The case for a policy change in favour of ethnic minority businesses

Mayank Shah discusses how government figures for SMEs and business ownership may be misleading when it comes to ethnic minorities.

There are over 300,000 ethnic minority-owned businesses in the UK, however the latest figures published by the Department for Business, Innovation and Skills (BIS) say that ethnic minority businesses make up just 5 per cent of all small and medium-sized enterprises (SMEs).

This figure may have come as a surprise to many, especially when compared to the 2015 Global Entrepreneurship Monitor (GEM) study whose figures indicated that those from ethnic minorities in the UK are three times more likely to be more entrepreneurial than those born in Britain.

But let us look at the bigger picture and why this contradiction in data is so important. The conflicting figures are almost certainly a reflection of the lack of data collected on not just ethnic minority businesses in the UK but business ownership as a whole.

Unlike the USA where the government uses an economic census every five years to measure and understand business performance and the wider economy, data on UK businesses ownership is not accurately recorded by Companies House or through an economic census.

SMEs are the key to economic growth and it has never been more important than now, in our post-Brexit Britain, to have functioning support measures for them.

To move forward we should be collecting and using economic data for the mutual benefit of all business and to shape policy around their economic growth.

As we see changes in population demographics then it is only logical that we will see changes in the make-up of businesses across the UK and Europe.

Corporations should spend more money with ethnic minority businesses

I believe it is crucial for large corporations to publicly commit to spending more money with small and medium-sized businesses including those owned by ethnic minorities, women and other underrepresented sectors, which is why our organisation and others like it are so important in setting a precedent in helping break down barriers to inclusion.

We drive inclusive procurement by actively connecting SMEs owned by ethnic minorities to public and private sector supply chains to achieve a long-lasting socio-economic impact.

The under-representation of ethnic minority businesses (EMBs) and SMEs in both the public and private sector supply chain not only restricts inclusive economic growth but deprives purchasing organisations of an alternative supply chain option that may bring new, innovative commercial solution.

The economic benefits of any procurement activity can only be felt by all if the sourcing processes of any purchasing organisations are inclusive, buying decisions have an impact on the local economy and on our local community.

Companies like Balfour Beatty, Cummins and Skanska are leading the way in inclusive procurement and should be recognised for their efforts to make supply chains competitive. Balfour Beatty was the first UK company to publicly commit to spending £1 billion a year with SMEs and one of the first to report spend with women-owned businesses.

As Aaron Reid, sustainable supply chain manager of Balfour Beatty explains, ‘We adopt positive and targeted action to overcome barriers to participation and supporting underrepresented businesses to win business and build capacity.

Small and diverse businesses may often lack the capacity to comply with the policy requirements of large corporations and so we help cut through the red tape by simplifying our pre-qualification process for low-risk SME suppliers.’

The evidence speaks for itself; my organisation MSDUK celebrates its tenth anniversary this year and we will hold our annual conference and awards celebrating the best of British business practising inclusive procurement.

Our network has seen entrepreneurs and innovators from outside of London showing the greatest vision, tenacity and inventiveness and businesses led by women from ethnic minority backgrounds showing the most significant demonstrable growth within the competitive marketplace in which they operate.

The UK public sector, including local councils and the central government, spends an estimated £353 billion purchasing goods and services every year.

Imagine the effect that this spend could have on SMEs and EMBs, but more importantly on the communities in which they operate.

Mayank Shah is the founder and CEO of Minority Supplier Development UK (MSDUK).

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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