Scottish Government

CHAPTER SIX CONSULTATION AND INTERPRETATION

Introduction

6.1 This chapter examines the key themes that have emerged from the different elements of the national scoping study on the importance of minority ethnic enterprise in Scotland. It draws together an interpretation of the importance of different themes from secondary, quantitative and qualitative findings. In addition the authors take the opportunity to bring in findings from the extensive consultation undertaken with community leaders and institutional providers of support, advice and finance. These findings are not reported in any detail; rather they are used to provide a balance of views, to bring in other experience and issues and to provide an additional perspective.

6.2 The extent of consultation is indicated in Table 6.1 in terms of the range of views, different perspectives and institutions consulted. In each case an identified key informant was consulted. Consultation was conducted either through face-to-face interviews, by telephone or by e-mail. Due to the variety of sources consulted, a flexible consultation guide was used by the research team. Although two versions of this guide were used and are provided in Annex 6, the relevance of this guide obviously varied according to the key informant and the source consulted. Therefore, the research team used a very flexible approach for this final stage of the study. For the most part the interviews were not recorded, key issues and salient points were noted and this has formed the basis of further analysis and interpretation.

Table 6.1: Consultation: key informant sources

Source: Paisley PERC Contacts

Table 6.2: Number of key informants by locational remit

Source: Paisley PERC Contacts

6.3 Table 6.2 also gives a breakdown of key informants by geographical remit area, this reflects the nature of the locational area that their organisation was involved with and the nature of their area remit. Table 6.2 illustrates that key informants were also chosen for the nature of their experience with MEBs and minority ethnic communities in different locations in Scotland. This reflects the underlying methodology and research strategy in the study- that is to include representation from the main cities in Scotland, the Central Belt and rural areas such as the Highlands and Islands.

6.4 Finally, the aims of the scoping study should be born in mind. These are concerned with identifying the nature of and importance of minority ethnic enterprise in Scotland, together with its distinctive features. Whilst important issues for minority ethnic enterprise owners are identified, further research and work will be required to map the nature and scope of these issues, and how they impact on minority ethnic enterprise owners. With these caveats in mind, the interpretation and significance of identified issues are discussed, drawing together material from different chapters of this report.

The diversity of minority ethnic enterprise in Scotland

6.5 A key recurring theme is the strength and diversity of minority ethnic enterprise in Scotland. This is apparent from the 2001 Census data on self-employment, the baseline data analysis and the in-depth qualitative analysis. The importance of the main minority ethnic groups has been identified in the secondary data analysis. Although the importance was dominated by the city areas, (especially Glasgow and Edinburgh), and by a predominance of sectors, nevertheless, important cultural diversity in parts of the Central Belt and other areas of Scotland are reported. The baseline data analysis demonstrated more Scottish MEBs in traditional sectors and less diversity than their English counterparts, but also a good representation of growth orientated business owners. One of the features that emerges, supported by the interview data, is the innovation and resourcefulness of MEB owners even in predominant traditional sectors of retailing and catering. As commented on by one respondent from the consultation, " although there is so much pressure on them, they are doing extremely well".

6.6 Nevertheless, the main dependence for Scotland on cultural and ethnic diversity in business ownership is in the main cities and to some extent in traditional sectors, although this is a changing and dynamic pattern. This has been confirmed by some of the consultation especially in reference to the dependence on the traditional sectors by minority ethnic enterprises. The interviews have revealed the extent of diversity that does exist particularly in new and emergent sectors and the innovation and resourcefulness of MEB owners.

6.7 A related issue is the extent to which issues are related to traditional sectoral concentration of MEBs, reported in this study, rather than distinctive issues that reflect ethnicity of owners and hence issues associated with MEBs rather than sectoral issues. The authors are aware that issues may reflect sectoral concentration, for example, where there is a need for diversification, however, the authors have been careful to report distinctive issues, which are discussed in this chapter, and the consultation has assisted this process.

6.8 It can be argued that ethnic diversity can contribute to the competitiveness of individual businesses and economies in various ways. One route is because diversity can be seen as a source of creativity and innovation. This is illustrated by recent work undertaken in London on the role of Asians in the creative industries. This work concluded that as typically knowledge-based or skill-based businesses, Asian-owned firms in creative sectors contrast with the low value-added nature of many traditional areas of Asian business activity in London, such as clothing and retailing (Smallbone, et al. 2005).

