In the summer of 2020, the All Party Parliamentary Group (APPG) for Black and Minority Ethnic Business Owners carried out a listening exercise (BAME Business Owners COVID-19 response), which identified a lack of information behind the impact of coronavirus (COVID-19) on ethnic minority business owners. The report recommended that a national system for data collection should be established to ensure that better data on the ethnicity of business owners was available and to help improve policy development and outcomes. The Office for National Statistics (ONS) has been leading a working group to address this recommendation.
This article sets out a summary of the working group's discussions and recommendations; the full report is available on request, by emailing ABAPS@ons.gov.uk.
Recommendations
Following several meetings, the working group recommends pursuing the following options:
explore adding an ethnicity field to the annual registration process at Companies House
include additional questions as part of the Management and Expectations Survey
The working group could also see the potential merit of further investigation into two other options:
linking existing social and business survey data sources
third party collection via financial institutions
Definition of ethnic minority owned business
To address the recommendation, the working group considered an appropriate definition. They recommend using the definition currently used by the Small Business Survey run by BEIS. This defines Minority Ethnic Group (MEG) led businesses as those businesses with either: "50% of the management team, or a sole owner from an ethnic minority background".
Policy and Research Questions
The working group discussed the types of policy and research questions that cannot be answered with existing data. Data is currently limited but is available from the Small Business Survey produced by BEIS. This survey has a small sample size and the data cannot be broken down far enough to understand impacts on different ethnic groups.
The development and evaluation of policy impacts on MEG-led businesses is not possible given the current data. There are anecdotal examples of disproportionate impacts and so improved data could either validate or correct understanding. Further data could help target policies on specific sectors or geographic regions, based on the distribution of MEG-led businesses.
Greater data could facilitate further exploration on whether there are productivity, innovation, or economic growth differentials between businesses led by different ethnic groups. There are also questions around the ability of businesses to access different types of services including government support programmes, business bank accounts, and other financial services.
The working group also identified that an approach developed to collect data on the ethnicity of business owners could also be helpful for collecting data on other characteristics of business owners, such as gender or disability. Understanding the intersectionality between these characteristics will also help to inform a number of policy and research areas.
Key criteria for a suitable data source
The working group developed several key criteria, which can broadly be grouped into three overarching types: quality, technical, and trustworthiness.
Technical criteria refer to the practical implementation including methodological and systems feasibility, the time to implement and the level of detail that could be published.
Quality criteria refer to improving the quality of the information that is collected and consider the size of the sample, the accuracy of reporting and the ability to link the outputs to other relevant datasets.
Trustworthiness criteria refer to the confidence in the people and organisations that produce statistics and data. This one of the most important elements to get right as a good response rate is vital to ensuring quality data. It is important to ensure that ethnic minority communities have confidence in the data that is being produced and held. To support this, the APPG has offered to facilitate a consultation exercise with business owners. This will inform the development of tailored communications focussed on addressing the concerns of the community.
Options consideration
Several options for collecting this information were considered, including existing business and social surveys, administrative data sources and exploring the potential to make connections between existing data sets.
The working group carried out a preliminary assessment of these options, considering them against the key criteria. Based on this assessment, two options are recommended. A further two options are considered for further exploration and although these may prove a viable solution, the complexities and uncertainty about their feasibility mean they are not considered the primary focus for filling the data gaps.
Recommended: explore adding an ethnicity field as part of annual registration updates at Companies House
This is considered to best meet the data needs. As one of the most complete records of all businesses, any data collected as part of Companies House registration is comprehensive and accurate as it needs to be signed off by the business directors and updated on an annual basis. This data could also feed into the inter-departmental business register (IDBR). This would enable samples to be targeted at certain ethnic groups in business surveys.
Currently ethnicity data is not one of the required fields for registration at Companies House. However, a number of social characteristics are collected, and some of those are partially protected by not being fully shared on the public register (date of birth).
Given that ethnicity fields are not currently collected, it is anticipated that this option may take some time to implement, including potential consultation and safeguards to ensure that the data is protected effectively.
There is a risk that this option will not provide full coverage of all businesses, as many small or independent businesses may not be registered at Companies House. Data from the business populations estimates 2021 suggested that 52% of businesses were unregistered. Another alternative, which may fill the remaining gap, would be to consider collecting ethnicity of the business owner through HMRC data, but as these businesses will also not be registered for VAT or PAYE, it is unlikely to resolve the issue.
Next steps: APPG for BAME Business Owners to lead on pursuing this option further, with support of the ONS, reaching out to Companies House and facilitating a discussion about this proposal and exploring its feasibility.
Recommended: include additional questions as part of the Management and Expectations Survey
This biennial ONS survey collects information about the leadership and management of businesses. This would probably be the most thematically appropriate survey to collect further data on business ownership characteristics. It may also facilitate better research on the productivity and innovation in businesses from different ethnic backgrounds, as these themes are also covered in this survey.
This option would be less comprehensive and less frequent than collecting data via the Companies House annual registration process, but if feasible it may be quicker to implement.
Next steps: the ONS to explore the methodological and systems feasibility of incorporating questions on ethnicity of owners as part of the next collection of information.
Explore further: link data between Social and Business survey records
It is likely that it will be very difficult to provide comprehensive data on the ethnicity of business owners. It depends on the relevant parties being subject to both business and social surveys, and then ensuring links are being correctly made. Collecting additional data at Companies House may improve the ability to make effective links between social and business data.
As the project to link data progresses, we will continue to consider it as an option because it has the potential to address the needs identified by the APPG. The complexity and associated uncertainty mean that it is not part of the primary recommendations.
Next steps: the ONS to continue exploration as part of the development of the Reference Data Management Framework.
Explore further: third party collection via financial institutions
A proposal to work with financial institutions to collect ethnicity information as part of any application for business financial services was also considered by the group. Although this option is unlikely to be comprehensive because many small or independent businesses may not use business bank accounts, it offers an alternative route to collect additional information that could facilitate research on access to finance across firms. Another alternative route may be to consider the credit reference agencies for business finances, but this would still fail to capture any businesses that do not rely on business finance services.
Many elements of this option remain unclear, and it would require new processes for the collection and processing of administrative data, however given the ambition from the financial sector to consider whether this may be feasible, further exploration would be sensible.
Next steps: explore as part of separate discussions with the APPG for BAME Business Owners, financial providers, and the Financial Conduct Authority.
Next Steps
The ONS will continue to act as a coordinator on the recommended options and options to explore further, providing feedback on progress, and the ongoing feasibility of options to the working group and other interested parties on a regular basis. The ONS will also continue to work alongside the APPG for BAME Business Owners, to understand the ongoing discussions with the community, their concerns with a lack of data, and around the collection of this data.