Roughly four in ten adults not currently doing business in Scotland see good opportunities to start a business in the next six months, but more than half say fear of failure would put them off, according to a new survey .
The Global Entrepreneurship Monitor (GEM) Scotland report 2021/22, which captures rates of entrepreneurship in the general adult population, shows that there are significant gaps in Scots’ confidence in their entrepreneurial abilities.
The study is part of a global research consortium that measured rates of entrepreneurship by surveying around 150,000 adults in 50 countries in 2021, including around 10,000 respondents from all four of the UK’s home nations.
This report, which captures the views of more than 1,500 Scots who took part in the GEM Adult Population Survey, shows that despite ongoing economic challenges, almost half a million people in Scotland were doing independent business in 2021. This includes around 170,000 in established companies (over three and a half years old) and more than 320,000 in Total Early-stage Entrepreneurial Activity (TEA). Around 130,000 women and 60,000 18 to 24 year olds were involved in founding the company.
However, whilst Scotland’s TEA rate of 9.5% increased slightly from the 7.3% reported in 2020, this growth was not statistically significant, meaning that in 2021 Scotland’s TEA rates remained broadly the same like in 2020.
Scotland has held steady amid the 2020 pandemic, but other home nations appear to have scaled back more and delivered significant growth. England (7.7% to 11.8%), Wales (6.5% to 10.3%) and Northern Ireland (5.4% to 9.1%) saw a significant increase in overall early-stage entrepreneurial activity in a strong rebound from their 2020 dips.
In Scotland, just around 16% of non-entrepreneurial adults expect to start a start-up in the next three years, the lowest rate among home countries in 2021.
The authors of the survey suggest that more needs to be done to inspire people to get involved in early-stage entrepreneurial activities and then grow those businesses, with an increased focus on entrepreneurship skills in schools and among entrepreneurs .
In 2021, less than four in ten non-entrepreneurial adults felt they had the skills, knowledge and experience to start a business, with only around 10% of young entrepreneurs and established business owners in Scotland believing they had more create more than 10 jobs and increase employment by more than 50% over the next five years, both below the UK average.
This suggests that in Scotland, compared to other parts of the UK, there are proportionately fewer entrepreneurs who believe they can make a significant contribution to the growth of the economy and fewer adults who feel confident in their entrepreneurial abilities.
Co-leader of the GEM Scotland study, Dr. Sreevas Sahasranamam, Senior Lecturer at the Hunter Center for Entrepreneurship at the University of Strathclyde, said: “There is a need to increase the focus on entrepreneurship education in schools, further education and higher education, in our communities and among practicing entrepreneurs. Beyond formal courses, the University of Strathclyde has contributed to this effort through initiatives such as Strathclyde Inspire, the Growth Advantage Programme, the Help to Grow programme, and by working with industry and third sector partners in Scotland and internationally.”
All Scottish regions reported nominal TEA growth in 2021, contributing to the slight increase in national entrepreneurial activity rates.
Both male and female TEA rates also saw a slight increase in 2021, although female TEA growth was slightly higher than male (9, 4% to 11.4%). This means that almost 10,000 more women were involved in the growth of start-up activity in 2021 than in 2021, improving the TEA female to male ratio in Scotland by 11 points from 57% in 2020 to 68% in 2021. However, this is still five points below the UK average of 73%.
Gender differences also vary differently across Scottish regions, with female early-stage activity being comparatively lower than male in the North East (7.1% vs. 12.5%) and South West (6.7% vs. 11.8%). Female activity is also lower in eastern Scotland (8.6% vs. 10.8%), with parity only seen in the Highlands and Islands, both at 9.2%.
dr Samuel Mwaura of the Hunter Center for Entrepreneurship and co-leader of the GEM study in Scotland said: “TEA rates are approaching convergence across Scottish regions, largely due to increases in female entrepreneurship. Although women’s start-up rates have improved, we would have needed more than 60,000 women engaged in start-up activities in Scotland to achieve gender parity in 2021, so much work remains to close the gap at national and regional levels shut down.”
Mark Logan, former COO of Skyscanner and Chief Entrepreneur to the Scottish Government, said: “Entrepreneurship is fundamental to creating opportunities that enable Scotland’s people to thrive. Every job that exists today exists because someone, somewhere, started something. In this context, the GEM Scotland Report clearly highlights the work ahead; particularly in normalizing entrepreneurship as a career option, in tackling the serious gender imbalances in entrepreneurship and in the need to promote mainstream entrepreneurship education across all age groups.”
Andrew Harrison, Head of Business Banking, NatWest Group, said: “Against the challenging backdrop of the pandemic and cost of living crisis, the findings of this report show once again that Scotland is a nation of entrepreneurs, with around one seven Scottish adults now leading either a business or want to start one.”
“The resilience of small businesses over the last few years is both inspiring and important. With the economy facing significant turbulence in the coming year, it is vital that Scotland has a strong base on which to build this entrepreneurship boom. As one of the largest commercial banks in the country, we are determined to do our part to ensure future business success stories begin, grow and thrive.”