6.9 Such diversity needs to celebrated and profiled by the Scottish Executive and the Enterprise Networks. The consultation revealed that there are only a limited number of agencies that are promoting such diversity, although Scottish Enterprise recognise the importance of diversity for the promotion of innovation and creativity. However, even where there are successful minority ethnic entrepreneurs, there are only a few that are well known or profiled. Consultation has revealed that profiling and the promotion of more minority role models could be easily achieved and there was strong support for the beneficial effects of such measures in raising the profile of the diversity of minority ethnic entrepreneurs in growth businesses and in different sectors. For example, some agencies particularly outside the main cities, and in rural areas, could obtain information on how to profile MEB diversity from units within the Scottish Executive or other more specialised agencies concerned with promoting diversity. It is recognised that attempts are being made to increase communication and raise the profile of support services, this is a theme that is returned to in the conclusions and implications.

6.10 The consultation revealed that this diversity, especially the nature of entrepreneurial

skills of MEB owners, is an asset for Scotland that should be promoted. There are implications of the range of diversity for support agencies as well. The consultation indicated that Scottish Enterprise and Business Gateway " lump all ethnic groups together". Highlands and Islands Enterprise also recognised a need to understand the minority ethnic communities better and their business owners. Thus the consultation revealed that MEB owners are treated by the mainstream support agencies as homogenous with similar needs, perhaps located in traditional sectors, whereas the reality is a much richer picture of diversity that requires much more individual treatment. Indeed, there is a tendency in some of the mainstream support agencies to see MEB owners as located " predominantly in retail and catering" or related sectors. However, specialised agencies were seen to be in touch with the diversity of minority ethnic enterprise, and were in contact with a much more diverse pattern of minority ethnic ownership. The problem of non-engagement is a separate issue that is dealt with later.

6.11 Diversity was further enhanced by the relatively young age profile of MEB owners. The baseline data analysis indicated the younger age profile compared to English MEB owners. The secondary Census data analysis is also important for identifying the younger age profiles of minority ethnic groups. The interviews revealed the growth aspirations of younger owners, often as 2 ^nd generation owners. As mentioned previously, the recent introduction of the young person's business start-up grant, by Business Gateway, should be beneficial and is a welcome initiative.

The importance and contribution of minority ethnic enterprise to Scotland's economy and GDP

6.12 The secondary Census data analysis led to estimates of over 4,000 MEB owners, perhaps contributing over 1.5 per cent of private sector turnover. The actual number of small business owners in Scotland is unknown but can be estimated from official sources. MEBs probably account for over 3 per cent of all small business owners in Scotland, a higher figure than demographic returns might suggest. The contribution to GDP is, therefore, significant, but difficult to estimate without making a series of assumptions, as explained in Chapter 3. The quantitative baseline data analysis suggested that Scottish MEB owners have relatively smaller enterprises and hence smaller turnovers than their English counterparts. Thus any estimation of the importance and contribution of minority ethnic enterprise to Scotland's economy and GDP needs to be treated with caution.

6.13 According to recent revised estimates, in 2001, Scotland's GDP was estimated at £64 billion. The best estimate of MEBs contribution to Scotland's GDP, bearing in mind the reservations expressed, is in the range of £500-£700 million ⁶. The significance of MEBs for the vitality of Scotland's economy, however, cannot be over-estimated. MEBs contribute to the vibrancy of the small business sector and that is vital for health and prosperity in Scotland. If the Scottish Executive wish to build a strong, Smart Successful Scotland (Scottish Executive, 2001), then it will be necessary to ensure that the diversity and importance of Scotland's MEBs is promoted and supported. A detailed explanation of the process of estimating the contribution of MEBs to GDP is given in Annex 3.

6.14 The consultation supported the important contribution that MEB owners have made to local economies. It was reported that MEBs make " a huge contribution" to local economies, especially in some areas of the Central Belt, as well as in Glasgow and Edinburgh, a view given some support by the secondary data analysis. Even in rural areas, such as the Highlands and Islands the contribution of MEB owners to the richness and diversity of the regional economy was recognised in the consultation, particularly given the demographic context in rural areas.

