Posted: Wed 28th Sep 2022
The UK saw a significant rise in the number of people starting a business or making plans to launch one in 2021 as COVID-19 restrictions were completely removed.
That's the latest findings of the annual Global Entrepreneurship Monitor (GEM), which surveys 150,000 people in 47 countries including 10,000 in the UK.
It said that UK early stage entrepreneurial activity rose in 2021 compared to 2020 when lockdown measures were in place. One in three working age individuals were starting or running a business or intended to launch a company within the next three years, researchers said.
The UK's 11.5% early-stage entrepreneurial activity rate in 2021 was the highest level since the annual survey began in 1999. It was "statistically significantly higher" than Germany (6.9%) and France (7.7%) but lower than the US (16.5%).
Mark Hart, deputy director of the Enterprise Research Centre and professor of small business and entrepreneurship at Aston Business School, said:
"In 2020 we saw a collapse of early-stage entrepreneurial activity as many decided to delay their move into setting up their own business in the face of the most severe economic downturn in 300 years – but within 12 months it has bounced back.
“The GEM survey, undertaken in the middle of 2021, showed a sharp rise in the number of individuals in the early stages of setting up a new business compared to even the pre-pandemic high in 2019. It is now at the highest level since the annual survey began in 1999 and is an indicator of the entrepreneurial resilience of the UK."
'Historic high' for women starting a business
There was a sharp rise in the number of women setting up new businesses in the UK in 2021, the report found. Almost one in 10 adult women were in the early stages of starting up which is "an historic high".
The ratio of female-to-male entrepreneurship rose to 73%, up from 69% in 2020, which researchers said shows "the resilience of female early-stage entrepreneurial activity in the midst of the most severe economic crisis in 300 years".
The female total early-stage entrepreneurship rate (TEA) in 2021 was 9.7% compared to 13.2% for males. Both rates were significantly higher than in 2020 (9.0% for males and 6.1% for females) and higher than in France and Germany but lower than in the US.
"In most high income countries, females are around two-thirds as likely to be early-stage entrepreneurs as males, and this was the case for the UK in 2021," the report said. "Therefore, in 2021 it is no longer valid to state the long-held mantra that women are only half as likely as men to be early-stage entrepreneurs."
The proportion of 55-64 year-olds starting a business in the UK nearly doubled, going from 3.2% in 2020 to 7.4% in 2021. The study claimed the change might be explained by the 'Great Resignation' which saw older individuals re-evaluating their careers following the effects of COVID-19 on the labour market.
Entrepreneurial activity among the non-white population was 20.4% in 2021, compared to 10.1% for ethnic white entrepreneurs.
Entrepreneurial attitudes and aspirations
At 47%, the proportion of those who saw opportunities in their area to start a business in 2021 was higher than the 32% in 2020 which reflects the economy beginning to recover after the COVID-19 crisis.
On the downside however, the share of those who believed they had the skills, knowledge and experience to start a business was 39% and down on the 44% recorded in 2020, while the proportion of respondents held back from starting a business by a fear of failure was 58% in 2021, up from 53% in 2020 and 46% in 2019.
Perceptions of entrepreneurship among non-entrepreneurially active individuals in the UK home nations (%), 2021 (Source: GEM UK APS 2021).
Entrepreneurial conditions and support
To provide an overall view of how favourable an environment is for entrepreneurial activity across countries, GEM introduced the National Entrepreneurship Context Index (NECI) in 2018.
Countries are scored on a range of factors including provision of start-up finance, government small business policy, entrepreneurial education in schools and the quality of physical infrastructure.
An score below five indicates that experts regard the conditions for entrepreneurship to have room for improvement.
The UK was ranked 18th overall with a score of 4.9:
Entrepreneurial Framework Conditions and NECI in the UK in 2018 to 2021.
The top 20 countries were:
United Arab Emirates 6.8
Saudi Arabia 6.1
South Korea 5.7
United Kingdom 4.9
Andrew Harrison, managing director of business banking at NatWest, said:
"The resilience of small businesses over recent years is both inspiring and important. As the economy faces significant turbulence in the year ahead, it is critical that the UK has a thriving ecosystem to support this boom in entrepreneurship, which is central to economic stability and growth."
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