BLACK ECONOMICS

Black businesses and Finance

While Business services is the biggest sector for black-owned businesses (around 25 per cent of all black-owned businesses are in this sector), it is not quite as important for black-owned businesses as for all businesses (40 per cent of all businesses are in Business services). Black-owned businesses are over-represented in industries such as Catering/Take Aways/Restaurants and Hairdressing, as well as other Services (including membership organisations, recreational, cultural and sporting activities). Thus, there is some evidence of sectoral concentrations in different areas than for all businesses. However, it does not seem to be the case that black-owned businesses are as highly concentrated in ‘niche-markets’ as has been suggested in the literature. In particular, the propensity of African and Caribbean businesses to be concentrated in the construction industry appears to be less strong now than it was ten years ago.

Nonetheless, black businesses-owners appear to be significantly underrepresented in certain sectors. The industries in which black-owned businesses appear to be the most underrepresented are Business Services and Financial Services. This is important as these two sectors are the two highest productivity sectors and a significant part of London’s economy. Business services has been the single fastest growing sector in London’s economy over the past two decades. And the London Plan predicts that it will continue to be one of the fastest growing sectors to 2016. If blackowned businesses are less concentrated in these sectors than other businesses, then they may be less able to take advantage of projected future growth in these sectors. Financial and Business services account for around 32 per cent of employment in London and around 40 per cent of London GVA.

Problems accessing external finance

Several previous studies have found that black-owned businesses have difficulties accessing adequate finance. One of the most comprehensive recent studies was the British Bankers Association 2002 report Ethnic Minority Business in the UK: Access to Finance and Business, which found that access to external start-up finance was very different between
Ready for Business: The contribution of black businesses to London's economy. Mayor of London 21 different ethnic groups. Chinese businesses were the most likely to access external start-up finance (51 per cent) and African-Caribbean businesses the least likely (31 per cent).

Professor Monder Ram, one of the authors of the report, commented in the press release “The research does not provide clear evidence of discrimination, but it does paint a picture of diversity, and does demonstrate that African-Caribbean businesses have particular difficulties in accessing finance. Much of this can be explained by factors such as size, but there is an unexplained difference.” Chart 20 shows to what extent the businesses surveyed for the LDA/BL4L
Annual London Business Survey considered that the difficulties in accessing finance were a problem. Black-owned businesses appear to experience this as a bigger problem than businesses in general.