2005 Global Entrepreneurship Monitor Shows UK Entrepreneurial Activity Remains Steady With More Youth Wanting To Start Their Own Business;

Training Is Key

The largest annual survey of entrepreneurial activity in the United Kingdom shows more people between 18 and 24 expect to be running their own business over the next three years than any other age group.

London Business School’s 2005 Global Entrepreneurship Monitor United Kingdom (GEM UK) surveyed 32,500 adults across the nation in 2005 on their perceptions about entrepreneurship and whether they were engaged in any such activity. It is the single largest study of entrepreneurial activity anywhere in the world.

Global Entrepreneurship Monitor (GEM), now in its seventh year, is a worldwide project published annually by London Business School and Babson College. It currently monitors levels of entrepreneurial activity in 35 countries.

As well as expecting to be their own boss within three years (13.4% for 18-24 age group compared to 9.3% for 35-44 age group), GEM UK found 18-24 year olds were the most positive in their attitudes towards entrepreneurs, with 69.7% regarding it as a good career choice. Entrepreneurs were also given the highest status among the young.

For the first time GEM UK examined the impact of enterprise training on levels of entrepreneurial activity – one of the pillars of UK government policy regarding the fostering of a more entrepreneurial society. In most cases, across age and gender groups, enterprise training more than doubles the likelihood of setting up a business. For example, women who have undergone some enterprise training are twice as likely to be engaged in an entrepreneurial activity (6.9 % compared to 3.3%).

In 2005, 6.2 % of the UK adult working population was involved in some form ofentrepreneurial activity. This level is the third highest rate of the G7 economies behind the US (12.4%) and Canada (9.3%). The gap between the US and UK has widened slightly in the past 12 months, due largely to an increase in activity in the US. Levels of total entrepreneurial activity (TEA) for the UK remained very similar to the 2004 level of 6.3 %.

Male TEA has gone down slightly, from 8.5% of the UK population to 8.2%, while female entrepreneurship levels have remained the same at 3.9%. A fear of failure has increased slightly from 33% of the total population to 34%.

Across the country, 2005 saw the regional gap in TEA widening slightly, due largely to an increase in entrepreneurial activity in London (up from 7.5% to 8.3%) and a reduction in the North-East (from 4.5% to 3.8%). Rural areas have higher levels of entrepreneurship than urban ones (8.2% and 6% respectively).

Ethnic minority groups are, as in previous years, much more entrepreneurial than their white counterparts. Non-White ethnic minority groups are 40% more likely to be entrepreneurs than white people. The most entrepreneurial group is Black Africans who are more than three times more likely to be entrepreneurs than their White British counterparts. Indian and Pakistani people are twice as likely as white British people to be entrepreneurs.

Rebecca Harding, GEM Global chief executive, London Business School, said a culturalchange is evident in the UK. “Since 2002, there does appear to be a step change in attitudes towards entrepreneurship especially among the young. Fear of failure, however, remains a challenge since, over the period as a whole, there has been little change in this attitudinal indicator. If the Government is to close the gap between the UK and the USA in entrepreneurial activity, then this is a key feature which should be addressed with some urgency.”

Overview of GEM UK 2005 Report

• Entrepreneurial activity in the UK has remained roughly the same in the UK between 2004 and 2005.
• The Total Early Stage Entrepreneurial Activity (TEA) index identifies the proportion of adults of working age who are either setting up or have been running a business for 2005 for less than 42 months. In 2005 the rate stood at 6.2% of the adult working age population.
• This is the third highest rate of the G7 economies behind the US (12.4%) and Canada (9.3%).
• The gap between in TEA between the UK and the US has widened slightly in 2005, due to a boost in the US rates of entrepreneurship from 11.3% in 2004 to 12.4% in 2005.
• Male TEA has gone down slightly from 8.5% of the UK population to 8.2% of the UK population.
• Female TEA has remained the same at 3.9% of the population.
• Necessity entrepreneurship in the UK has fallen from 1.4% of the adult working age population to just 0.7% between 2001 and 2005.
• Opportunity entrepreneurship has increased marginally over the same period from 5.1% to 5.2%. The UK is the only country in the G7 to see a 50% drop in necessity entrepreneurship combined with a slight increase in opportunity entrepreneurship.
• In all other G7 countries, both necessity entrepreneurship and opportunity entrepreneurship have declined, with the exception of the US, where there was a small but insignificant increase from 1.3% to 1.5% and from 10.3% to 10.4%, respectively.
• Early stage entrepreneurship across all UK regions has increased over the whole period since 2002, but there has been no significant change in any region between 2004 and 2005. In the past year, there were small but insignificant reductions in entrepreneurial activity in the East Midlands and the North East and Wales. Entrepreneurial activity remained the same in Northern Ireland, the South East, and the South West. It increased, but not significantly, in the East of England, London, the North West, Scotland and Yorkshire and Humberside.
• Attitudes towards entrepreneurship are generally positive with a small but significant increase in the numbers of people seeing good business opportunities between 2004 (36%) and 2005 (38%). However, fear of failure has increased slightly but not significantly from 33% to 34% of the whole population.
• 18-24 year olds are the most likely of any age grouping to be expecting to start a business in the next three years.
• They are also, with the 25-34 age group, the most likely to know an entrepreneur and have the second lowest fear of failure rate after the 55-64 age group.
• Entrepreneurship is significantly more likely to be seen as a good career choice, and entrepreneurs are noticeably given a higher status in society by 18 to 24 year olds than any other age group.
• Ethnic minority groups are, as in previous years, substantially more entrepreneurial than their white counterparts, although this may in part be because they tend to be younger on average. TEA rates amongst Indian origin respondents and Pakistanis are twice as high as they are in White communities and TEA in the Black African community is almost three times higher. Black African women are significantly more entrepreneurial than women from other ethnic groups.
• Social entrepreneurial activity (SEA), defined as the proportion of working age adults actively trying to start a social enterprise that they will manage alone or with others, or managing a new social enterprise that is less than 3½ years old, was 3.2% in the UK in 2005.
• SEA is particularly high among those with postgraduate education experience (5.5%) and is also high among students (5.0%) and in the ethnic minority community (5.0%).
• GEM UK reports for the first time in 2005 responses to questions about enterprise education. The proportion of working age adults expecting to start a business in the next three years doubles, irrespective of gender or educational level, for those who have ever taken part in some form of enterprise training, government training or work experience.
• The differences in levels of early stage entrepreneurial activity between deprive and non-deprived areas are surprisingly small and not statistically significant.
• Early stage entrepreneurial activity is lowest in the 20% most affluent wards in the UK (5.6%) and highest in the second most deprived quintile of UK wards (6.6%). This is true for the whole of the UK. However this may mask differences within regions or local authority areas

Notes

• Regional reports will be available for the following regions: East Lancashire, Yorkshire and Humberside, South East England and East Midlands from Thursday 16 February at http://www.london.edu/gem.html
• GEM UK 2005 sponsors are: Barclays Bank, Blackburn and District Council, Camden District Council, Deloitte, East Midlands Development Agency, Hunter Centre for Entrepreneurship, University of Strathclyde, Institute of Family Business, Invest Northern Ireland, Small Business Service, South East Development Agency, Welsh Development Agency, Yorkshire Forward

For further report information or interviews with Rebecca Harding, please contact:

Kerry Taylor, London Business School, 020 7706 6972 / 07966 907 126

kerrytaylor@london.edu

or

Kate Watkins, London Business School, 020 7706 7866/ 07966 907 125

kwatkins@london.edu

GEM reports are available from www.gemconsortium.org