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EXECUTIVE SUMMARY
1. This national scoping study on minority ethnic
enterprise in Scotland is the first systematic study on the
distinctive nature and importance of minority ethnic
businesses (
MEBs) in Scotland. The vitality of
Scotland's economy is dependent upon the range and
diversity of entrepreneurial activity.
MEBs are an important contributor to
that diversity and this study identifies the extent of
their importance and diversity. To do this, the study has
used a combination of research methods: secondary 2001
Census data analysis, quantitative analysis of baseline
data, qualitative interviews and extensive consultation
with key informants. The extent of this study provides an
opportunity, for the Scottish Executive and other agencies,
to build on the main findings and some implications from
the main conclusions.
Research Aims
2. The main aim of the scoping study was to provide
information on the distinctive issues and distinctive
importance of
MEBs in Scotland. In order to do this it
has been necessary to:
2.1 Map their geographical and sectoral distribution and
importance in Scotland.
2.2 Examine the nature of distinctive issues with
MEBs in Scotland compared to a white
control group and
MEBs in other areas of the
UK.
2.3 Investigate the importance of the nature of issues
with an interview-based sample with
MEB owners across different localities
and different sectors, representative of the distribution
indicated by the quantitative phases of the study.
2.4 Undertake extensive consultation with minority
ethnic community leaders, providers of finance, advice and
support from both 'mainstream' and specialised
agencies.
Research Methods
3. The scoping study has used a combination of research
methods to achieve these aims. These methods have been used
in distinct stages so that the quantitative methods, used
in the earlier stages, can underpin the basis of the
qualitative samples used for the later stages of the study.
In more detail the study has involved the following
research methods:
3.1 Secondary data analysis of the 2001 Census data on
the numbers and distribution of self-employment in Scotland
by minority ethnic groups including: Pakistani, Indian,
Chinese, Bangladeshi, African and other groups. The
analysis has included an investigation into the importance
of minority ethnic self-employed and small employers in the
main cities, the Central Belt outwith the main cities and
rural areas including the Highlands and Islands and the
South of Scotland.
3.2 Baseline data analysis of a dataset of 81
MEBs located in Scotland including
representation of Pakistani, Chinese, Indian, Bangladeshi
and African owners. The dataset also comprised an
additional 33 white-owned businesses, which served as a
control group.
3.3 A programme of 41 face-to-face, semi-structured
interviews with
MEB owners including representation of
the minority ethnic groups from the quantitative analysis
phases. The programme of interviews has been designed to
include representation of different sectors; both
traditional, such as retailing, and emergent, such as
IT and leisure and of geographical
distribution in the main cities, in the Central Belt and in
rural locations in the Highlands. Most of the interviews
have been transcribed and analysed using a qualitative
software package.
3.4 An extensive programme of consultation with 32 key
informants through either face-to-face interview, telephone
interview or e-mail communication. The consultation was
completed with identified key informants from minority
ethnic business communities in different localities and
with representatives from support agencies and providers of
finance including, where possible, key decision-makers that
have experience of direct contact with
MEB owners.
4. Methodological issues in conducting the research were
overcome through assistance from the Research Advisory
Group, for which the research team are grateful, and by
having a research team that contained experienced
researchers with minority ethnic communities who could, in
some cases, conduct interviews in the respondents' first
language. The research team have used the respondents' own
perception of their ethnicity using definitions of minority
ethnic groups from the 2001 Census.
Summary Findings
5. The following summary findings are identified, as
associated with each stage of the study.
5.1
From the 2001 Census data
- Minority ethnic business owners account for just
over 3 per cent of all self-employed in the nation, or,
alternatively, minority-owned businesses account for
3.6 per cent of the number of small employers. It is
estimated that there are over 4,400
MEB registered enterprises in
Scotland. However, the importance of
MEBs is greater than the ethnic
breakdown of Scotland's population might suggest, this
is due to the higher rates of self-employment and
business ownership in minority ethnic communities than
other ethnic groups, with the highest rates of
self-employment in the Pakistani, Chinese, Indian and
Bangladeshi communities respectively. The relative
importance of the numbers of
MEBs for Scotland will increase in
the future, on current trends, due to the younger
demographic profile of the minority ethnic
population.
- The most important concentration of minority ethnic
enterprises geographically is in Glasgow, which is
Scotland's most important city for minority ethnic
enterprises.