6.15 Underlying this importance, the in-depth interviews also revealed strong growth and survival strategies of MEB owners. Growth and diversification were achieved, despite difficult trading conditions in competitive sectors. Therefore, it is not just the importance of MEBs to Scotland's economy which isrelevant, but also their potential contribution through strong business growth

Human capital and access to training

6.16 The baseline data analysis and the in-depth interviews suggest that MEB owners have limited formal management training but are younger and have less experience, than the white owners. However, MEB owners are often well qualified, as reported in Chapter 5, although their extent of management experience prior to start-up may be more limited. The baseline analysis suggested that the relatively low levels of access of formal management training could be treated as a policy issue.

6.17 However, the interviews indicated that, in general, there was a willingness to pursue education and training by MEB owners where this was available. It was suggested, in Chapter 5, that there maybe differences accounted for by access to opportunity and provision. For example, it was suggested that there may be greater awareness, access and opportunity in Glasgow compared to other areas in Scotland. The consultation revealed some support for this view and general support for limited access to adult training. For example, it was reported to the authors that minority ethnic groups do not access career training opportunities " as well as their white counterparts do". In some areas, specialist training and management development programmes have been introduced with good participation rates. For example, management development seminars run by Glasgow City Council are well attended through promotion from their minority ethnic business support programme. In other areas, in Scotland, the consultation revealed that there is less provision, being part of mainstream services and within mainstream agencies. This may explain the relatively low access and take-up, an issue that is recognised by some of the mainstream agencies.

6.18 Combining material from the interviews, from the consultation and from the baseline data analysis suggests that, where provided, management and additional training will be undertaken. However, there may be an issue in providing additional support to increase take-up. Additional management training was also something that was reported as a need by a number of MEB owners. The experience in rural areas as well suggests that training may be difficult to access, despite there being identified training needs. There may be a need to use additional communication methods in rural areas to reach MEB owners. This would suggest that initiatives to raise awareness of training opportunities and making provision relevant would be worthwhile, although it is recognised that Highlands and Islands Enterprise are well aware of such issues.

Financial capital and access to formal sources

6.19 The baseline data analysis indicated that MEBs as a group in Scotland do not access formal sources of finance to the same extent as either the white control group or comparative MEB groups in England. Hence, they were more likely to rely on informal sources of finance, such as finance from family and friends, than their white counterparts, relying on informal finance for a significant part of their start-up capital. However, as pointed out in Chapter 4, there are considerable ethnic differences with, for example, Chinese MEB owners being more successful in accessing formal sources of finance. The face-to-face interviews with MEB owners give support to a picture of relatively low levels of access of formal finance, albeit reinforcing a pattern of inequality through examples of successful access and utilisation as well as examples of avoidance of formal sources through reliance on personal and informal sources. The interviews did reveal that the banks became more important providers of finance after start-up, but overall the interviews confirmed a heavy reliance on personal and family sources.

6.20 More importantly, the interviews revealed a marked reluctance to approach the banks and other institutional sources of finance, for both start-up and development finance, even allowing for the well known tendency of small business owners, generally to rely on personal and internal sources. A number of sources, from the consultation, particularly by community leaders, were able to confirm this marked reluctance. Although as testified by a number of respondents, once relationships were established, and the initial reluctance was overcome, then MEB owners did not have " any more problems than white guys". The consultation with institutional providers revealed that there was certainly an awareness of this issue, but with limited attempts to reach into MEB communities. As indicated by respondents, the commercial banks and institutional providers " treat all business the same"; but the banks need to be more proactive, in some areas in Scotland, towards developing relationships with minority ethnic communities and their businesses.

6.21 The interviews revealed that for some minority ethnic groups, religious and cultural reasons prevent them from accessing formal sources of finance such as the commercial banks. Again the consultation revealed that institutional providers of finance are aware of such issues and would like to see Islamic Banking developments, which have been launched in England, introduced in Scotland. This is a development that the Scottish Executive could encourage with any discussions with representatives of the commercial banks.

6.22 Where specialised finance is provided, accessed by all small businesses, such as loan schemes, providers were dependent on referral from agencies or intermediaries. Therefore, a compounded result of the lack of engagement with support agencies, is low take-up by MEB owners. However, where there is strong contact with minority ethnic communities and with MEB owners, then take-up can be high. For example, a separate study undertaken by the authors for Glasgow City Council has indicated that a specialised MEB support programme was very effective at levering in additional sources of finance, especially from institutional as well as specialised sources (see Annex 4 and PERC, 2004). In Edinburgh, as well, strong links exist with local minority ethnic communities and MEB owners. Although support is delivered through mainstream agencies, the links that exist mean that there is a strong and active referral system to formal sources of finance. This is something that is suggested is lacking in some areas of Scotland. The PERC study of Glasgow City Council's MEB support programme suggested that financial incentives can be offered to encourage more MEBs to access formal and institutional sources of support (see Annex 4). This appears to be a more acute issue in Scotland than other areas of the UK.

