Key findings:

• 61 per cent of UK EMBs are planning to grow, compared with 43 per cent of all SMEs
• EMBs are more likely to trading overseas when compared to all SMEs
• Staffing issues are key to holding back EMB growth, as 30 per cent describe themselves as struggling
• 60 per cent of EMBs have a high level of trust in their bank

UK Finance and BVA BDRC have today released their Ethnic Minority Businesses Report, looking at sentiment among ethnic minority owned businesses (EMBs) in the UK.

The report demonstrates the high-level of ambition held amongst EMBs in the UK. The research shows 65 per cent of EMBs have ambitions to be much bigger, and 73 per cent are prepared to take risks. Almost 6 in 10 EMBs have ambitions to be both much bigger and take risks, significantly higher than for SMEs overall (27 per cent).

When surveyed EMBs were also more likely to be actively planning to grow (61 per cent v 43 per cent of all SMEs). They were more likely than most to be taking on more staff (37 per cent v 22 per cent of all SMEs) or developing a new product or service (24 per cent v 17 per cent of SMEs).

EMBs are also more likely to be trading overseas (23 per cent v 19 per cent of all SMEs) and, amongst those with employees, to employ staff from overseas (20 per cent v 11 per cent of all SME employers). Meanwhile, 12 per cent were planning to sell more overseas (v six per cent of all SMEs).

However, like a lot of businesses EMBs are facing challenges amid a difficult economic outlook. 30 per cent are worried about the economic climate and 43 per cent saw increased costs as a future barrier to growth.

These concerns are reflected in the financial situation of UK EMBs. In the 18 months to Q2 2023, EMBs were somewhat less likely than SMEs overall to have made a profit (56 per cent v 75 per cent of all SMEs).

EMBs are more likely to describe themselves as ‘struggling’ (30 per cent v 18 per cent of SMEs overall), and while 33 per cent of all SMEs felt they are ‘well off / comfortable’ this was the case for 18 per cent of EMBs. This may in part be due to the fact that the majority (79 per cent) of EMBs interviewed were small and young businesses.

Staffing issues are seen as a blocker to future growth for EMBs. In the 18 months to Q2 2023, 20 per cent of SMEs with employees saw the recruitment and retention of staff as a major future barrier to their business, a concern that has risen steadily over recent years.

Encouragingly, 60 per cent of EMBs have a high level of trust in their bank, compared with 59 of SMEs overall. Meanwhile, 40 per cent of EMBs reported using external finance in the 18 months to Q2 2023.

Where ethnic minority led businesses have faced issues with access to finance, the report found this is often due to credit issues and affordability.

The financial services sector has a wide range of options available to help EMBs meet their ambition for growth. UK Finance is encouraging ethnic minority businesspeople to speak to lenders to find out about the range of options available to them. These include mentorship programmes, resource hubs, and events designed to boost ethnic minority entrepreneurship in the UK.

Moreover, a number of individual firms within the financial services sector have introduced initiatives to promote diversity, within their own organisations and the wider economy.

David Raw, Managing Director of Commercial Finance at UK Finance said:

The ambition for growth is clear amongst ethnic minority business leaders, and lenders are here to help all entrepreneurs develop and take their businesses to the next level.

Ethnic minority owned businesses contribute a huge amount to the UK economy, but like lots of businesses they have been facing a host of challenges over the last few years. Financial services firms want to help them overcome challenges, realise their potential and foster inclusive growth.

Shiona Davies, Director at BVA BDRC and Editor of the SME Finance Monitor said:

BVA BDRC is delighted to have produced this independent analysis of SME Finance Monitor data, looking into sentiment amongst ethnic minority owned businesses. They are a critical element of the UK economy and, while they face challenges, our data shows they have a strong desire for growth. We believe our work will help inform the financial services sector as they seek to provide further support for ethnic minority businesses up and down the country.