Entrepreneurs from Ethnic Minority Backgrounds

When the Minister responds, can she give us the Government’s assessment of the lending practices of financial institutions to ethnic minority businesses, and say whether she sees real progress being made? It is welcome that between 2012 and 2018, over 11,000 ethnic minority entrepreneurs received Government-backed start-up loans. The additional action that is needed is largely for the financial services industry, but there is one area where Government action is particularly needed: public procurement. A big section of the report by the London Chamber of Commerce and Industry is devoted to this area, and it calls for a Government taskforce to work on increasing public procurement from ethnic minority businesses.

The LCCI wants the Government to move beyond merely “best endeavours” to introducing, for example, minimum target percentages for procurement from minority-owned businesses, in order to simplify procurement procedures and increase public purchasing from micro-businesses. It also wants tenders to be scored, in bid assessments, on supply chain diversity, and the Government to establish prestigious awards to highlight the achievements of minority-owned businesses.

In the LCCI’s report, a quote caught my eye from Demi Ariyo, founder of a funding platform:

“It became clear to me that there was a problem to be solved upon witnessing my church’s experience and hearing the first-hand experience of other minority ethnic entrepreneurs who had tried to seek funding.”

As the chair of the all-party parliamentary group on faith and society, I would like there to be greater support for entrepreneurship among people who are coming together in faith groups. Britain’s history is replete with great businesses that have their roots in religious faith. Let us have more of them, and newer ones.

My second point is about the lack of reliable data on ethnic diversity in business, which the report describes as “a recurring theme”. Here again, we need action by Government and by business. Companies House does not record the ethnicity of company directors. There is no legal requirement for businesses to publish their ethnicity pay gap, although they are rightly obliged to publish their gender pay gap. In 2017, the then Prime Minister, the right hon. Member for Maidenhead (Mrs May), promised to ask large employers to publish their ethnicity pay gap data. It has not happened yet. Can the Minister tell us whether that 2017 commitment still stands, and if so, when it will be implemented?

The paucity of data means that there is a lot that we just do not know. Without detailed and reliable data on ethnic minority entrepreneurship, we cannot fully understand the barriers that exist, as we must if we are to remove them. In this recession, the gap between ethnic minorities and others in business may well get worse. We need to grip this issue now, so that trends can be monitored and support appropriately targeted. We cannot meet the needs of minority-led businesses without having adequate information about their characteristics and their performance.

In the LCCI report, Dr Tony Matharu, chair of the LCCI’s Asian Business Association, and Lord Michael Hastings, chair of its Black Business Association, call for financial institutions to collect data about their support for ethnic minority businesses, as they do for women-led businesses under the Investing in Women code.

The two issues that I have highlighted are part of a much bigger set of challenges. When the Minister responds, can she assure us that the Government recognise the need, spelled out by the LCCI, for strategic engagement between the business community, Government and ethnic minority entrepreneurs?

The economic impact of ethnic minority entrepreneurs is far-reaching, with some estimating the contribution to the UK economy to be worth up to £25 billion. However, the crucial role of these businesses is much more than just economic. Their impact reaches much further than across the business ecosystem. As was mentioned, these businesses are most likely to invest in innovation, which is critical in helping us to achieve our ambitions around research and development investment and making the UK a science superpower. With more innovation comes improvement in productivity, so building on the potential of these businesses will be crucial to improving our productivity record.

What really matters to me is that these businesses operate in every region of the UK, including the most deprived parts. I doubt that East Ham is different from where I was brought up, Small Heath—an area often overlooked and underestimated. The efforts of black and Asian businesses are invaluable to ensuring that we level up across the country. Even more excitingly, these businesses are most likely to export, which puts them at the forefront of our efforts to harness global opportunities, which include our changing how we do business and diversifying our business models, especially now that we have left the EU.

Let me respond to some of the questions raised, starting with those about opportunities to access finance. Despite the impact of ethnic minority businesses, there is evidence to suggest that there are still barriers preventing them from reaching their full potential. Access to finance is regularly raised as one of the most significant issues holding those businesses back; there are reports of ethnic minority entrepreneurs keeping reservations about accessing financial assistance from traditional lenders.

