International Women’s Day is just around the corner and there is so much to showcase when it comes to the crucial role that women are playing in building SMEs around the world.
As the motor of every nation’s economy, SMEs are recognised for their importance to a country’s prosperity. In the UK alone, over 99% of businesses can be classified under this category, employing between 0-250 employees and generating more than half of total business turnover in Britain each year.
In 2016, 22% of SMEs with no employees and 20% of SMEs with employees were led by women which in concrete terms means that around 1.2 million SMEs in the UK currently have a woman at the helm.
Unfortunately, female leadership is still sharply segmented by industry in a broad reflection of the wider inequities of gender participation in the labour market. According to analysis by the SME Finance Monitor, only 3% and 4% respectively of female SME leaders work in the ‘Transport, Storage, and Communication’ and ‘Construction’ sectors compared to 18% each in the women dominated ‘Health and Social work’ and the ‘Community, Social and Personal Services’ sectors.
Addressing this issue will take time, but we can start by encouraging leadership role across all fields- regardless of gender. Women should be supported to lead in traditionally male dominated industries like construction, while men should also be encouraged to spearhead initiatives in the ‘people oriented’ sectors which can be subject to biases stemming from outdated misconceptions of ‘female oriented’ industries, particularly in roles outside of top level management.
The persistence of the gender divide in leadership and the lagging rates at which women launch their own business remains a critical societal issue because diversity in leadership matters. The existence of role-models at the top can inspire other would-be-entrepreneurs to start their own businesses and model gender equality and achievement to their employees and colleagues.
Closing the gap between male and female rates of entrepreneurship could also have a profound effect on the nation’s economy. Despite recent evidence that more women than men are choosing to move into self-employment since the 2008 recession, the RBS Enterprise Tracker – which tracks people’s attitudes to starting up in business – found during 2016 that women continued to be less likely than men to want to start a business (30% vs. 38%) and that fewer women were in the process of starting their own business (3% vs. 5%).
Research cited by the Federation of Small Businesseses suggests that an additional 900,000 businesses would be created if the UK achieved the same level of female entrepreneurship as in the US, resulting in an additional £23 billion gross value added to the UK economy. In England alone, 150,000 extra businesses would be created per annum if women started businesses at the same rate as men.
The final piece to the puzzle is the funding gap between male and female led SMEs, which can hobble promising new start-ups before they can truly grow. According to a 2017 TechCrunch review of Venture Capital funding in the US, since 2010 women led teams raised an average $82 for every $100 a male founded team raises. In early-stage venture funding, the picture was even bleaker with women-only founding teams raising on average $77 for every $100 a male-only founded team raised.
While these statistics are for the US, VCs are similarly male dominated environments in the UK both in terms of businesses funded and the gender makeup of the VCs themselves. Securing funding is critical for SMEs and the predominance of male dominated fundraising environments can make this a more difficult process for female led businesses.
Of course, such hurdles are frequently overcome everyday by the countless trailblazing women who lead successful businesses across the country. In 2018, however, we hope that this International Women’s Day will be one of the last where admiration for such success still needs to be paired with a call to action for the continued fight for equality.