Investing in Women
In July, the Investing in Women Code was launched, which commits signatories to playing their part in encouraging, supporting and backing female entrepreneurs. At UK Finance we are pleased to be a signatory to the code.
The Code was one of many recommendations in the government-commissioned Rose Review which was tasked with identifying the “unfair obstacles” that are holding back female entrepreneurs and what could be done about it.
Read the Alison Rose Review of female entrepreneurship here
The Review revealed that at every stage of the business journey UK women are less likely to pursue entrepreneurialism than men. Only half as many women as men start businesses. Male entrepreneurs are also five times more likely than women to grow their business to £1 million turnover or more.
So why was the Rose review necessary when the challenges that women face in starting and running their own businesses are not new and the issue has been the subject of extensive research and reporting in the past?
There has been a steady increase in the number of women becoming entrepreneurs (GEM, 2017). Aston University studies showed that when comparing 2003-6 and 2013-16, the number of women setting up their own business rose by 45 per cent, compared to just 27 per cent by men.
The simple reason is that women-owned enterprises bring much needed diversity to the business world which translates into UK economic growth and the creation and maintenance of jobs — jobs that support individuals, families, communities and the country.
Yes, as a country we have made progress but, as the Rose Review shows, other countries such as the US are more successful and there remains a continuing disparity between male and female entrepreneurship rates in the UK.
The reasons are complex, including many which are socio-economic. This is a challenge that all stakeholders must recognise and take on.
What can the finance industry do? A considerable number of large-scale quantitative studies such as the Women-Led Business report based on 20,000 interviews have examined the ability of women entrepreneurs in accessing debt finance more generally. These studies demonstrate no gender discrimination in approval rates once controlling for business characteristics, such as size, industry sector and risk rating. This is not surprising as debt providers neither ask for or capture gender-related data as part of their decision-making processes.
Yet the finance industry can do a great deal to address the issue of disparity in entrepreneurship rates. In the US, lenders were quick to recognise the opportunity to encourage female entrepreneurs and by the early to mid-1990s the US witnessed a significant increase in the launch of financing initiatives to help aspiring women entrepreneurs. A study performed by American Express found that from 1997- 2013 the number of women-owned companies increased by 59 per cent, while revenues from those companies grew by 63 per cent. Today, according to the National Association of Women Business Owners one in five US businesses with revenues of $1 million or more is female owned.
The key to addressing this gender gap is much wider than access to finance and it is significant that the new Code recognises that there is already valuable work underway by individual organisations to help women who are seeking to start or scale up their businesses.
UK Finance and our members have a key role to play.
Download the Investing in Women Code as a PDF here