Entrepreneurship in the United Kingdom
Overview TEA in the UK is about 6.3% of the adult population of working age, and although the level is not as high as Canada or the US, it is higher than Germany, Japan or Italy. Female entrepreneurial activity has increased slightly and the pattern is similar to that of overall TEA. The gap between male and female entrepreneurial activity has narrowed significantly from 42.9% of male entrepreneurial activity in 2003 to 46% of male entrepreneurial activity in 2004. Necessity entrepreneurship has halved in the UK since 2001 and now represents just 0.6% of the total adult population. Opportunity entrepreneurship has increased slightly and is about 5.5% of the UK population. Necessity entrepreneurship represents just 11% of all entrepreneurial activity in the UK compared to nearly 16% in the US. Informal investment activity has fallen in the UK as elsewhere. However, although the numbers of people expecting to start a business has fallen in the US, Germany and Japan, they have increased significantly in UK.
UK culture Cultural attitudes towards entrepreneurship are strong. More people in the UK in 2004 saw good opportunities (35.9%), knew an entrepreneur (27.6%) and thought they had the skills to start a business (51.7%). Fewer people would let fear of failure prevent them from starting a business (32.9%). There has been a constant increase since 2002 of individuals expecting to start a business over the next three-years from 4.6% to 9.5% in 2004. However, there does still appear to be something of an issue around fear of failure which is about 32.9%.
Entrepreneurial people Age: Total entrepreneurial activity is highest in the 35-44 age group at 7.9%. Male entrepreneurship is 10.7% of the adult male population in this age group while female entrepreneurship is 5.9% of the adult female population. Education: All educational groupings (with the exception of Master’s and PhD level) in the 18-24 year old age group have higher numbers of individuals answering positively to the question, “Do you expect to start a business in the next few years?”. In the younger age groups, 18-24 and 25-34, it is individuals with degrees of any kind who are most likely to know an entrepreneur, see opportunities and to think they have the skills to start a business. However, in the older age grouping, people with postgraduate qualifications are far more likely to see opportunities than those with Bachelor’s degrees.
Female entrepreneurship: Women are half as likely to be involved in either independent or job related start-up activity as men. Ethnic minorities: People from White or Mixed ethnic backgrounds are the most likely to be involved in start-up activity using technology that was not available a year ago. All other groups score very low indeed. However, for own-rmanaged businesses, Indians and other Asians are the most likely groups to be providing a good or a service based on technology that was not available a year ago.
Entrepreneurial businesses High growth: On average, a high growth entrepreneurial start-up will expect to grow by 400% in terms of sales turnover within a three-year period. Technology: As a percentage of all start-up businesses, 18.6% said that they were using or supplying new technology in 2004, compared to 11.3% in 2003, while 15% of owner-managed businesses in 2004 were using or supplying new technology compared to 9.9% in 2003. There has been a sizable increase in the numbers of technology start-ups and own-rmanaged businesses across all regions of the UK since 2003. An average of 43.8% of all start-ups in the UK are providing a good or a service that is new to some or all customers and 21.4% of owner-manager businesses have introduced in the last year a product or service that was new to the market.
Social entrepreneurship Overall in the UK some 4.7% of the population is setting up a socially oriented entrepreneurial activity while 6.9% are owning, running or managing a socially oriented organization. Women are more likely to be involved with starting up socially oriented activities, but are less likely to be owners or managers of a social venture. The Social Entrepreneurial Activity rate is three times higher in the 35-44 year old age group compared to the 18-24 year old age group.
