This week, we at The Entrepreneurs Network released a report with Sage showing how new business creation could play a vital role in the U.K.’s post-pandemic economic recovery and the wider levelling up agenda.
On the back of extensive polling and focus groups in London’s three most deprived boroughs, and six of Newcastle’s most deprived wards, we found that within these communities starting a business and becoming your own boss is seen as a route to a better life—both in terms of income and wellbeing.
There is huge untapped potential for people to start to earn independently, to be their own boss and potentially create new businesses, with nearly half of respondents coming up with an idea for a business or side-hustle unprompted. That means that just within the deprived communities we talked to there are 234,000 people with business ideas. Extrapolating this trend across the 10% most deprived communities in the U.K. means there are over a million people sitting on business ideas.
So what’s stopping people with great ideas making the leap? Finance and confidence.
Over 80% are held back by fears over administrative, tax and legal compliance. Lack of mentoring is a clear barrier too: 73% of SME leaders surveyed had access to a mentor and more than half sought their advice, but less than half of the 58% of potential SME owners who have someone to turn to had done so.
And 70% of potential business owners do not feel close to having enough money to start a business. In addition, only a third (34%) feel comfortable taking out a loan and half believe they would not be granted one if needed.
We calculate that if the right support was in place to overcome these barriers then potential business owners would be, on average, 17% more likely to take the leap. This would translate to 38,000 more people working for themselves in the areas we looked at, and 188,000 more when extrapolated across the U.K.’s 10% most deprived communities.
The report has three recommendations to improve the situation.
First, we call for the expansion of the New Enterprise Allowance to £100 per week for up to a year and allow recipients to access more of it immediately as a lump-sum. As part of this, we also think eligibility should be expanded and it should be marketed more directly towards young people in communities with high levels of deprivation.
We also call for the incorporation of entrepreneurship education into the Government’s lifelong learning programme, and the funding of SME mentoring by expanding schemes such as Peer Networks.
Finally, we call for the deployment of resources to demystify the administrative side of starting a business. New resources should be delivered and promoted through social networks such as YouTube and Instagram, which our polling revealed is the most effective way to reach deprived communities. We also call for the government to adopt the Once-Only-Principle—an e-government idea that businesses should only have to provide key information to the Government once—to reduce unnecessary admin.
Report author Sam Dumitriu, Research Director from The Entrepreneurs Network said: “In communities where work tends to be low paid and career opportunities limited, entrepreneurship is a real and viable path towards higher earnings, greater flexibility, and more fulfilling work. Even in the face of the significant setbacks in financial outlook and wellbeing caused by the pandemic, there are thousands of potential business owners in communities across the U.K. with strong ideas, but most lack the confidence and resources to take that leap.”
Dumitriu adds: If we can put the right support in place by expanding and revamping the New Enterprise Allowance, making it easier for budding entrepreneurs to learn from established SMEs, and demystifying the administrative aspects of starting a business, we will create highly valued work and empower hundreds of thousands of people to build businesses, change their lives and create jobs in their communities.”
The private and charitable sectors have a role to play too. Alongside the launch of the report, Sage announced a partnership with MyKindaFuture to provide training and mentorship via Jobcentre Plus to help disadvantaged and underrepresented groups to develop their business ideas.
Sage CEO Steve Hare, says: “The most deprived communities in the U.K. have taken a huge hit over the last 12 months. We know that starting and growing a business is a proven route to long term employment, high job satisfaction and wealth creation, but that opportunity is not always accessible to everyone in these areas. As a business that supports millions of SMEs globally, we want to knock down these barriers. I passionately believe that everybody should have the opportunity to thrive and have seen first-hand the long-term benefits individuals, families and communities experience when given that chance. Our partnership with MyKindaFuture will provide real support, the right tools and quality mentoring so that people can build and own their own businesses and be part of an inclusive recovery.”
While as a think tank we focus a lot on entrepreneurship at its zenith, we think it matters all the way down. After all, sometimes the difference between poverty and economic security is simply a side hustle. The skills and confidence developed by pursuing a passion project can have impacts throughout someone’s life. And for those businesses that grow, the positive ripple effects on communities can be profound—as I’m reminded each year I judge the excellent Small Awards.