MEBs account for 10.6 per cent of
the self-employed and 14 per cent of small employers in
Glasgow. It is estimated that there are over 1600
VAT registered
MEBs in Glasgow alone. High rates of
self-employment also exist in Edinburgh, particularly
in the Pakistani community, with
MEB owners accounting for over five
per cent of the total numbers of self-employed for the
city. Dundee is also important where
MEBs account for over 7 per cent of
the self-employed for the city.
- MEB owners are also important in
areas of the Central Belt outside Glasgow and Edinburgh
and indeed this area contains over 45 per cent of all
the minority ethnic self-employed in Scotland, with a
similar proportion accounted for with the number of
small employers and own-account workers.
- In the remaining rural areas, of the Highlands and
Islands and the South of Scotland,
MEBs are much smaller in number and
more dispersed, although there are still some high
rates of self-employment.
5.2
From the database analysis.
- The database analysis, comparing
MEBs in Scotland to a white control
group and equivalent
MEBs in England, indicated a
concentration of
MEB owners in traditional sectors of
retailing and catering. The analysis also indicated a
lower propensity of
MEB owners in Scotland to obtain
management qualifications and formal training (compared
to
MEBs in England). However, the
analysis found that
MEBs in Scotland were not
disadvantaged in terms of their actual growth
performance.
- The analysis found larger differences between
minority ethnic groups in their success in raising
external finance at start-up than between
MEBs as a group and white-owned
firms. It was Chinese-owned firms who showed the
highest propensity to access finance from mainstream
sources. They also showed the highest propensity to
access external advice at the start-up stage.
MEB owners were significantly more
likely to draw on finance from family and friends at
start-up than white-owned firms. Finance from informal
sources appeared particularly important in the case of
Pakistani-owned firms.
- The analysis indicated that in seeking and
accessing formal finance,
MEB owners had lower success rates
than white-owned firms. In terms of seeking and
accessing advice and support, the analysis indicated
that
MEBs, as a group, were less likely
to do so than white-owned firms, although there were
differences between minority ethnic groups.
5.3
From the programme of interviews
- The interviews revealed a richness and diversity of
MEBs through the range of sectors,
different ownership and generation. The interviews
highlighted great contrasts between the experience of
MEB owners in different locations,
in different sectors and in different markets.
MEB owners in declining sectors and
in declining markets have adopted coping strategies
that draw upon innovation in service and product
provision and adding value. There is also evidence of
successful diversification and breaking into new
markets. One common theme appears to be high drive and
ambitious
MEB owners who are able to achieve
business development and growth, even in traditional
sectors, and in the face of increased competition.
- In accessing formal finance, the qualitative
findings reinforce the quantitative baseline analysis,
indicating dependence by
MEB owners on personal and informal
community sources for finance. This finding is further
affected by a marked reluctance to approach
institutional providers, even with 2
nd generation owners.
- The interviews indicated that, although variable,
MEB owners tend to be well-educated.
Some
MEB owners have been willing to
engage in additional training, although there is some
evidence that this could be enhanced.
MEB owners appear to be remarkably
adaptable to the demands of new technology and willing
to innovate. Although the quantitative baseline
analysis indicates limited management qualifications
and training, the interviews reveal that when training
is available, then
MEB owners will take this up.
- The interviews confirm that the role of social
capital and resources acquired from close knit
networks, is complementary to that of informal capital,
although it may act as a barrier to the ambitions of
younger and 2
nd generation
MEB entrepreneurs. Related to this
finding, is the lack of awareness and, more
importantly, basic knowledge of the level and type of
services provided by the mainstream agencies, which
should be a major focus of concern. The lack of
engagement ranges from the relatively basic lack of
awareness, attitudes that see support agencies as not
relevant, and deliberate strategies to by-pass support
agencies.
- The interviews also indicated important additional
issues of diversification, crime, security, insurance
and racism, further highlighting and reinforcing the
diversity of
MEB experience in different sectors
and localities in Scotland. In some localities such
issues are an acute everyday and common occurrence, in
some cases such barriers have been overcome by
remarkable resilience in the face of adversity in
trading conditions. In some cases there has been a more
stoic acceptance that such difficulties are part of the
normal and expected patterns of establishing a
successful business.
The main conclusions
6. Combining the analysis from these different stages of
the research together with the extensive consultation has
provided a basis for interpretation and conclusions. These
are discussed as separate chapters in the main report but
include the following.
