A quarter of a million people in Scotland were setting up or running new businesses in 2020, despite the challenges of the COVID-19 pandemic, a survey has found.
The Global Entrepreneurship Monitor (GEM) survey estimates that 7.3% of the Scottish population – 247,000 adults – were actively engaged in setting up a business or already running an enterprise established in the last three-and-a-half years. A further 5.7% – 194,000 – were entrepreneurs running more established businesses.
Around 60,000 young people in Scotland, or 13% of 18-24 year olds, were early-stage entrepreneurs, the highest rate among the home nations. Entrepreneurship among people under 30 years old in Scotland has steadily grown from being the lowest in the UK at 3.5% in the 2007/09 period.
GEM measures rates of entrepreneurship across multiple phases in the general adult population. In 2020, nearly 140,000 people from 46 economies across the globe were surveyed, with 2,019 responses from Scotland, making it the world’s most authoritative comparative study of entrepreneurial activity.
The study found that Scotland had similar rates of total early-stage entrepreneurial activity (TEA) to other nations within the UK, mainly because Scotland held steady in the face of the pandemic while early-stage entrepreneurial activity in England suffered a significant decline from 2019 rates.
The Highlands and Islands region had the highest proportion of 18-64-year-olds in early-stage entrepreneurial activity (8.7%), followed by South Western Scotland (7.4%), Eastern Scotland (6.9%) and North Eastern Scotland (6.5%). In North Eastern Scotland, there has been a significant decline in the TEA rate from 2019 (8.7%) to 2020 (6.5%), while the rest of Scotland held steady despite the pandemic.
Around 5.3% of adult women in Scotland were trying to set up a new business or running a young business in 2020 compared to 9.3% of men – a rate that has changed little over the last decade and makes the gender gap in Scotland the highest amongst the home nations.
Further, there is a significant gender difference in reasons for trying to start a business with 62% of men citing the building of “great wealth or a very high income” as a key motivation compared to only 51% of women. In contrast, 76% of female early-stage entrepreneurs in Scotland, compared to 57% of males, indicated that a key reason they were trying to start a business was “to earn a living because jobs are scarce”.
Following previous trends, the TEA rate of the white ethnic population in the Scotland in 2020 was lower than that of the non-white population, at 7.05% compared to 12.95% respectively. However, the TEA rate for the non-white ethnic group was lower than the rate in 2019 (16.8%), while it remained comparable for the white ethnic group. This suggests that amid the higher rates of entrepreneurial activity among ethnic minorities, there is greater precarity too.
In Scotland, contrary to the trend in the wider UK, both the most deprived quintile and the least deprived quintile reported similarly high TEA levels, of around 9%. The most deprived 20% were thus just as likely to start a business as the wealthiest 20% in Scotland in 2020.
Dr Samuel Mwaura, lecturer in the Hunter Centre for Entrepreneurship and co-lead of the GEM Scotland study, said, “Despite the pandemic, there were around 250,000 entrepreneurs that were actively trying to set up a business in 2020 in Scotland, helping keep entrepreneurial activity on a par with 2019.
“Historically, we know that new businesses play a vital role in the recovery from major crises, however in 2020 immediate and sustained efforts to mitigate the coronavirus crisis prioritised more established businesses to the neglect of startup entrepreneurs.
“Many of the 250,000 startup entrepreneurs in 2020 will thus not have accessed much needed support and our findings suggest that thousands have thus had to delay the operationalisation of their new businesses. It is likely that many of these businesses will never see the light of day.
"We also found significant regional disparities among the four regions of Scotland, each with unique strengths and vulnerabilities. This means that different regions have different needs and tailored support is required. It is encouraging to see regional support infrastructure develop, such as Aberdeen City Region, and the new South of Scotland Enterprise.”
Dr Sreevas Sahasranamam, co-lead of the GEM Scotland study, said, “Our findings on rates of entrepreneurial activity among young people under 30 in 2020 gives us a lot to both celebrate and draw lessons from.
“The success of this group has come from substantial investments in well-integrated national programmes such as The Prince’s Trust, the Bridge to Business programme for schools and the Scottish University Scale-Up Consortium, among others.
“Many individual universities in Scotland are also making entrepreneurship a more strategic priority internally for their students and graduates while also taking a greater role in supporting the wider ecosystem, such as Strathclyde’s partnership with Glasgow City Council, Scottish Enterprise, Glasgow Chamber of Commerce and Entrepreneurial Scotland to create the Glasgow City Innovation District.
“These initiatives provide fantastic case-studies of best practice that is working for young people that can be suitably adapted to address the issues we continue to observe in entrepreneurship among women and ethnic minorities as well as the regional disparities.
“Another related trend we noted was the highest entrepreneurial activity within Scotland’s most deprived quantiles, suggesting a case of entrepreneurship being seen as an emancipation tool.
"It was very encouraging to note that despite the pandemic nearly half the early-stage entrepreneurs in Scotland saw new opportunities, which augers well for an economic recovery.”
Sean McGrath, Chief Executive Officer, Entrepreneurial Scotland, said, “These are eye catching and hugely-reassuring figures. They support the view that individuals who have an entrepreneurial mindset are key players in the economic recovery.
“Against all the odds and in the midst of a health crisis the like of which none of us have ever lived through before, it is deeply encouraging to learn that so many individuals are either engaged in business creation or running one.
“This is undoubtedly good news and comes at a time when people everywhere are endeavouring to drive Scotland’s economy forward and out of the difficulties caused by the pandemic.”