Around four in 10 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.
The latet Global Entrepreneurship Monitor (GEM) for Scotland, which captures rates of entrepreneurship in the general adult population, reveals 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 during 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 survey, shows that despite ongoing economic challenges, almost half a million people in Scotland were engaged in independent entrepreneurial activity last year.
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 to 24 year-olds were also 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 that 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 10 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 the University of 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.”
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 startup activity, which improved the female to male TEA ratio in Scotland by 11 points from the 57% reported in 2020 to 68% in 2021.
This is still five points below the UK average of 73%, however.
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, lecturer at 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 startup activity rates have improved, we would have needed over 60,000 more women engaged in startup activity in Scotland to approach gender parity in 2021 so much work remains to close the gap nationally and in the regions.”
Mark Logan, the Scottish Government’s new 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 at the 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.
“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.”
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