How entrepreneurial is Wales? That is the question that the latest Global Entrepreneurship Monitor (GEM) attempts to answer in its latest report which investigates those involved in early-stage entrepreneurship - defined as starting and managing a new business.
This year’s results show that the rate of total early-stage entrepreneurship (TEA) in Wales in 2021 was 10.3% as compared to 11.5% for the UK.
This is significantly higher than the previous year (6.5%) and means that around 192,000 adults aged between 18 and 64 are involved in entrepreneurial activity in Wales.
Nearly three quarters are in the very early stages of starting a business and the rest involved in managing a new business aged between four and 42 months old.
This is an important finding as not only is the overall rate of entrepreneurial activity in Wales increasing but this is largely accounted for by those starting a business.
In this respect, it is critical that the right support mechanisms are in place to ensure that these new ventures survive and prosper after they have been started.
Understanding the motivations of why people take the step into working for themselves is critical in developing the right culture and environment to promote greater entrepreneurship and this is a question that is asked by the GEM study.
The result show that over 70% of Welsh entrepreneurs are starting a business “to earn a living because jobs are scarce” which was higher than for the rest of the UK, suggesting that a large proportion are being influenced into entrepreneurial activity because of necessity.
However, it is also worth noting that 59% were starting their business ‘to make a difference in the world’ and 65% were motivated by the need ‘to build great wealth or a very high income’.
Various studies have shown how important it is to get more women involved in entrepreneurship and the GEM results for Wales are encouraging in this respect.
Female early-stage entrepreneurial activity was nearly the same as that for men and at 9.8%, is considerably higher than the average rate of 4% that was recorded between 2002 and 2010.
The level of early-stage entrepreneurial activity by young people has also grown considerably in Wales over the last two decades, rising from 2% in 2002 to 16.5% in 2021.
This could be a result of the changes in entrepreneurial attitudes amongst young people, with many choosing a portfolio approach to their careers which includes developing new businesses as a ‘side hustle’ to other jobs.
However, it could also indicate that many opted for working for themselves during the Covid pandemic as other jobs were not available.
Regardless of why this is happening, it is critical that the Welsh Government continues to support young people who are looking to start their own businesses through schemes such as the Young Person’s Guarantee which have recently introduced.
On the other side of the age spectrum, it is worrying that the entrepreneurial activity rate for those aged 55-64 is lower in Wales than for the rest of the UK and may reflect the wider trend of increased economic inactivity amongst this age group.
Nevertheless, it is disappointing that these talents are not being utilised properly and there may be a need to ensure that organisations such as Prime Cymru are better utilised to support the over-55s into entrepreneurship.
Looking more widely at the general population to examine their propensity towards taking that step into starting a new business, the GEM study finds that 43% of non-entrepreneurs state that they have the skills, knowledge, and experience to start a business and just under half (45%) know an entrepreneur that has started a business within the past two years.
This implies that there is a pool of potential entrepreneurs who, if motivated and encouraged properly, could grow the level of entrepreneurial activity within Wales.
In fact, four of out of ten non-entrepreneurs believe there are good start-up opportunities locally within the next six months.
To take advantage of this trend, there needs to be a focus on understanding how those with the intent to start-up a business can be encouraged to do so and to put the mechanisms into place to do this.
Perhaps one of the major obstacles to overcome is fear of failure, with 55% of those in Wales that identified start-up opportunities stating this would prevent them from starting a business.
Nevertheless, 19% of non-entrepreneurial working age adults in Wales expect to start a business within the next three years, the highest level ever recorded by the GEM study in Wales.
This suggests that we could, because of the opportunities and challenges brought on by the Covid pandemic, be facing a new renaissance in entrepreneurial activity which hopefully will not be impacted too much by recent economic headwinds.
However, if this is to be sustainable then it is critical that support and funding is made available to strengthen the enterprise ecosystem in Wales.
More importantly, universities, large firms, financial institutions, government, and entrepreneurs must work together to ensure they create the conditions to boost entrepreneurial activity over the next few years.
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