6.23 The recent introduction of the Business Start-up Grant for young people (aged 18-30) should provide a significant welcome support for start-up MEB owners in this age range. The secondary data analysis, in Chapter 2, has indicated the younger demographic profile of the minority ethnic population in Scotland.

Social capital and access to formal sources of advice and business support

6.23 The importance of social capital was a key finding from the interviews. Conceptually, social capital refers to the ability of decision-makers, such as entrepreneurs, to draw on resources from their social networks (Lin, et al. 1981; Portes, 1998), or the ability to use resources from social exchange (Emerson, 1972). Such social networks may be based on a number of networks including family, community and organisational business networks such as local business clubs and business forums.

6.24 Chapter 5 revealed that MEB owners, as may be expected, are indeed able to rely on strong social capital from their family, friends and their communities. However, its role is both complex and variable, not always being beneficial and could act as both help and hindrance. For example, for 1 ^st generation MEB owners, strong social capital has played a powerful complementary role to that of informal finance. However, for some 2 ^nd generation owners it can operate as hindrance, particularly where the attitudes and ambitions of 2 ^nd generation owners can be different from their parents. This is a finding confirmed from the consultation phase of the study, where there was agreement that 2 ^nd generation owners have different attitudes to those of 1 ^st generation, in fact some were of the view that they tended to be very different. Other writers have suggested that 2 ^nd generation owners may be more willing to access formal sources of advice and support (see, for example, Baldock and Smallbone, 2003; CEEDR, 2000), but there wasn't strong evidence of this. There are clearly some policy issues that arise from these issues. For example, there may well be a specific support need where businesses transfer from 1 ^st to 2 ^nd generation ownership, the research suggests that support agencies need to be aware of such issues.

6.25 A more pressing problem, however, is the overall lack of engagement with mainstream, formal sources of support and advice. This is reported by the study with the baseline analysis. This is an issue throughout the UK, since the analysis showed that it is only marginally different in Scotland from other areas of the UK, although, as with other issues, there are marked ethnic differences with particularly low rates found with Indian and Pakistani business owners. However, the interviews confirm the bypassing of mainstream support agencies and the reliance on community sources for advice and support. Given the legal context, which places a duty on public sector agencies to ensure that minority ethnic groups are not disadvantaged, this means that the lack of engagement should be a major concern to policy makers.

6.26 The interviews provided greater depth and information on attitudes to formal sources of advice and support. It is suggested that these may be on different levels from a lack of awareness of their existence, to a level where awareness is high but sources are viewed, by MEB owners, as not relevant to their needs. In general, although views differed, the consultation provided some support for these overall general attitudes of MEB owners. However, the level of seriousness with which these issues were taken varied considerably. In some cases it was recognized that there were awareness and communication problems, but it was also felt that, because of concentrations of MEB owners in traditional sectors such as retailing and catering, that much of the constituency was therefore outside the reach and scope of support agencies .

6.27 The consultation also revealed a concern of some respondents in mainstream support agencies with an argument of "non-displacement" of support provision. An argument thatsupport and advice can only be provided, particularly with start-ups, where it involves non-displacement of existing businesses (for example in non-competitive emergent business sectors). Yet, as a counter-argument the Glasgow City Council's MEB support programme demonstrates that targeted support can be provided to traditional sectors without displacement effects by providing advice and assistance with diversification, innovation and business growth ( PERC, 2004).

6.28 It would appear that there is considerable scope for development of brokerage arrangements, which allow MEBs to access mainstream sources of advice, support and finance. Again, there was strong support for such developments from the consultation, although the support for a separate Minority Ethnic Business Forum was more lukewarm, but it is noted that this has been successful, in England, in providing a bridge between institutional sources of advice and support and MEB owners and in general raising awareness of such sources. It may be that an alternative initiative is required to provide such a bridge. However, such an initiative should be an imperative of Scottish Executive policy. The consultation further revealed that an awareness raising event is planned by Scottish Enterprise early in 2005. This will need to be followed up with additional initiatives that seek to put something more substantial in place that will meet the current gap in enterprise support provision for MEB communities in Scotland, as evidenced from the programme of interviews with MEB owners and discussed in Chapter 5.

