CHAPTER SEVEN CONCLUSIONS
7.1 This study is the first systematic and comprehensive national study on the distinctive importance of MEBs in Scotland. It was noted in the introduction that this was an omission, since the important contribution of MEBs to the UK economy has been recognised for some time (Bank of England, 1999). The study has used a combination of research methods; secondary Census data analysis, quantitative analysis of baseline data, qualitative interviews and extensive consultation. The extent of this study provides an opportunity, for the Scottish Executive and other agencies, to take forward implications from the main findings and some of the policy measures that could be considered from the main conclusions, are identified. In addition, an indication of areas for further research are provided. It is important to realise that, although the scope of the study has been extensive, the nature of the study is still one that has identified issues, rather than provided a full in-depth investigation. The previous chapter has interpreted and integrated the main findings and this chapter builds on this to identify the main conclusions.
The importance and diversity of minority ethnic enterprise in Scotland
7.2 Minority ethnic enterprise in Scotland accounts for a little over three per cent of all self-employment and there are likely to be over 4,500 registered MEBs, contributing an important share of Scotland's GDP. It is estimated this is in the range of £500 to £700 million for 2001 (see previous chapter and Chapter 3 for explanation). Although such a contribution to GDP is important, it is the diversity of minority enterprise that is vital to Scotland's economy. The highest rates of self-employment were in the Pakistani, Chinese, Indian and Bangladeshi communities respectively and the highest geographical concentrations were in Glasgow and Edinburgh. In Glasgow alone, for example, it is suggested that there are over 1600 VAT registered MEBs. However, it is also indicated that MEBs are also important to maintaining diversity in other locations, especially areas of the Central Belt, contributing to local economic development. In rural areas, such as the Highlands, the role of minority ethnic enterprises is still important, helping to diversify and enrich local rural economies, although it is recognised that delivering business support effectively to MEBs in rural areas and areas of low minority densities is more challenging than in an urban context.
7.3 Although there is evidence of diversification, with strong representation of MEBs in new and emergent industrial sectors such as ICT, telecommunications, media and leisure, the database analysis indicated that Scottish MEBs are still more concentrated in the traditional sectors of retailing, wholesaling and catering than their counterparts in England. The interviews revealed that even in traditional sectors, MEB owners were resourceful, were still prospering, being able to innovate and diversify. However, it is still the case that Scotland is dependent for cultural and ethnic diversity on MEB owners that are both geographically and sectorally concentrated. The continuing vitality and diversity of MEBs will be crucially significant for Scotland's economy. Demographic trends indicate a significantly ageing population for Scotland ( GROS, 2004), it is important that the younger age profile of minority ethnic communities is able to contribute to economic development through the achievement of potential entrepreneurial development. This will mean encouraging both diversification of sectoral concentrations and ensuring engagement of new start MEBs with appropriate and relevant support. This emphasises the importance of policy initiatives focused on diversification. Further investigation and consideration should be given to the ways in which diversity programmes run by supply-side agencies such as Scottish Enterprise can potentially contribute towards the diversification of minority ethnic businesses into different sectors.(for example, see Ram M. and Smallbone D. 2003).
7.4 Without being contradictory, it is concluded that the diversity of minority ethnic enterprise is also important in Scotland. For example, MEB owners are represented in a considerable range of different sectors, are operating in global markets and achieving significant business growth. The pattern of MEB ownership is dynamic and diverse. The dynamic nature of this pattern is reflected in the importance of younger 2 nd generation owners. The baseline analysis indicated a younger age profile for MEB owners compared to their English counterparts. Where there is inter-generational transfer of ownership, this may mean particular support needs.
7.5 The Scottish Executive and other agencies will need to recognise the dynamic pattern and diversity of MEBs. Discussion, previously in Chapter 6, has indicated the potential of policies seeking to exploit the links between diversity and competitiveness through innovation and creativity (Smallbone, et al. 2003; CEEDR, 2000). Also, as indicated in the previous chapter, MEBs cannot be treated as having homogenous needs, however, some issues deserve particular attention; these include access to finance.
