Record proportion of UK start-ups created by women

Female business owners now account for a larger proportion of new company incorporations than ever before, the latest data from a major government-commissioned review has revealed.

A progress report on the review of female entrepreneurship by NatWest chief executive Alison Rose found that the growth in women-led start-ups is outstripping men for the first time.

Over 145,000 all-female founded companies were created in 2021, a figure that is growing by more than a third each year. In total, over 20% of new firms are now led by women which is a record high.

Rose was first asked by the government to lead a review into female entrepreneurship in 2019. Her initial report found that 16% of new incorporations were by women in 2018.

Although the proportion of women has increased, men still remain three times as likely to start a business. There were 409,800 all-male-led incorporations in 2021, up from 193,400 in 2018.

The review has a target of boosting the number of female entrepreneurs by 600,000 by the end of the decade.

The impact of the pandemic on female entrepreneurship

The new report found that the COVID-19 pandemic exacerbated the challenges faced by women in starting and scaling businesses.

Despite efforts to break down barriers faced by female business owners with caring responsibilities, they spent six to 10 more hours per week on childcare than they did before the pandemic, twice the increase for men.

Women founders with children were also worse affected by coronavirus. Their businesses are 62% less likely to have recovered than those of founders without dependants.

In 2019, Alison Rose found that the UK economy could be boosted by £250 billion and 1.1 million more businesses if more was done to close the gender gap in British entrepreneurship. However, the latest report said that challenges such as those around childcare mean "we have only just begun to realise that value which can be a critical contributor to UK economic growth".

Finance for female entrepreneurs

Another big challenge for female entrepreneurs is funding.

Treasury-commissioned research in 2019 found for every £1 of venture capital investment, only 1p goes to female entrepreneurs. Three years on, the problem persists.

UK start-ups raised £13.5 billion during the first half of 2021, almost three times the investment raised in the first half of 2020. In addition, more than 100 tech ‘unicorns’ and 153 ‘futurecorns’ are based in the UK.

However, venture capital investment levels in female founders have remained "significantly low", the report said, at under 5%. In comparison, all-male teams accounted for 84% of total VC funding in 2020.

The 2021 Annual Investing in Women Code Report further highlighted that all-female teams account for only 10% of investment pitches that reach VC signatory firms, and the share of all female founder teams funded dropped to 6%.

"There is a lack of transparency around how funding decisions are made, with various reports suggesting signs of perceived bias towards diverse businesses within the VC community," the report said.

"Female entrepreneurs have spoken about this bias by sharing their accounts of being judged as less competent than their male peers, despite having a similar degree of skills and business experience.

There has there has been some progress though. In 2019, Treasury launched the Investing in Women Code. By signing up to the Code, financial services firms commit to improving female entrepreneurs' access to tools, resources and finance.

It had attracted 134 organisations as of end of February 2022, up from 80 in March 2021, a 68% year-on-year rise, and representing nearly £1 trillion in assets.

The Rose Review has a target of 30% of all investment in private companies going to female founders and co-founders by 2030.

It intends to launch a new recruitment campaign to increase signatories to the Code, and run a campaign to help more women become business angels to ensure that female founders across the UK have a better chance to access early-stage investment.

Mentoring for female entrepreneurs

The report said there are a growing number of mentoring and networking opportunities to help female entrepreneurs find the support, confidence and inspiration to grow a business.

Among the schemes and organisations the report highlighted are Enterprise Nation's Entrepreneurial Women and Amazon Small Business Accelerator as well as Mastercard's Strive initiative which is supported by Enterprise Nation.

Alison Rose said: "With fresh thinking, swift action and a redoubled effort, we can continue to work together to achieve our ambitions and unleash the untapped potential of female-led businesses to drive our economic recovery."