireland                                                                                                 into the 20% most deprived wards.1
                     and the North East have much lower start-up rates compared
                     to London and the South East. Other regions such as Yorkshire                                                                                                   The government is also conducting a review of areas that
                     & Humber, North West, East Midlands and West Midlands                                                                                                           qualify for economic funding. The “Review of the Assisted
                     are behind the English average.10 Regional divisions are there-                                                                                                 Areas of the UK” is looking at the criteria that should be used
                     fore growing and not narrowing.                                                                                                                                 to define the areas that should be included for assistance.

                                                                                                                                                                                     However, determining the success of government policy on
                                                                                                                                                                                     this target to date is difficult to establish. Government statis-
                                                                                                                                                                                     tics paint various pictures:

                                                                                                                                                                                     n   The Neighbourhood Renewal Unit has defined 88 local
                                                                                                                                                                                         authorities in England as being deprived (See Exhibit 5).

                                                                              Ex 4: Start-up per 10,000 adults 10,000 adults
                                                                                               Ex 4: Start-up per
                exhibit: 3 businesses numbers since 1997
        Ex 3: Increase inEx 3: Increase in businesses numbers since 1997
                                                                     exhibit: 4
wledge etc
                      Increase in businesses numbers since 1997 by region                                                                                                                Start-up per 10,000 adults by region
                                                                                                                                       Source: ONS, VAT Registrations 1997 to 2005

                                                                                                                                                                                                                                                                                           Source: ONS, VAT Registrations 2004

           UK                                               12                                                                                                                                                                                          38
                                      UK                                                               12                                                                                           UK                                                                                               38
      England                                                    13                                                                                                                                                                                     39
                                 England                                                                    13                                                                                 England                                                                                               39
    North East                          8                                                                                                                                                                                    21
                               North East                                           8                                                                                                        North East                                                                21
                                              9                                                                                                                                                                        North East
   North West                                                                            9                                                                                                                                                   32
                               North West                                                                                                                                                   North West                                                                           32
                                                                                                                                                                                                                      North West
Yorks & Humbs                                 9
                       Yorks & Humbs                                                     9                                                                                               Yorks & Humbs                                       32
                                                                                                                                                                                                                   Yorks & Humbs                                                 32
East Midlands                                               12                                                                                                                                                                                    35
                        East Midlands                                                                  12                                                                                    East Mids                                                                                35
                                                                                                                                                                                                                       East Mids
West Midlands                                     10                                                                                                                                                                                              35
                       West Midlands                                                         10                                                                                              West Mids                                                                                35
                                                                                                                                                                                                                       West Mids
         East                                                    13
                                     East                                                                   13                                                                                   East                                                   40
                                                                                                                                                                                                                            East                                                                             40
      London                                                                            18                                                                                                                                                                                   59
                                  London                                                                               18                                                                      London                                                                                                                                 59
   South East                                                              16                                                                                                                                                                                43
                               South East                                                                         16                                                                        South East                                                                                                                           43
                                                                                                                                                                                                                      South East
   South West                                          11                                                                                                                                                                                          37
                               South West                                                         11                                                                                        South West                                                                                 37
                                                                                                                                                                                                                      South West
       Wales               4                                                                                                                                                                                                            29
                                   Wales                          4                                                                                                                              Wales                                                                      29
      87                                                                                                                                                                                                                   Wales
     Scotland                   5                                                                                                                                                                                                       29
                                 Scotland                             5                                                                                                                       Scotland                                                                      29
 80 N Ireland
            100                  N Ireland                                          8                                                                                                         N Ireland                                  31
               0       4                                12 4              16                 20                                                                                                                         N Ireland
                                        8 0                                                        12            16         20                                                                            0               20                           40                   60
                                                                                8                                                                                                                                                   0                             20                       40                                         60

   Ex 7: % self-employed % self-employed who are female
                   Ex 7: who are female                                                                                          Ex 8: Self-employmentSelf-employment rate                                                                                                             7
                                                                                                                                                 Ex 8: rate

                                                                                                                                                                                                  % total             % all ethnic
                                                                                                                                                                                                                              % total                       % all ethnic
                                    28.0                                                                                         8.0
    enabling the enterprise revolution                                                                                                   issue 5

    exhibit: 5                                                                      exhibit: 6
    Start-ups in deprived areas                                                     Percentage of females who are self-employed