Entrepreneurial impact The role of the founding entrepreneur is both measurable and very important in generating higher growth and productivity in start-up businesses. This suggests that entrepreneurs themselves do have a big impact on the overall productivity and performance of an economy. The majority of entrepreneurial activity takes place in the Business Services sector that accounts for some 27.1% of all entrepreneurial activity in the UK. However, health, education and services have a relatively high TEA rate at 14.4% of all entrepreneurial activity. The figures for retail and mining and construction are 13.8% and 12.3% respectively. Entrepreneurial activity is lowest in manufacturing at 4% of the total TEA for the UK in 2004. There has been no change of the numbers of jobs that owner-managed businesses create or expect to create. Start-ups in the UK tend to be rather undercapitalized, but as they grow, they tend to increase the level of capital intensity relative to people and reach a threshold of efficiency and competitiveness quite quickly. There is an exception to this however: New technology firms tend to rely on more capital-intensive methods at the start-up phase. The median turnover now has increased between 2003 and 2004 by £10,000.
Finance The median start-up finance required by an entrepreneur is £10,000 of which he or she will invest £7,000 of their own money to begin the process. 56.4% of men and 62.7% of women say that fear of lack of finance would prevent them from starting a business and this demonstrates how important appropriate finance is, even at this relatively small scale end of the market. Friends and family and bank overdraft are the most likely sources of external finance used by both men and women.
Entrepreneurial culture 9.5% of people will consider setting up a business over the next few years, some 7.2% have considered setting up a business recently and 7.6% will consider it in the future. Fear of debt is the single largest barrier to entrepreneurship for both men and women, although women are significantly more fearful of this than men. The second biggest barrier is age, and again the differences between men and women are significant with women far more likely to use this as a reason for not starting a business than men. 14.5% of the population say they have no interest in starting a business. The biggest single driver for men and women is to make more money with 44.3% of women and 48% of men answering positively to this question.
• Slight decline in total entrepreneurial activity in 2006, from 6.2% to 5.8%, but drop was not as large as those of other countries such as US, France, Germany, and Canada.
• SouthWest of the UK was the area with most entrepreneurial activity in 2006 at 7.6%.
• Scotland, Northern Ireland, Yorkshire and Humberside have TEA score significantly lower than the UK average.
• UK has one of the lowest ratio of female established business ownership compared to TEA of the G8.
• Levels of entrepreneurial activity highest among 35-44 age bracket.
• There is broad governmental support for entrepreneurial activity in the UK as it aims to close the productivity gap with the US
• Median amount of money required to start a business was £10,000. For men the figure was £15,000, and for women it was £7,250.
• Opportunity entrepreneurship accounts for 82% of all activity – it is 83% in US, and 84% in Canada.
• Regional considerations – SouthWest of the UK is most entrepreneurial with 7.6% of the adult population involved in entrepreneurial activity
• In London, it’s 6%.
• Most popular form of start-up financing is a bank overdraft (low interest loan)
United Kingdom Entrepreneurship Monitors
Global Entrepreneurship Monitor Country Report 2006
East of England
United Kingdom Entrepreneurship Websites
British Entrepreneurship Funding & Finance
Angel Investor Magazine
British Venture Capital Association
The Capital Fund
Top Technology - Early stage venture capital
VCR Directory – A searchable database of information on 3,000 investors
3i - Venture capital and private equity for start-ups
YFM Group – Small company investment specialists
Beer and Partners
Guide to Grants and Government Supports for starting a business
Guide for Borrowing Money
British Women’s Entrepreneurship
United Kingdom Entrepreneurship Articles
In Britain, “Entrepreneur” Is No Longer an Insult
Starting a business without bank support
30% of the UK wants to start their own business
UK entrepreneurship is booming
Angel Investing takes flight again
Why it’s a great time to start a new business
How new firms can thrive in the recession
How start-ups can survive the economic downturn
Why it pays to research your business sector
United Kingdom Business Websites
Her Majesty’s Revenue and Customs Service
British Council – Encourages Investment in the UK
UK Trade and Investment Organization
Association of British Chambers of Commerce, International Division
London Chamber of Commerce
Regional Development Authorities
East of England
Invest in Northern Ireland
Invest in Wales
Scotland Trade International
The London Development Authority
Yorkshire and the Humber Region
British American Business Association
Association of British Chambers of Commerce, International Division
British Standards Institute
Confederation of British Industry
British Exporters Association
London Stock Exchange