Black and minority ethnic businesses need support to weather the pandemic

The coronavirus pandemic has highlighted underlying inequalities that ethnic minorities face in the UK. In England, both death rates and hospital admission rates are more than twice as high for Black people or people from a south Asian background than they are for white people.

The poorer outcomes from COVID-19 among the Black and Asian populations are a result of the underlying social and economic risk factors that ethnic minorities face, such as living in overcrowded accommodation, being employed in riskier lower-skilled jobs, having worse access to healthcare, not to mention structural racism.

But among these well-documented racial inequalities, there is another hidden story: the specific plight of Black, Asian and minority ethnic (BAME) business owners who have also been disproportionately affected by the pandemic.

Specific challenges

During the first lockdown in March, many businesses in the UK temporarily closed with the majority of those that were able to operate doing so at reduced capacity with lower turnover. This had significant implications for BAME-owned businesses, which are traditionally concentrated in the sectors worst hit by lockdown such as retail, health and social care, education, restaurants and accommodation.

Before the pandemic, BAME business owners were less likely than non-BAME business owners to obtain mainstream business support and in the early days of coronavirus, nearly two-thirds of BAME business owners felt unable to access state-backed loans and grants, leaving many on the brink of financial ruin.

The economic crisis facing these businesses is aggravated by the fact that they are more likely to hire a considerable number of BAME employees and attract more BAME customers. The significantly higher risk among such groups from COVID-19 implies that these businesses would have had to incur considerable costs to protect their staff and customers.

COVID-19 has also exacerbated pre-existing disadvantages in the business sector. Although there are some exceptions, BAME entrepreneurs on average have substantially lower success rates for starting businesses and see less success overall compared to other entrepreneurs.

Black business owners in particular experience worse outcomes than their white counterparts. Last year, Black business owners in the UK had a median turnover of £25,000, compared to £35,000 for white business owners. The median productivity of Black business owners is also less than two-thirds that of white business owners, and only half of Black entrepreneurs meet their non-financial aims, compared to nearly 70% of white entrepreneurs.

Our research

To help understand better how COVID-19 has affected business owners, we are currently asking British entrepreneurs about their experiences of the pandemic.

So far, we have found a range of options that many BAME-owned businesses have used to cope in these uncertain times. These include raising the prices of certain products to cover the cost of compliance with new regulations, adjusting operations to take account of social distancing, adopting new technology to facilitate day-to-day business activities and venturing into new business endeavours entirely.

Adaptability and the capacity for evolution have been crucial for BAME-owned businesses to keep afloat during this pandemic, especially as restrictions have become localised and three-tier lockdowns have been introduced.

Despite this tendency to adapt to changing times, some BAME business owners have reported that their customers have stayed away for fear of contracting the virus specifically because of the higher mortality rates reported for for their ethnic groups.

How the government can help

We must appreciate the concrete action BAME business owners have already taken to protect their customers and staff in this time of crisis. But the government can do more to protect individuals from adverse health and economic outcomes.

State-backed grants and loans should be made more accessible as an incentive to business owners who have incurred additional costs to protect customers and staff. Crucially, the process to obtain them should not be too onerous, which risks putting people off applying. Regional governments should also take care to plug BAME businesses into the supply chains of local projects in response to the pandemic.

As a community, we need businesses to get through this pandemic in one piece, and we must help protect those who are most at risk. That means working specifically with BAME business owners in creative ways to help ensure their survival.

Tolu Olarewaju receives funding from the British Academy.

Jagannadha Pawan Tamvada receives funding from the British Academy. He is co-founder of iPowerz, a digital platform to support small businesses and entrepreneurship. He is affiliated with the India Centre for Inclusive Growth and Sustainable Development at the University of Southampton, the Centre for India and Global Business at Cambridge, India Global, a think-tank based in the United States and India, and the Indian Cultural Association of Dorset.