6.1 A key conclusion is the importance of the numbers
and diversity of
MEBs in Scotland. It is noted that there
are likely to be over 4,500
MEBs contributing an estimated £500
million to £700 million towards Scotland's
GDP. In diversity,
MEBs contribute to range of sectors and
locational areas although there are still concentrations in
traditional sectors. In location, the highest
concentrations are Glasgow and Edinburgh, however,
MEBs are also important to maintaining
diversity in other locations, especially areas of the
Central Belt, contributing to local economic development.
In rural areas as well, such as the Highlands, the role of
minority ethnic enterprises is important, helping to
diversify and enrich local rural economies, particularly
given the demographic context for rural areas, which
generally provides a more marked ageing population
structure than other areas of Scotland.
6.2 Minority ethnic diversity is important for
contributing to the competitiveness of individual
businesses and economies in various ways. It is suggested
that diversity can be seen as a source of creativity and
innovation and that policies can be developed to help
promote such diversity, contributing to diversification.
Examples of positive strategies to promote such diversity
as a source of innovation and creativity that have been
used elsewhere, for example in London, are discussed in the
main report.
6.3 The interviews revealed that, even in traditional
sectors,
MEB owners are resourceful and
prospering, and are able to innovate and diversify.
However, Scotland is dependent for cultural and ethnic
diversity on
MEB owners that are both geographically
and sectorally concentrated. The continuing vitally and
diversity of
MEBs will be crucially significant for
Scotland's economy. Demographic trends indicate a
significantly ageing population for Scotland (
GROS, 2004), it is important that the
younger age profile of minority ethnic communities is able
to contribute to economic development through the
achievement of potential entrepreneurial development. This
will mean encouraging both diversification of sectoral
concentrations and ensuring engagement of new start
MEBs with appropriate and relevant
support.
6.4 Having noted the importance and diversity of
MEBs in Scotland, there are particular
issues regarding access to finance and business advice and
support.
- First, there is comparatively low access to formal
sources of finance. There is a marked reluctance to
approach banks and institutional providers of formal
sources of finance, although there is little reporting
of any dissatisfaction with the commercial banks.
Take-up of targeted financial schemes is also low, for
example with micro-credit or loan funds that might have
MEB owners as users. It is suggested
that it is an issue that may be compounded by the lack
of engagement by
MEB owners with mainstream support
(and other agencies) that could act as a referral
mechanism for such sources of finance. There appears to
be a lack of intermediaries between agencies, the banks
and minority ethnic communities that could provide a
means of building the trust that is required to
establish relationships with the commercial banks.
- Second, there is a lack of engagement with the
formal mainstream sources of advice and support such as
Business Gateway and a low take-up of formal training.
This matters because it could restrict the development
potential of
MEB owners that could benefit from
such sources of support and it is important for
Scotland's economic performance and productivity that
these business owners do engage with public sector
sources of support. There are different dimensions to
this non-engagement. These dimensions include a lack of
awareness of sources of support and advice to
deliberate strategies to avoid engagement. The former
could be tackled by profiling and the use of additional
means of communication, making messages relevant to
local minority ethnic communities. The latter requires
the building of trust with local minority ethnic
communities in the same way as required to build
relationships with formal sources of finance such as
the commercial banks. It is suggested that the key
issue for the Scottish Executive and the Enterprise
Networks is the development of initiatives that improve
communication and engagement with
MEBs, partly through initiatives
that provide incentives, such as targeted procurement
policies, and through developing links with community
leaders or with organisations that represent
MEB owners. An increase in the
take-up of formal training should follow from increased
engagement. The feasibility of establishing a
representative formal body for
MEBs in Scotland such as a Minority
Ethnic Business Forum or Institute should also be
explored. Any initiatives to raise profile will need to
be embedded in local minority ethnic communities to
provide the bridges to build trust. The study also
notes the importance of the legal context, for support
agencies, from the Race Relations (Amendment) Act 2000.
For example, such organisations will need to be aware
of how this Act extends protection against racial
discrimination by public authorities and places a new
enforceable general duty on public authorities to
promote equality and eliminate discrimination,
including in the delivery of support.
6.5 This study has identified a number of additional
issues including:
- Third, the nature of succession planning. Many
MEBs are family businesses, where
these are in traditional sectors there may be a
reluctance of the 2
nd generation to continue in the family
business. In addition, in some cases, there are
different attitudes of the 2
nd generation even where they wish to
continue with the family business. Although there will
be similar issues in family businesses generally, the
nature of such issues will be different with
MEBs and may require specialist
advice and support.
