Global Entrepreneurship Monitor : Scotland Report 2021/2022

Mwaura, Samuel and Sahasranamam, Sreevas and Hart, Mark and Bonner, Karen and Prashar, Neha and Ri, Anastasia and Levie, Jonathan (2022) Global Entrepreneurship Monitor : Scotland Report 2021/2022. University of Strathclyde, Glasgow. (

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Background In 2021, the Global Entrepreneurship Monitor (GEM) research consortium measured rates of entrepreneurship by undertaking structured interviews with around 150,000 adults across 50 countries. Within the UK, 10,044 18 to 80-year-olds participated in the GEM Adult Population Survey (APS) in 2021. This report mainly focuses on Scotland, comprising 1,541 participants in the adult working-age bracket (18-64) from an overall sample of 2,000 adults (including over 65s) that took part in the APS. The report also documents findings from the National Expert Survey (NES) employing data gathered from 44 entrepreneurship experts in Scotland in 2021. This monitoring report details GEM measures of entrepreneurial attitudes, activity, and aspirations in Scotland and compare the results across the four home nations of the UK. We also explore regional differences between the four NUTS2 (2013) regions within Scotland. Findings from Expert Survey (NES) are presented at the end. Entrepreneurial Activity Total early-stage Entrepreneurial Activity or TEA (the sum of the nascent entrepreneurship rate and the new business owner-manager rate - without double counting) in Scotland in 2021 was 9.5% against a UK average of 11.5% in 2021. This was up from 7.3% in 2020 but this growth was not statistically significant meaning TEA rates in Scotland remained broadly the same in 2021 as in 2020. TEA rates in 2021 also varied, but again not significantly so, across the home nations: Scotland (9.5%), England (11.8%), Wales (10.3%), and Northern Ireland (9.1%). However, England, Wales, and Northern Ireland saw significant increases in total early-stage entrepreneurial activity in a strong recovery from their 2020 slumps. Scotland had held steady amid the pandemic in 2020 but other home nations appear to have built back stronger and achieved significant growth in 2021. TEA rate within Scotland is nominally highest in Eastern Scotland (9.7%) although there are no statistically significant differences between the regions in 2021. All Scottish regions reported nominal growth in the TEA in 2021 which contributed to the small uptick in national entrepreneurial activity rates. Demographics Both male and female TEA rates increased by about two percentage points in 2021 to 11.4% and 7.8%. Female TEA was growing from a much lower base so the year-on-year growth is higher at 44% compared to 21%. Among TEA entrepreneurs, there remains a significant difference between males and females in terms of the extent to which “to earn a living because jobs are scarce” motivated the entrepreneurial activity. 74% of female TEA entrepreneurs indicated this was a key motive compared to 57.7% of males. In 2021, the female to male TEA ratio in Scotland is 68%, five points below the UK average (73%) but an eleven-point improvement on the 57% reported in 2020. While overall regional TEA rates within Scotland are converging, gender disparity within regions remains with female TEA comparatively lower in North-Eastern (7.1% vs 12.5%) and South Western regions (6.7% vs 11.8%). Female TEA is also lower in Eastern Scotland (8.6% vs 10.8%), with parity observed in the Highlands and Islands (both at 9.2%). Early-stage entrepreneurial activity continues to be driven largely by younger entrepreneurs. The TEA rate for the 18-24 age group is highest (13.3%) with 25-34s at 12.6%, 35-44s at 9%, 45-54s at 7.2% and 55-64 year-olds at 6.6%. Wales has an 18-24s TEA of 16.5% in 2021, the highest among the home nations in 2021 which has grown from the 10.1% reported in 2020. Scotland’s leading rate of 13% from 2020 improved marginally to 13.3% in 2021 and is now second in the UK. The TEA rate among the white ethnic population in Scotland in 2021 was lower than that of the non-white population, at 9.2% compared to 15.5% respectively although within the margin of error. Unlike white TEA which held steady in 2020 and has grown by 31% in 2021, the TEA rate for the non-white ethnic group saw a marked decline in 2020 and with slower growth in 2021 is yet to recover to pre-pandemic levels. In Scotland, contrary to the situation in other home nations, there are no significant differences in rates of total