Fixing the gender gap in start-up businesses

140,000 firms were founded by all-women teams last year

(Image credit: © Getty Images)

International Women’s Day prompted a slew of announcements from campaign groups supporting female entrepreneurs and small-business owners. But while more women than ever before are launching businesses in the UK, the government’s research continues to point to a huge gender gap.

The 2022 Rose Review found that 140,000 companies were established by all-women teams last year, the first time that numbers have outstripped male-led companies. The number of women launching new businesses is growing by a third each year, with young female entrepreneurs increasing in number particularly rapidly.

However, the Rose Review – first launched in 2019, when ministers asked NatWest chief executive Alison Rose to review female entrepreneurship – also notes that women’s small-business ambitions were more likely to have been disrupted by the Covid-19 pandemic than those of men. Female entrepreneurs spent twice as much time discharging caring responsibilities during the crisis, and received only a fraction of the funding from equity investors that their male peers were able to access.

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Ministers hope new initiatives from the Rose Review will support female entrepreneurs further. They include a new campaign to be led by the Women Angel Investment Taskforce, which will encourage more women to become business angels and then to support female business founders. There are also plans to expand networking and mentoring schemes.

On financing, ministers have announced a campaign to persuade more financial institutions to sign up to the Investing in Women Code. This requires firms to publish data on the diversity of their small-business funding, and to appoint a senior leader with responsibility for supporting equality. Some 134 firms with capital of almost £1trn have signed so far.

The funding gap

Such funding will be critical to helping more women fulfil their ambitions, with a lack of finance often frustrating female founders. Research published this week by Small Business Britain, a lobby group, suggests as many as 17% of women are keen to start a business following the pandemic, up from 15% a year ago. However, finance for these women remains in short supply – research suggests that women in the UK start out, on average, with 53% less capital when starting new businesses. Male entrepreneurs are 86% more likely to be funded by venture capital.

The problem is not confined to the UK. Across Europe as a whole, female founders have secured just 1.3% of all venture capital funding available since 2017, with many complaining about the unconscious bias of all-male investment teams.

The more positive news is that there are growing resources to turn to for women looking for advice and support as they try to get new ventures off the ground. Startups (startups.co.uk) lists more than 20 groups with bespoke services for women. These range from accelerators and investment houses such as the AllBright Collective and Female Founders Accelerator, to networks such as the British Association of Women Entrepreneurs and the Female Founders Network.Many of these groups also provide support for female business owners once their ventures are up and running.

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David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.