Nobody doubts the fact that entrepreneurship creates wealth but how much does it contribute to addressing wealth inequality? Although some studies suggest that it is the middle-aged and wealthy who benefit disproportionally from entrepreneurship, recent research show that entrepreneurship’s wealth effect is spreading and more young people and those from less privileged backgrounds are becoming entrepreneurs.To help ensure that this trend strengthens, we need to consider a range of measures, including embedding entrepreneurship into the education system, nurturing early-stage companies and encouraging further growth of social enterprise to accelerate this development. Entrepreneurship in the UK is certainly flourishing. Since 2008, the number of SMEs in the UK has reached a record high, with some 5.2m small businesses in total incorporated, according to Lord Young’s February 2015 report on small firms. Initiatives such as StartUp Britain, a national campaign established by entrepreneurs for entrepreneurs is designed to celebrate, inspire and accelerate enterprise in the UK. Its related think tank, The Centre for Entrepreneurs, calculates that 581,173 businesses were registered with Companies House last year, up 10.4 per cent on 2013. Government-backed schemes such as Business in You and Small Business Saturday have all helped to drive national awareness and support of entrepreneurship and SMEs. Policies designed to benefit entrepreneurs and SMEs to help boost their success have been developed by successive governments, including entrepreneurs’ tax relief, the fair payment scheme, the British Investment Bank and the Small Business Charter.
Despite the huge growth in entrepreneurship, studies (e.g. Fairlie and Krashinsky, US-based academics) argue that it is the wealthy and middle aged who benefit most from entrepreneurship, as they transition from paid employment to become successful entrepreneurs. Also often the businesses they run are lean, so rather than contributing to wealth distribution they could contribute to wealth inequality. This perception is reinforced by a recent BNP Paribas study of 2,500 successful entrepreneurs globally, which identified that 60 per cent have a history of business ownership within their family. The study also found that almost 70 per cent of entrepreneur angel investors invested in other businesses, with the overriding aim of generating a return on their investment and further increasing their own wealth – rather than contributing to narrowing wealth inequality. However new trends are emerging and according to 2014 data from Experian, more first-time entrepreneurs than ever before are establishing businesses and they tend to come from less affluent backgrounds than previously: a third of these entrepreneurs came from households with income of less than £25,000 and around 8 per cent lived in social housing – more than double the 2009 figure. Read more about British entrepreneurship:
- The sacrifices British entrepreneurs make to launch a new business
- UK leads the charge for female entrepreneurship in Europe
- How Airbnb has become a source of funding for UK entrepreneurs
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