Access to finance
7.6 It is concluded that there is comparatively low access to formal sources of finance by MEBs in Scotland. This was indicated by the baseline data analysis when compared to MEBs owners in England and when compared to a white control group. The reliance on informal and personal sources of finance was particular high, although there were ethnic differences with Chinese owners less reliant on such sources. There is a marked reluctance to approach banks and institutional providers of formal sources of finance, although it is commented that once relationships were established there is little reporting of any dissatisfaction with the commercial banks. Take-up of targeted financial schemes was also low, for example with micro-credit or loan funds that might have MEB owners as users. In some cases, religious and cultural reasons were cited for the avoidance of institutional sources of finance such as the commercial banks. Even allowing for such factors, however, the conclusion is that there is a low take-up of formal and institutional sources by MEB owners in Scotland.
7.7 This should be of concern to the Scottish Executive and the commercial banks. It is suggested that it is an issue that may be compounded by the lack of engagement by MEB owners with mainstream support (and other agencies) that could act as a referral mechanism for such sources of finance. There appeared to be a lack of intermediaries between agencies, the banks and minority ethnic communities that would provide a means of building the trust that is required to establish relationships with the commercial banks, at present that trust is noticeable only by its absence.
7.8 It is recommended that experience from the Glasgow City Council's minority ethnic business support programme is examined for lessons that can be learned for building trust and developing initiatives that can lever in additional sources of finance with MEB owners (see Annex 4). Separate interim evaluations of this support programme have demonstrated that formal sources of finance will be used by MEB owners when trust is established through the intermediary role of business advisers employed on the programme acting as a referral mechanism ( PERC, 2004).
Access to support, advice and training
7.9 Traditionally, minority ethnic communities have had strong local networks, which have provided resources both financially and socially. It has been noted that the strong local networks that provide informal finance for MEB owners also provide social capital, or informal sources of advice and support. The interviews have confirmed that the local minority ethnic communities are important for sources of finance and advice and support. There are many dimensions to such resources and it has been noted that strong social capital may not always be beneficial (as is assumed in much of the previous literature). It is concluded that in Scotland, like other areas of the UK, such informal sources of support, advice and finance have been important to the development of minority ethnic enterprise.
7.10 Therefore, the lack of engagement with the formal mainstream sources of advice and support such as Business Gateway is perhaps not surprising. The baseline analysis indicated similar levels of non-engagement compared to MEB owners in England. Although it is possible to argue that the lack of engagement may not matter for some MEB business owners, as only a minority of all business owners will utilise such sources of advice and support, the issue is still important since it will affect the potential of the minority of MEB owners that could benefit from such sources of support. In addition, those that could benefit are the potential growth businesses from the MEB community, particularly those engaged in diversification into new and emerging areas of business activity. It is important for Scotland's economic performance and productivity that these business owners do engage with public sector sources of support, so that they can achieve their potential.
7.11 There are different dimensions to this non-engagement. These dimensions include a lack of awareness of sources of support and advice to deliberate strategies to avoid engagement. The former could be tackled by profiling and the use of additional means of communication, making messages relevant to local minority ethnic communities. The latter requires the building of trust with local minority ethnic communities in the same ways that are required to build relationships with formal sources of finance, such as the commercial banks. The key policy issue for the Scottish Executive and the Enterprise Networks, therefore, is the development of initiatives that improve communication and engagement with MEBs, partly through initiatives that provide incentives, such as targeted procurement policies, and through the need to develop links with community leaders or with organisations that represent MEB owners.
7.12 One of the gaps in Scotland, is a recognised voice for MEB owners and their communities. Although there was lukewarm support for the development of a Scottish Minority Ethnic Business Forum, a representative organisation, so long as it is embedded in minority ethnic business communities, should be encouraged, such as the proposed Scottish Institute for Asian Businesses. It may be noted here, that we describe support as lukewarm mainly because opinions, where they were given by MEB owners, were not consistently supportive, as some felt that such a body might have narrow interests. Any initiatives to raise profile will need to work in conjunction with representatives of local minority ethnic communities to provide the bridges to build trust. These are complementary to the initiatives that are required to build trust with the commercial banks. Taken together they will start to close the support and finance gaps that currently exist for Scottish MEBs, as mentioned in the previous chapter, they should be a priority of policy.
