Around four in ten adults not presently engaged in business activity in Scotland can see good opportunities to start businesses in the next six months, but more than half say the fear of failure would stop them, according to a new survey.
The Global Entrepreneurship Monitor (GEM) Scotland report 2021/22, which captures rates of entrepreneurship in the general adult population, reveals there are significant gaps in the confidence Scots have in their entrepreneurial abilities.
The study is part of a global research consortium that measured rates of entrepreneurship by interviewing around 150,000 adults across 50 countries in 2021, including around 10,000 respondents from all four UK Home Nations.
This report, which captures the views of more than 1,500 Scots who took part in the GEM Adult Population Survey, reveals that despite ongoing economic challenges, in 2021, almost half a million people in Scotland were engaged in independent entrepreneurial activity. This includes around 170,000 in established businesses (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 18–24-year-olds were involved in start-up activity.
While Scotland’s TEA rate of 9.5% increased slightly from the 7.3% reported in 2020, this growth was however not statistically significant, meaning TEA rates in Scotland remained broadly the same in 2021 as in 2020.
Scotland held steady amid the pandemic in 2020, but other home nations appear to have built back stronger and achieved significant growth. England (7.7% to 11.8%), Wales (6.5% to 10.3%), and Northern Ireland (5.4% to 9.1%) saw significant increases in total early-stage entrepreneurial activity in a strong recovery from their 2020 slumps.
In Scotland, only around 16% of non-entrepreneurial adults are expecting to set up a start-up over the next three years, the lowest rate among the home nations in 2021.
The survey authors suggest more needs to be done to inspire people to engage in early-stage entrepreneurial activity and then grow those businesses, with a need for 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 about 10% of both early-stage entrepreneurs and established business owners in Scotland expected to create more than ten jobs and grow employment by more than 50% in the next five years, both below the UK average.
This indicates that compared to elsewhere in the UK, there are proportionately fewer entrepreneurs in Scotland that expect to make substantive growth contributions to the economy and fewer adults confident in their entrepreneurial capabilities.
Co-lead of the GEM Scotland study, Dr Sreevas Sahasranamam, Senior Lecturer at the Hunter Centre for Entrepreneurship at Strathclyde, said: "There is a need for an increased focus on entrepreneurship education in schools, further and higher education, in our communities, and among practicing entrepreneurs.
"Beyond formal degree courses, the University has been contributing to this effort through initiatives such as Strathclyde Inspire, Growth Advantage Programme, the Help to Grow scheme as well as working with industry and third sector partners in Scotland and internationally.”
All Scottish regions reported nominal growth in the TEA in 2021 which contributed to the small uptick in national entrepreneurial activity rates.
Both male and female TEA rates also saw modest increases in 2021 although growth in female TEA growth was slightly higher at 2.4 percentage points (5.4% to 7.8%) than male (9.4% to 11.4%). This means than in in 2021, there were almost 10,000 more women than men engaged in the 2021 growth in start-up activity which improved the female to male TEA ratio in Scotland by eleven-points from the 57% reported in 2020 to 68% in 2021. This is however still five points below the UK average of 73%.
Gender disparity also varies differently across Scottish regions with female early-stage activity comparatively lower than male in the North East (7.1% vs 12.5%) and South West regions (6.7% vs 11.8%). Female activity is also lower in Eastern Scotland (8.6% vs 10.8%), with parity only observed in the Highlands and Islands, both at 9.2%.
Dr Samuel Mwaura, from the Hunter Centre for Entrepreneurship, and co-lead of the GEM Scotland study, said: “Scottish regions have seen TEA rates approach convergence which has mainly been driven by increases in female entrepreneurial activity. However, while female start-up activity rates have improved, we would have needed over 60,000 more women engaged in start-up activity in Scotland to approach gender parity in 2021 so much work remains to close the gap nationally and in the regions.”
Mark Logan, former COO of Skyscanner and Scottish Government’s Chief Entrepreneur said: “Entrepreneurship is foundational to creating the opportunities through which Scotland’s people can flourish. Every job that exists today, exists because someone, somewhere started something.
"In this context, the GEM Scotland Report clearly highlights the work ahead of us; particularly in normalising entrepreneurship as a career option, in addressing the severe gender imbalances in entrepreneurship and in the need to instigate broad entrepreneurial education at all ages.”
Andrew Harrison, Head of Business Banking, NatWest Group said: “The findings of this report, against a challenging backdrop of the pandemic and the cost of living crisis, once again show that the Scotland is a nation of entrepreneurs, with around one in seven Scottish adults now either running a business or looking at starting one.
“The resilience of small businesses over recent years is both inspiring and important. As the economy faces significant turbulence in the year ahead, it is critical that Scotland has a strong base on which to build this boom in entrepreneurship. As one of the country’s biggest banks for business, we are determined to play our part in helping the future business success stories start, scale and thrive.”