early-stage entrepreneurial activity among the various deprivation quintiles. Attitudes and Aspirations In Scotland, as with the wider UK, just over four in ten non-entrepreneurial adults personally know someone that has started a business in the last two years. Further, 71% of non-entrepreneurs believe that most people would consider starting a business a good career choice, 78% have seen stories of successful entrepreneurs in the media, and 81% feel successful entrepreneurs have a high status and respect in society. Notwithstanding the high regard afforded to entrepreneurship by non-entrepreneurs in Scotland, in 2021, less than four in ten of them felt they had the skills and competencies required to start a business themselves. Among non-entrepreneurs in Scotland, this belief in their abilities to undertake entrepreneurial activity has declined by 20 percentage points since 2019. In contrast, the perception of good start-up opportunities is now higher than in 2019 having strongly recovered from a sizable slump in 2020, but the fear of failure among those that perceive good startup opportunities remains high, especially in the North-Eastern region. Further, only 16.4% of non-entrepreneurs in Scotland expect to set up a business within three years. Support is thus required to help many of those non-entrepreneurs perceiving entrepreneurial opportunities gain requisite skills and overcome the fear of failure so they can advance into actual startup intentions and in turn realize entrepreneurial activity. To capture growth expectations, GEM asks respondent entrepreneurs if they expect to create more than ten jobs with growth in employment of more than 50% in the next five years. In 2021, Scotland scored relatively poorly in this regard among both early-stage entrepreneurs and established business owners; both at around 10% against a UK average of 16.4% among TEA entrepreneurs and 11% among established business owners. There thus appears to be some relative underperformance across the full lifecycle in Scotland. Many non-entrepreneurs are perceiving good opportunities but there is greater fear of failure and lower self-efficacy. Many non-entrepreneurs are thus actually not expecting to set up a business in the near term. Further, many already in business in Scotland, whether early-stage or more established, do not appear to have high growth expectations. In 2021, as in 2020, around 1 in 2 of those involved in TEA agree that there are still new opportunities because of the pandemic in Scotland. This is lower than among established business owner-managers although the rate has increased from 31% to 42% in 2021 suggesting that established business owners have also adapted to become more alert to new opportunities occasioned by the pandemic. Entrepreneurial framework conditions in Scotland In 2021, Scotland returned an overall National Entrepreneurial Context Index (NECI) of 4.98 out of 10, similar to Northern Ireland and the UK. All were below the mid mark of 5 suggesting relative perceived weaknesses in many of the thirteen individual Entrepreneurial Framework Conditions (EFCs) that comprise the index. The strongest performing condition was the sufficiency of entrepreneurship programmes where both Scotland and Northern Ireland, scored significantly better than the UK as a whole. Physical infrastructure, commercial and professional infrastructure, taxes and government bureaucracy, entrepreneurial education at post-school age, and ease of R&D transfer all scored above 5/10 suggesting they were perceived to be adequate. Scoring just below 5/10, cultural and social norms in Scotland were perceived to not very strongly support entrepreneurship. The relevance and effectiveness of government support policies, as well as internal market burdens and entry regulations, were also barely satisfactory. Sufficiency and access to financing for entrepreneurs are also found to be below par in Scotland. Internal market dynamics scored 4.5 with both business-to-consumer and business-to-business markets found to have some year-on-year instabilities. Similarly, affordability of market entry costs is also a concern. Entrepreneurial education at school-age is the weakest condition in Scotland with a low score of 3.4/10. Major concerns surround adequate teaching about market economic principles, attention to entrepreneurship and new firm creation, as well as the general encouragement of creativity, self-sufficiency, and personal initiative at school.

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