As we emerge from the economic downturn caused by the Covid-19 pandemic, it is clear that higher levels of entrepreneurship will one of the key factors in building back the Welsh and UK economies.
Given this, it is worth examining the latest data on entrepreneurial activity in the UK from the Global Entrepreneurship Monitor (GEM). This worldwide project measured rates of entrepreneurship in 43 economies in 2020 with 9,453 adults interviewed for the UK study. As such, it gives us a comprehensive analysis of how entrepreneurship has been developing during one of the worst recessions in history.
One of the key indicators within the GEM survey is Total early-stage Entrepreneurial
Activity (TEA) which measures those individuals that start and manage a new business.
According to the study, the rate of early-stage entrepreneurship in Wales in 2020 was 6.5% which is lower than the UK (7.5%), England (7.7%) and Scotland but higher than Northern Ireland (5.4%).
Unfortunately, this is not just a Covid-19 related result as pooling the data over the most recent three years (2018-20) to remove annual fluctuations gives a TEA rate of 6.8% for Wales as compared to 8.4% for the UK
If we examine entrepreneurial activity by gender, we find that males (9.0%) in the UK had a significantly higher TEA rate than females, (6.1%) in 2020, equivalent to a female to male early-stage entrepreneurship ratio of 63%.
Wales has the second highest proportion of women starting or managing a new business after England although more could be done to ensure a greater focus on encouraging more women-led startups in the Welsh economy.
Entrepreneurial activity by age shows that the rates of those aged 45-54 years old and older are significantly lower than those in younger age groups. However, the most important result is the trend in TEA rates for young people (18-29 year olds) which has doubled across all nations since 2002.
Indeed, the TEA rate for young people in Wales of 10.1 is almost twice the average for the rest of the population, demonstrating that, contrary to popular belief, entrepreneurs are no longer waiting until their 30s to start a business. However, Wales still lags both Scotland and Northern Ireland but is actually higher than England.
There continues to be a debate as to whether entrepreneurship is linked to the prosperity of a region or nation and if we examine the GEM data by areas of multiple deprivation, the study shows that the least deprived parts of Wales have the highest TEA rates in the country with the most deprived areas experiencing the lowest TEA levels. This suggests that more could and should be done to target support for entrepreneurial activity in some of our poorest communities and help to boost local economies.
So what was the view of entrepreneurs on the impact of Covid on their businesses? As we have seen during the last eighteen months, there have been record numbers of new businesses created in the UK economy with new opportunities for businesses being created as a result of the pandemic and around half of all entrepreneurs engaged in early stage entrepreneurial activity were of the opinion that the
pandemic had provided new plausible opportunities.
In contrast, only around 38% of businessowners who had established businesses had the same opinion which suggests that new entrepreneurs were more likely to perceive new markets during the crisis.
If we look at the home nations, Wales had the lowest proportion of new entrepreneurs perceiving new opportunities although it had also had the highest proportion of established business owners having the same sentiment.
Whilst there have been high numbers of new firms created as a result of the pandemic, there has also been the perception that some would have been discouraged from taking the plunge due the challenges caused by the economic downturn last Spring. In fact, 68% of those starting a new business in Wales had
delayed getting business operational because of the coronavirus pandemic as compared to 61% for the UK as whole.
Therefore, the GEM study demonstrates that despite the challenges of the Covid pandemic, entrepreneurial activity continues to be an important part of the UK and Welsh economies. Whilst there are encouraging statistics for Wales, more needs to be done to close the gap with the rest of the UK. However, the growth in entrepreneurship amongst young people over the last eighteen years needs to continue especially in stimulating graduates from all eight Welsh universities to take the plunge to launch their own venture.
That, along with stimulating greater female entrepreneurship, could help further boost the number of new businesses created in Wales over the next few years.