                                                                     Source: SBS

                                                                                                                                                       Source: ONS
    Their figures show that registrations per 10,000 adults in                     There is some evidence that female entrepreneurship levels
    these areas fell from 8 to 7 between 2000 and 200.1                        have increased over the past few years, particularly since
                                                                                   2001. % of women are now self-employed compared to .6%
n   Other government figures show that VAT registrations in                        in 2000 (Exhibit 6). Over the next three years 6.% of women
    the 20% most deprived areas in England increased from 6                       expect to start a business.18 This has increased from 5.1% two
    to 7 per 10,000 adults between 2000 and 200.15                               years ago. However, it is still apparent that nearly twice as
                                                                                   many men than women expect to start a business.
n   A recently introduced methodology showed a significant
    rise from 25 per 10,000 adults in 2000 and 28 in 200.16                       It is also important to put this into perspective. While female
                                                                                   self-employment has increased, it has increased at a much
The government is also considering introducing a new measure                       slower rate than the male self-employment rate. In fact the
to assess success in this area, which would focus on self-                         percentage of self-employed people who are female has actu-
employment numbers in deprived areas. The picture in terms                         ally fallen from 27.8% in 2000 to 26.7% (Exhibit 7).19 The gap
of start-ups in deprived areas is therefore dependent on                           between male and female self-employment has therefore
which government statistics one chooses to look at. It is also                     widened.
noticeable that different terminology exists which adds to
the confusion. In particular, there are varying references to                      Ethnic minority entrepreneurship
‘deprived areas’, ‘deprived wards’, ‘disadvantaged areas’, ‘neigh-                 To encourage more ethnic minority entrepreneurship the
bourhood renewal areas’, ‘enterprise areas’ and ‘assisted areas’.                  government has taken a number of steps, including the set-
The government must do more work to determine the picture                          ting up of bodies such as the Ethnic Minority Business Forum
on the ground, and to clarify the areas that it is targeting.                      to look at the needs of ethnic minority entrepreneurs. They
                                                                                   are also working with the National Employment Panel (NEP)
Female entrepreneurship                                                            to review access to finance issues for ethnic minorities.
The government has also set itself a target to ‘reduce the gap
between male and female self-employment rates’.17 To achieve                       The Budget 2005 accepted the findings of a NEP report ‘Enter-
this it has taken numerous steps, including developing a                           prising People, Enterprising Places’, including that of setting
‘Strategic Framework for Women’s Enterprise’. It has also set                      up ‘Centres of Vocational Excellence for Entrepreneurship’ in
up a Task Force on Women’s Enterprise, working with the                            certain locations to develop entrepreneurship of ethnic minor-
Regional Development Agencies, who have made a commit-                             ity communities. It is interesting to note that 70% of the ethnic
ment to developing women’s enterprise within their regional                        minority population live in the UK’s most deprived districts.
economic strategies.

                                      Ex 2: I have the skills, knowledge etc                                                                                 Ex 3: Increase in businesses numbers since 1997


                                                                                                                                                       UK                                                   12
                          White                                          50.7                                                                     England                                                        13
                   issue 5                                                                                                                                              enabling the enterprise revolution
                          Mixed                                                   64.2                                                          North East                                8

                                                                                                                                               North West                                     9
                         Indian                                                 58.8
                                                                                                                                            Yorks & Humbs                                     9
                       Pakistani                                           53.1
                  But, success in raising ethnic minority entrepreneurship has                                                              East Midlands                                                   12
                   Bangladeshi                27.5
                  been limited. While the total number of people from ethnic                                                                West Midlands                                         10
                       Chinese           17.6                                                                                                                                                                    13
                  minorities who are self-employed has increased, the total                                                                          East
                                                         51.5                                                                                                                                                                     18
                  increase in the ethnic minority population has meant that
                   Other Asian                                                                                                                    London
                  since 2000, the all-ethnic minority group65.5 has actu-
               Black Caribbean                                                                                                                 South East
                                                                                                                                               South West                                              11
                  ally fallen below the total self-employment rate (Exhibit 8).
                  Black African                       46.6
                                                                                                                                                    Wales                    4
                  However, there are varying patterns within the overall
                    Other Black                                        87
                  statistics. There have been falls in the Asian or Asian British                                                                                                         8
                                0      20          40       60     80     100                                                                    N Ireland
                  self-employment rate, but the Black or Black British rate has                                                                              0           4            8                 12              16               20
                  remained relatively constant since 2000 (Exhibit 9).20