7.13 A further related policy issue is that there is a low take up by Scottish MEB owners of formal sources of management training and they have lower rates of formal management qualifications and training compared to equivalent MEB owners in England. Therefore, a further benefit of initiatives to build trust with MEB owners and their local communities, that could be expected, is the greater take-up of formal sources of training. It should be remembered, of course, that small business owners in general have a low take-up of formal sources of training. However, it is also noticeable that where strong relationships have been built with MEB communities, sources of management training such as management development seminars will be well attended. As mentioned in the previous chapter, initiatives to raise awareness of training opportunities, making provision relevant and using additional communication methods, in relation to these, would be worthwhile.
7.14 The legal context, mentioned in the previous chapter, means that there is a general duty to make the promotion of racial equality central to the work of public authorities. This means that the affected organisations must take account of racial equality in the day-to-day work of policy-making, service delivery, employment practice and other functions. Support agencies will have to consider whether they are doing enough to help MEBs. Specifically they will have to consider whether they understand the issues intrinsic to MEBs and whether they have the resources to meet the requirements of such businesses. They should also be able to provide the right advice when approached by MEBs and that they are making enough of an effort to engage with MEBs.
7.15 In order to meet their general duty under the law, support agencies and their associated bodies may have to consider whether they have enough diversity in their workforce, e.g. personnel who can speak minority ethnic languages and can communicate with ethnically diverse clientele. Organisations such as Business Gateway and Scottish Enterprise will have to review their recruitment and selection policies and in line with legislative requirements, introduce ethnic monitoring (if not already in place) and have a coherent action plan to promote equality of opportunity in the delivery of services. This may also require a reassessment of the current equal opportunities policy of organisations and the extent to which they should provide some kind of race awareness training for their staff.
Additional issues
7.16 This study has identified a number of additional issues including:
7.17 The nature of succession planning. Many MEBs are family businesses, where these are in traditional sectors there may be a reluctance of the 2 nd generation to continue in the family business which raises a succession planning problem. In addition, in some cases there are different attitudes of the 2 nd generation even where they wish to continue with the family business. Although there will be similar issues in family businesses generally, the nature of such issues will be different with MEBs and may require specialised advice and support.
7.18 The remaining concentration of MEBs in traditional sectors and the need for diversification. Although it has been noted that MEB owners have shown resilience and innovation in traditional sectors, there are still areas of support needed to achieve diversification. Although these sectors are perceived to be ineligible for support, such as retailing, it should be possible to provide advice and assistance drawing upon successful examples of diversification or providing assistance with feasibility studies. The Glasgow MEB support programme has managed to provide assistance of this nature to help MEBs in traditional sectors achieve diversification and ways of making such experience and practice more widely available should be undertaken.
7.19 Marginalisation of MEBs in some localities, trapped in hostile trading conditions that exist in difficult environments. It has been noted that the geographical distribution of MEBs is very uneven. Likewise so is the pattern of MEB experience and trading conditions. Some MEBs are in new sectors, niche and expanding global markets and achieving business growth. By contrast there are also examples of MEBs operating in marginal economic environments with limited local markets, where there are high crime rates and overt racism against the owners. Thus the nature of any intervention and support has to be very different. The latter category probably needs co-ordinated and targeted assistance from a range of organisations to ensure that trading conditions improve and assistance is provided to achieve breakout of marginal conditions. However, the concern of MEB owners in such environments could provide an opportunity for a policy initiative targeted against crime and racism, this would provide an incentive for MEB owners to engage with providers of public sector support and advice. An examination of policies designed to improve local trading environments through holistic approaches could be examined from elsewhere in the UK.