Other issues

6.29 A number of other issues have been discussed in Chapter 5, these have included business and succession planning, diversification, insurance, crime and racism. These are distinctive additional issues facing MEBs in Scotland. Comments have been made on the nature of these and it has been noted that that there is no consistent pattern, but it has been observed that MEB owners are able to diversify and innovate even where there are acute and difficult trading conditions; where insurance, crime and racism can all be problems. The existence of these issues was supported by the consultation. Some local business communities and economies are dependent on the survival of MEBs for the vitality of their local economic development, sometimes this survival and vitality takes place within a difficult environment. In such cases additional initiatives may be required to recognise the local importance of MEBs, their contribution to diversity and to the local economy and to assist them to access mainstream sources of support.

6.30 Finally, the importance of the legal context cannot be underestimated. In particular, the Race Relations (Amendment) Act 2000, which came into force in April 2001, represents a significant overhaul of race relations legislation. The Act strengthens and extends the scope of the 1976 Race Relations Act: it does not replace it. Whilst the legal framework is complex, there are no variations in its applicability in Scotland compared to England and Wales. Some of the Act's new provisions are likely to have repercussions for support agencies and other stakeholders interested in the research on minority ethnic businesses. 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. Organisations will need to consider measures to eliminate any unlawful discrimination in the delivery of services, which will have implications for support agencies and other bodies engaged in delivering a service to minority ethnic communities. They will also need to make efforts to promote positive action as there is a general duty to promote equality of opportunity and good race relations. More specific details on the implications of the legal context to such measures that support agencies need to take, are given in the following chapter.

Summary

6.31 This chapter has incorporated the results from the consultation process undertaken by the research team, but has also provided an opportunity to synthesise findings from separate elements of the national scoping study. The main findings can be summarised as follows.

• The combined results demonstrate a strong theme of the diversity of minority ethnic enterprise in Scotland, which has been maintained in the face of increasingly competitive sectors, especially in retailing and catering. Although minority ethnic enterprise is characterised by locational and sectoral concentration, albeit accompanied by new and emergent sectors, it is also characterised by innovation and resourcefulness of MEB owners, with diversity as an important source of creativity and innovation. We suggest that such diversity, innovation and creativity of minority ethnic enterprise could be celebrated and profiled. However, it is recognised that steps have been taken to raise awareness and promote diversity, such as, events connected with the 'Fresh Talent' initiative. Also, the recent introduction of the young person's business start-up grant should benefit new start young MEB owners.

• On human capital and access to training, the combined results suggest that there is limited formal management training undertaken by MEB owners, although there is a willingness to pursue training where this is available. We suggest that additional communication methods might be explored as a means of increasing the relatively low take-up of formal management development and training by MEB owners.

• On accessing finance, the combined results indicate relatively low levels for MEBs in terms of formal finance, although it should be noted that there are inter-minority ethnic differences, with, for example, Chinese owners relatively successful at accessing formal sources of finance. An important finding is a marked reluctance to approach institutional sources of finance such as the banks, something that could be addressed through more pro-activity and focus on the development of relationships with minority communities in Scotland by the Scottish commercial banks. In addition, we suggest that the recent launch of Islamic Banking in some areas of England could be examined to see if this would be relevant to areas of Scotland.

• On social capital and access to formal sources of advice and business support, the combined findings indicated that MEB owners rely upon strong social capital through close networks with family and the minority ethnic community. A key issue, however, is the lack of engagement with mainstream providers of advice and support such as Business Gateway, with particularly low levels with Indian and Pakistani business owners. In some areas there is a basic lack of awareness, which could be tackled. For example, we suggest that there is scope for brokerage arrangements which will allow MEB owners to access mainstream sources of advice, business support and through referral formal sources of finance.

• Other important issues included business and succession planning, diversification, insurance crime and racism. These were all distinctive issues, which were found to face MEB owners in Scotland. Success of MEB owners in the face of many difficulties, including trading conditions, is testament to their resourcefulness.

• We also point out that the importance of the legal context through the terms of the Race Relations (Amendment) Act 2000 which places a new enforceable general duty on public authorities to promote equality and eliminate discrimination with implications for the provision and delivery of support.