               While the GEM 2005 shows a more positive picture in terms
               of the number of people from ethnic minorities thinking adults
                                           Ex 4: Start-up per 10,000
bers since 1997about starting a business, the reality is that this is not translat- exhibit: 7
                                                                                    Ex 7: % self-employed who are female                                                                                                                                             Ex
           Ex 6: % females who are self-employed
               ing into self-employment and business start-ups. As a result,        Percentage of self-employed who are female
               government targets in this area are being missed.

                                                                                                                                                                                                                                                   Source: ONS
                 4.0                                    UK                                                          38
                                                                                                                                                    28.0                                                                                                             8.0
                                                  England                                                           39

                                                North East                                  21
                 3.9                           North West                                               32
                                                                                                        32                                          27.5
                                            Yorks & Humbs                                                                                                                                                                                                            7.5
                                                East Mids                                                    35
                 3.8                                                                                         35
                                                West Mids
                                                      East                                                          40
                                                                                                                                                 % 27.0                                                                                                              7.0
 8                                                                                                                                                 59                                                                                                            %
                                               South East                                                                43

                                               South West                                                      37
                                                                                                   29                                               26.5
                 3.6                                Wales                                                                                                                                                                                                            6.5
                                                 Scotland                                          29

                                                 N Ireland                                          31
                 3.5                                          0                        20                         40                               60
                        2000         2001      2002          2003        2004          2005                                                                                                                                                                          6.0
                                                                                                                                                                 2000    2001        2002          2003               2004        2005

                       exhibit: 8 Self-employment rate
                            Ex 8:                                                                                                              exhibit: 9
                   Self-employment rate                                                                                                        Self-employment rate by ethnic group
                                                                                                                              Source: ONS

                                                                                                                                                                                                                                                  Source: ONS

                                                       % total                  % all ethnic



                        %      7.0


005                                    2000        2001           2002     2003             2004        2005

 enabling the enterprise revolution                                                                                      issue 5

ImPortanCe oF BooStInG enterPrISe                                    Potential female self-employment
                                                                     As Exhibit 11 shows, there are currently 2.7 million self-
Encouraging self-employment and growing businesses is                employed males, with this projected to increase to almost
crucial to ensuring long-term sustainable growth in the UK.           million by 2020. The number of self-employed females
Business creates the jobs and wealth needed for the UK.              is currently less than 1 million, expected to grow by less
                                                                     than 250,000 over the next 15 years. The gap between
Potential business stock                                             male and female self-employment is therefore expected
As Exhibit 10 shows, London currently has more VAT regis-            to widen significantly.
tered businesses than Wales, Scotland and Northern Ireland
combined. On current trends, by 2020, London will have               By 2020, on current trends, there will be an extra 20,000
100,000 more businesses than these areas combined.                   self-employed women. However, if the growth in self-
                                                                     employed females could match the growth in self-employed
By 2020, these areas will have an extra 27,000 businesses in         males, this would grow to an extra 00,000 self-employed
total. If however, they could match the business growth rate         females by 2020.
of London, by 2020 there would be an extra 29,000 businesses
in Wales 7,000 in Scotland and 21,500 in Northern Ireland           Potential ethnic minority self-employment
than currently. Even if they just matched the UK business            There are currently .7 million people self-employed.21
growth rate, there would be an extra 61,000 businesses in total.     As Exhibit 12 shows, the percentage rate of white self-employ-
                                                                     ment has risen by 0.7 percentage points since 2000. This
This picture is matched in the North East, North West,               compares with a fall for the all ethnic minority group rate
Yorkshire & Humber and South West. If they could boost               by 0. percentage points.
enterprise levels to match the growth rate of the UK they
would collectively have an additional 120,000 VAT registered
businesses more than they currently have by 2020.