As noted in the latest “Black. British. In Business & Proud” report from the Black Business Network and Lloyds Bank, 67% of black business people state that they have experienced some form of discrimination in their past entrepreneurial efforts, with only 40% trusting banks to have their best interests in mind. That has to change. The report’s recommendations rightly focus on improving the link between financial institutions, Government and the ethnic minority community as the best way forward. I will come back to some of the points raised to show how we are supporting ethnic minority entrepreneurs in accessing finance.

The issue of data was raised. In addition to the difficulties in accessing finance, the ongoing lack of data collection continues to inhibit funding opportunities for ethnic minority business leaders. Greater information sharing is crucial for bolstering our understanding of lending patterns, and this Government are committed to securing this transparency.

Since its launch in 2012, the Government-backed start-up loans programme has issued around 20% of its loans to black, Asian and ethnic minority businesses. The future fund has also approved 1,190 convertible loans, totalling more than £1.1 billion. More than half—61.6%, to the value of £683.5 million—of the convertible loan agreements approved have been for companies with management teams consisting solely of ethnic minority team members and those with both ethnic minority and white team members. This is promising progress, but, of course, there is no denying that we have much further to go.

As previously mentioned, we are also delivering actions 55 and 56, set out in the inclusive written report, which aim to support and encourage those from less-advantaged backgrounds to thrive—this is where I am thinking of those from my community of Small Heath and the community represented by the right hon. Member for East Ham. Through these specific actions, we will support ethnic minority entrepreneurs in accessing finance more effectively and becoming more productive.

The Procurement Bill includes a new duty on contracting authorities to have regard to the barriers facing small and medium-sized enterprises. Among other things, they must consider whether there is a diverse representation of businesses in the pre-market engagements. We are always looking to engage with ethnic minority business leaders and networks to better understand the issues facing them. There was a recent opportunity to do so: the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Thirsk and Malton, was asked to speak at the third anniversary reception for the all-party parliamentary group for black, Asian and minority ethnic business owners. The Department is dedicated to continued engagement with ethnic minority entrepreneurs through valuable events, including those hosted by the APPG, as well as through the ethnic minority business group, a forum that convenes bimonthly to discuss priority issues affecting entrepreneurs from diverse backgrounds to see how we can work together to find practical solutions.

Ethnic minority leaders want to see themselves represented in the business landscape. That could be through their mentors, or through wider representation in senior leadership positions. The value of visibility and its longer-term impact on entrepreneurs cannot be overstated. Through the Parker review, we acknowledged that building a fairer economy means ensuring that the UK’s organisations reflect the nation’s diversity. The latest figures show that the number of FTSE 100 companies with an ethnic minority director on their board has increased to 89, with 42 companies having exceeded the target. The progress made so far is encouraging, but I argue that we have much further to go. We look forward to those figures increasing further, to reflect the real diversity of talent in the UK.

A question was raised by the hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) on dealing with disability and other issues—I would expect that question from her, as she is the chair of the APPG for disability. Of course, that is another issue that we need to explore. The Father of the House talked about unkinking the pipeline of black talent, and I do not doubt that the Department will now be looking very closely at the report that he mentioned.

The right hon. Member for East Ham raised the Government’s update on the ethnicity pay gap data. As the Government have set out, ethnicity pay gap reporting continues to be voluntary. We will not be legislating for mandatory ethnicity pay reporting at this stage, but good firms, obviously, will want to make sure that their data is on record.

Again, I thank the right hon. Member for East Ham for introducing this important debate. Separately, I congratulate him, in his role as Chair of the Work and Pensions Committee, on today’s publication of the “Universal Credit and childcare costs” report. Affordable, accessible childcare is key to enabling parents to work and to increase their working hours; that is linked to today’s debate on entrepreneurial activity.

I conclude by reiterating the importance and the wealth of ethnic minority talent across the UK, which we are committed to nurturing and celebrating. On the one point that the right hon. Gentleman raised that I could not respond to, I will ensure that he is written to by the appropriate Minister with a formal response. I reiterate that we want to work closely with parliamentarians across the House, and with business and financial institutions to ensure that access is equitable. We want to improve our understanding of the issues faced, and to identify practical solutions that we can offer. I remind all colleagues from across the House that we are committed to bolstering the potential of ethnic minority entrepreneurs who, in turn, will help the UK economy to thrive.

I thank the right hon. Member for East Ham for raising this issue and, if I may be so bold, I wish you a happy Christmas, Mr Hosie.