7.20 The nature of MEB experience in rural areas. MEBs in rural areas are important, as in urban areas, for their contribution to local economies and to cultural diversity, especially in the context of demographic issues. Yet they are virtually invisible in terms of assistance and profiling. Their needs are different, they do not have the advantage of strong networks and strong social or informal sources of financial capital, therefore, they may be more self-reliant and may require specific assistance. In rural localities, new MEBs can provide additional variety and diversity in the local environment that can attract additional wealth into such areas through increasing local economic diversity, tourism and trade. Arguments of non-displacement in policy, made by respondents in the consultation phase of this study, should not be allowed to prevent assistance to new start MEBs. Indeed it should be a part of the policy of agencies in such areas to attract greater numbers of MEBs. For example, Smallbone and Baldock in their study of MEBs in rural Devon and Cornwall concluded that the majority of MEBs operated in sectors that were relevant to tourist-related activities and that the ethnic diversity of cuisine and culture should be an element of a tourism strategy for the sub-region. They recommended that MEBs should be actively encouraged to take part in a range of initiatives to develop and promote the tourist sector (Smallbone and Baldock, 2003).
7.21 Agencies in rural areas, especially bodies such as VisitScotland, should profile ethnic diversity as a positive tourist strategy. As an illustration, award winning restaurants in the East of Scotland were identified through undertaking this scoping study. It is a pity that such success, in localities not readily associated with MEBs, is not celebrated and profiled more widely. However, it is recognised that there are more difficulties for the LECs in rural areas and Highlands and Islands Enterprise in developing effective strategies for the delivery of support.
Areas for further research
7.22 A number of areas for further research and monitoring arise from this study including:
7.23 Quantitative data collection on the importance and pattern of MEB owners in local economies. This should be conducted on a Local Enterprise Company basis so that each LEC can determine the profile of ethnic diversity in each locality. This should be accompanied by the sharing of experience by all LECs and with centres of expertise in MEB support agencies from Glasgow and Edinburgh. This could be done perhaps by a specialised unit within Scottish Enterprise (or for the Enterprise Networks) to disseminate information to individual LECs and Highlands and Islands Enterprise. Such a specialised unit, if established, could be tasked with developing approaches that would enable the more complete participation of MEB owners with the mainstream providers of support and finance. It has been suggested earlier, that this may be achieved by working closely with a representative body such as the proposed Scottish Institute for Asian Businesses or a Scottish Minority Ethnic Business Forum, although care should be taken not to duplicate provision.
7.24 Although diversity is a feature of Scotland's MEBs, nevertheless, concentrations of MEBs in traditional sectors have also been highlighted. Therefore, there is a need to investigate methods of successful diversification that can inform support policy in this area. There is a need for further research to examine ways of achieving diversification focusing on (i) supplier diversity and (ii) assessing scope for diversity being developed as a source of competitiveness for the Scottish economy.
7.25 An investigation into improving the relationships between sources of advice, support and finance, which could provide additional information on appropriate mechanisms that can build bridges with minority ethnic communities and their businesses.
7.26 Further qualitative and longitudinal research to capture the dynamic aspects of business development with MEB owners in different sectors. The research could investigate the nature of inter-generational ambitions and succession planning.
7.27 In particular, the dynamic nature and changing role of social capital and its distinctive nature for MEBs could provide an important strand of research. This would help to inform agencies how best to build bridges and trust with local minority ethnic communities. The relationship between formal and informal sources of both finance and advice, whether they are substitutes or complementary, is a key area for further investigation.
7.28 A related strand with this research would be the nature of human capital and the management training and development needs of MEB owners in different sectors. A training needs analysis ( TNA), with selected MEBs, could help to determine the nature of management development seminars and assistance, perhaps drawing on experience from the Glasgow City Council support programme.
7.29 An investigation into the nature of marginalisation of MEBs in difficult trading conditions. Such an investigation could identify mechanisms that will assist break-out into wider markets and identify policies that could provide some security and protection for existing MEB owners operating in difficult and marginal trading environments.
7.30 The nature of MEB development in rural areas of Scotland should be investigated further through additional qualitative and case study research to determine the extent of integration and/or isolation of MEBs and their associated special needs.
7.31 Finally, monitoring and evaluation of existing and planned initiatives will be required that may be targeted at MEB owners.