- Fourth, the need for diversification with
MEBs in traditional sectors.
Although it is noted that
MEB owners have shown resilience and
innovation in traditional sectors, there are still
areas of support needed to achieve diversification. It
is noted, in the main report, that these sectors are
perceived to be ineligible for support, such as
retailing and catering. However, it should be possible
to provide advice and assistance drawing upon
successful examples of diversification or providing
assistance with feasibility studies. Increased
diversification may be achieved by the promotion of
diversity linked to increasing innovation and
creativity, drawing upon examples of successful
policies elsewhere, mentioned in the main report.
- Fifth, the marginalisation of
MEBs in some localities, trapped in
hostile trading conditions that exist in difficult
environments, often facing crime and racism. The
geographical distribution of
MEBs is very uneven. Likewise, so is
the pattern of
MEB experience and trading
conditions. Support for
MEBs in marginal trading conditions
probably needs co-ordinated and targeted assistance
from a range of organisations to ensure that trading
conditions improve and assistance is provided to
achieve breakout of such markets and environments.
However, the concern of
MEB owners in such environments
could provide an opportunity for a policy initiative
targeted against crime and racism, this would provide
an incentive for
MEB owners to engage with providers
of public sector support and advice. An examination of
policies designed to improve local trading environments
through holistic approaches could be examined from
elsewhere in the
UK.
- Sixth, the nature of
MEB experience in rural areas.
MEBs in rural areas are virtually
invisible in terms of assistance and profiling. Their
needs are different as they do not have the advantage
of strong networks and strong social or informal
sources of capital, therefore, they may be more
self-reliant and may require specific assistance. In
rural localities, new
MEBs provide additional variety,
diversity and creativity in the local environment that
can attract additional wealth into such areas through
increased tourism and trade. It is argued that it
should be a part of the policy of agencies in such
areas to attract greater numbers of
MEBs. As well as contributing to
local rural economies through the natural diversity of
MEB business ownership, the ethnic
diversity of cuisine and culture should be an element
of a tourism strategy. The development of
MEBs in these sectors to promote
diversity, could provide a mechanism to engage
MEBs in mainstream support, whilst
recognising their distinctive needs. Agencies in rural
areas, such as
VisitScotland, should profile ethnic diversity
as a positive tourist strategy.
Areas for further research
7. Finally the authors suggest a number of areas for
further research that arise from this study :
- Quantitative data collection on the importance and
pattern of
MEB owners in local economies.
- Further qualitative and longitudinal research to
capture the dynamic aspects of business development
with
MEB owners in different sectors. The
research could investigate the nature of
inter-generational ambitions and succession
planning.
- The dynamic nature and changing role of social
capital and its distinctive nature for
MEBs could provide an important
strand of research. This would help to inform agencies
how best to build bridges and trust with local minority
ethnic communities. The relationship between formal and
informal sources of both finance and advice whether
they are substitutes or complementary, is a key area
for further investigation.
- An investigation of methods of successful
diversification that can inform support policy in this
area. There is a need for further research to examine
ways of achieving diversification in two main areas.
The first area focusing on supplier diversity and the
second area focusing on assessing scope for diversity
being developed as a source of competitiveness for the
Scottish economy.
- Further investigation with
MEB owners on the nature of human
capital and the management training and development
needs of
MEB owners in different sectors. A
training needs analysis (
TNA), with selected
MEBs, could help to determine the
nature of management development seminars and
assistance, perhaps drawing on experience from the
Glasgow City Council
MEB support programme.
- An investigation into the nature of marginalisation
of
MEBs in difficult trading
conditions. Such an investigation could identify
mechanisms that will assist breakout into wider markets
and identify policies that could provide some security
and protection for existing
MEB owners operating in hostile
trading environments.
- The nature of
MEB development in rural areas of
Scotland should be investigated further through
additional qualitative and case study research to
determine the extent of integration and/or isolation of
MEBs and their associated special
needs.
- An investigation into improving the relationships
between sources of advice, support and finance, which
could provide additional information on appropriate
mechanisms that can build bridges with minority ethnic
communities and their businesses.
- Finally, monitoring and evaluation of existing and
planned initiatives will be required that may be
targeted at
MEB owners.
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