Ethnic minority communities tend to have more positive attitudes towards entrepreneurship and better self-perceptions of their capacity to establish a business. However, they are proportionately more likely to let fear of a lack of finance prevent them from starting a business and to use family and friends as the key source for start-up finance.

According to the report, the key areas of weakness for ethnic minority business are finance, business support and ICT take-up rates. These are areas which, with careful targeted support at ethnic minority businesses are relatively easy to address and, given that ethnic minority people tend to be more entrepreneurial and have positive attitudes towards entrepreneurship, there is scope for increasing entrepreneurial activity in the UK as a whole by promoting it further and providing support amongst the communities.

Positive attitudes to business

Total Entrepreneurial Activity (TEA) is highest amongst Bangladeshi people. They exhibit the most positive attitudes and perceptions of entrepreneurship. For example, Bangladeshi people are the most likely of all ethnic groupings to see an opportunity (58.1%) and the least likely to fear failure (14.9%).

Compared to all other groups, except Pakistani people, they were the most likely to know an entrepreneur, and the most likely to see good start-up opportunities as well. Interestingly, they are also the ethnic grouping who are most likely to let lack of finance prevent them from starting a business.

The results for the Pakistani community, provided in the report, are also worth dwelling on. Pakistani people most likely to expect to start a business over the next three-years. They are quick to see opportunities and have a very low fear of failure rate.

Good service based on technology

On owner-managed businesses, Indians (43.6%) and other Asians (48.1%) are the most likely groups to be providing a good or a service, using new  technology. This comparative figure for  White businesses is 14.1%.

The report highlights that women from ethnic minorities are substantially more entrepreneurial than their white female counterparts.

Black Caribbean people are most likely of all ethnic backgrounds to be starting up a business that provides a good or service that is new to all customers at 36% of all businesses.

Indian start-up businesses are the least likely to be export-oriented of all ethnic groupings, with some 87.5% of respondents in this category saying that they had no customers abroad. This compares to 79.9% of White-owned start-ups and 40% of Mixed ethnic origin start-ups with no customers abroad.

Start-up finance from family and friends

The predominant source of start-up finance for many ethnic groupings is friends and family. The figures for this categoryare: Other Asian, 53.4%, Pakistani, 93%, Black African, 52.6%, and Black Other, 52.9%.

The predominant source of finance for White people is a bank overdraft at 29.3 per cent as it is for Black Caribbean people at 38.3 per cent.

From the data presented presented in the report, there is every reason to provide ethnic minority businesses with more support to start-up and grow since most ethnic minority groups are far more entrepreneurial than their White counterparts, the report concludes.

The GEM report, now in its sixth year, is a worldwide project published annually by London Business School and Babson College.

-- report by Don de Silva

Download GEM UK report