Women in the UK are just half as likely to start a business as men. The gap is twice as wide for younger women; when women have the choice, they don’t often choose enterprise and the aversion starts early.
Enlightened policy can and does make a difference. There was a steady increase in the rate of female enterprise during the Labour Governments of 1997-2010, supported by enterprise policy which aimed to take account of the specific needs of women. And in the USA, sustained affirmative action policies introduced in the 1970s and 1980s are credited with bringing a generation of women into business ownership.
The move to greater enterprise being pursued by the coalition government, by contrast, is strictly hands-off and gender blind. Female labour market statistics currently resemble a roller-coaster ride, with ferocious peaks and troughs. Female unemployment is at its highest since 1988; women make up almost all recent redundancies; and there’s been a 10% hike in female self-employment since 2009. Those facts are not unrelated and they have little to do with choice and liberation.
The weak level of female entrepreneurship is a critical economic and social issue for the UK. Its improvement is important for growth and competitiveness and also increasingly for social innovation and cohesion. So, how could Labour steer a path to enterprise that is positive and sustainable for women and our economy, rather than the coalition course: nasty, brutish and short?
The rate of female self-employment gradually increased during the Labour Governments of 1997-2010. To some extent this was enabled by considered Government strategy, with women-friendly approaches implemented across much of Government-funded business support.
Considerable funds were invested in research, supporting pilot projects and working to ensure that mainstream business support was equally accessible to women. Female clients increased from one fifth to one third of Business Link clients. New Labour’s approach meant women weren’t further left behind, but lack of boldness meant that they didn’t move as far forward as they could have.
While at an intellectual level, New Labour got the importance of enterprise to growth and competitiveness, its bold policy to stimulate this entrepreneurial activity was Business Link, a top-down state-led initiative. The irony and ineffectiveness of start-ups and entrepreneurs being supported by salaried quasi-civil servants was clear. While Business Link did evolve to become a brokerage service, which managed and evaluated a dynamic network of private and non-profit providers, Labour ultimately reverted to central control, imposing a rigid framework of centrally approved ‘products’ which it would support.
Labour also never quite believed in self-employment as an alternative to paid employment for the unemployed. The various welfare to self-employment routes introduced by New Labour were characterised by impossible bureaucracy, complexity and timescales. As a result take-up was very low. Tweaks to the system over the years resulted in successively lower numbers being supported into enterprise with each new scheme. But of those who managed to get over the hurdles, two-thirds were still in business a year later.
For women, the need was more pressing, with one in five women entering self-employment from unemployment, compared to around one in fifteen men. Despite this, only 17% of those accessing the New Deal for Self-employment were women. Welfare to work was focused on a traditional model of male unemployment and full-time employment. Most women start businesses part-time and at a more tentative and gradual pace; they did not begin to fit into Labour’s welfare to self-employment programmes.
New Labour tried hard to build a national enterprise culture, investing in enterprise education in schools and universities and supporting campaigns like Global Enterprise Week. Despite this, there’s been a decline in enterprise aspiration among young people, perhaps a wider symptom of global recessions. Male and female students are equally likely to participate in school enterprise education, but males are 50% more likely than females to be interested in starting their own business as a result. In contrast the girls are significantly more interested in setting up a charity or social enterprise. There’s evidence that a greater focus on enterprise education also seemed to reduce teachers’ enthusiasm for entrepreneurship.
Regardless of enterprise policy, many of the broader labour market changes New Labour brought in did make a positive difference to entrepreneurial women. Tax credits, child tax credits and the extension of free pre-school childcare and Sure Start gave large numbers of women considerably more certainty in taking an entrepreneurial risk.
What needs to change
Labour’s core value of equality is an important bedrock for greater female engagement in enterprise.
While equality has always been on its enterprise agenda, the New Labour association of enterprise with individual aspiration arguably obscured the more traditional Labour emphasis on poverty alleviation and making a living. In fact, Labour needs all of those perspectives. We need highly aspirational entrepreneurs to create the jobs of the future. But, we should also bear in mind that the vast majority of people who start businesses just want or need to create a job for themselves. Part-time micro-enterprise is an important employment model, for many women in particular. In our increasingly flexible economy, this group needs to have equal access to Government skills and social protection programmes.
Schools need to be the starting point for a women’s enterprise strategy. But the dominant models which rely on delivery by external organisations and inspirational activities, focused on entrepreneurship as a route to individual wealth, are a turn-off for girls and teachers. Instead we need enterprise and creativity to be integrated within the curriculum, demonstrating responsible business and values, supported and modelled by teaching staff.
Labour needs to get over its employment-obsessed approach to the unemployed. For too many of the unemployed with entrepreneurial aspirations, welfare benefits had become a cage rather than a safety net. The Coalition Government has begun to address this issue with the Universal Credit, which includes the principal that even a very small amount of work should ‘pay’ for the claimant. Labour needs to accept and build on this principal.
Building on the progress that New Labour has made in workplace equality is also important. Greater workplace and leadership equality drives greater innovation and prosperity for all. It also sets the tone for self-employment and entrepreneurship. The undercapitalisation of women’s businesses is linked to lower pay and prospects at work. It’s not just money: capital is the range of resources required to start and grow a business, including financial, social and human capital. It is this combination of capital deficiency which is key to unlocking women’s business growth potential.
Women now start businesses with higher levels of education, but their under-representation in senior management roles means that too often they don’t have the opportunity to build up the other critical forms of human capital: management training, experience and reputation. Because of this, those who start businesses particularly value enterprise training. It helps to close the gap in confidence and business credibility and doubles the likelihood of women getting a venture off the ground.
Social capital is ‘who you know’. Women are excellent networkers, but their marginal employment status can mean they just don’t know the right people when they start businesses. One outcome is that female businesses win less than 5% of corporate and public sector contracts. Public procurement needs to become much more open and accessible to smaller businesses.
As for financial capital, it’s a well-established fact that women start businesses with just one third of the finance that men do, irrespective of size or sector of business. There’s little evidence of discrimination either: women are more likely to be offered business loans and also more likely to turn them down. That’s not always a bad thing – established businesses with low levels of external finance are more resilient in downturns. But lack of start-up capital hinders women entrepreneurs’ chances of getting that far. What is important is the time and space to make well informed decisions and the support to act on them. That’s why high quality business support and mentoring is important for women who start businesses, particularly those with high growth potential.
Women are slightly ahead of a broader shift in values towards more socially responsible business. This sits well with Labour party ethos and needs to be more strongly reflected in enterprise education and business schools. It’s not just important for a more inclusive enterprise culture but also for a progressive economy which enables individual aspiration while safeguarding the common good.
Labour’s equality focus is important in setting a labour market context for more women to succeed in enterprise and for our economy to benefit from the wealth of untapped skills, talent and assets which they represent. As women do better in the workplace, they will start businesses on a stronger footing. But until there’s a level playing field, Labour also needs to recognise and support what’s distinctive about how women start businesses – at all levels, from unemployed women who need to create their own job, to high flyers who want to grow substantial businesses.
Standing up for women’s rights, in the workplace as well as in parliament, is at the very core of Labour’s historical narrative. It’s now time to bring that story up to date and get serious about making Labour the party of enterprise for all.
This is an excerpt of a Chapter written by Erika Watson MBE, Director of Greenwell Consulting in the Labour’s Business pamphlet