 exhibit: 10
 Projected business stock across UK

                                                                       1997                    2005                    2020
 London                                                             241,735                 285,260                  389,095
 Wales                                                                77,195                  80,010                  85,568
 (matching UK/London growth rates)                                                                           98,405/109,134
 Scotland                                                            121,170                 127,145                  139,154
 (matching UK/London growth rates)                                                                          156,378/173,426
 Northern Ireland                                                    54,540                   58,915                  68,086
 (matching UK/London growth rates)                                                                            72,460/80,360

 exhibit: 11
 Projected female self-employment

                                                                      2000                     2006                    2020
 Male                                                              2,368,000              2,733,000                3,818,000
 Female (on current trends)                                          911,000                998,000                1,235,000
 Female (matching male growth rate)                                                                                1,394,000

    issue 5                                                                       enabling the enterprise revolution

    exhibit: 12
    Project ethnic minority self-employment

                                                                  2000                     2005                     2020
    White                                                          7.1%                     7.8%                     9.6%
    All ethnic minority groups (on current trends)                 7.4%                     7.0%                     6.2%
    All ethnic minority groups (matching white trends)                                                               8.6%

enabling the enterprise revolution                               CBI
In 2000, the Government set itself the objective of making the   The CBI is the UK’s leading business organisation, speaking
UK the best place in the world to start and grow a business.     for some 20,000 businesses that together employ around
In 2002, the Small Business Service set out seven strategic      a third of the private sector workforce. The majority of CBI
themes to focus its work to achieve their overall goal.          Members are from the SME sector.

Throughout 2005 and 2006, the CBI is publishing a series         The SME Council is the focal point within the CBI for iden-
of reports, Enabling the enterprise revolution, looking          tifying and addressing issues of particular interest to small
at whether progress has been made, and will provide key          and medium-sized firms, and provides a voice for them to
recommendations on each of the themes to the government          influence mainstream CBI policy and influence government
on how to achieve its targets.                                   at home and abroad. The Council currently has a member-
                                                                 ship of around 0 companies, spanning all the UK regions
The reports will be published and be available at   and various business sectors.
                                                                 The Enterprise Group ensures that the views of CBI SME
n   August 2005 – The small business service five years on       members are directly represented to Government. It has
                                                                 achieved considerable success over the past few years. The
n   Oct 2005 – More dynamic start-up market
                                                                 information flows in the other direction, too, and the CBI’s
n   Nov 2005 – Building an enterprise culture                    Enterprise Group gather and summarise data from the
                                                                 legislative programme and give pointers to likely changes
n   Jan 2006 – Improving small businesses’ experience of
                                                                 that will affect members’ business.
    government services
n   May 2006 – Boosting enterprise across the population         Enterprise Group
                                                                 May 2006
n   June 2006 – Better regulation and policy
n   July 2006 – Improving access to finance
n   Sept 2006 – Building the capability for small business
n   Nov 2006 – Making the UK the best place in the world
    to start and grow a business – recommendations

 enabling the enterprise revolution                                                                          issue 5

1 ODPM PSA Agreement 2005-08
2 ACCA ‘access to finance: women’s enterprise and the role of the
   accountant’, 2005
3 National Employment Panel, ‘Enterprising People Enterprising
   Places’, May 2005
4 IPPR Centre for Cities, ‘mind the enterprise gap’, December 2005
5 SBS Booster Survey
6 Global Entrepreneurship Monitor 2005
7 ODPM, DTI and HM Treasury PSA Agreement 2005-08
8 OECD Factbook 2006, Variation of regional GDP per capita
9 VAT Registrations, SBS
10 Small Business Service
11 SBS Business Plan 2003
12 HM Treasury, Budget 2005
13 RDA round-up, England’s Regional Development Agencies,
   March 2006
14 VAT Registrations, SBS
15 VAT Registrations, SBS
16 VAT Registrations, SBS, (excludes 197 ‘Super Output Areas’)
17 A government action plan for small business – the evidence
   base, 2003
18 Global Entrepreneurship Monitor 2005
19 Labour Force Survey
20 Labour Force Survey
21 Labour Force Survey

Further information                                                  For a copy of this report in a large-text format,
Lucy Findlay – Head of Enterprise Group
                                                                     please contact:
T: + (0)20 795 8100
E:                                           Nicholas Bojas—Senior Policy Adviser
                                                                     T: +44 (0)20 7395 8245
Nicholas Bojas – Senior Policy Adviser
T: + (0)20 795 825                                               E:


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