Denial that female entrepreneurs often start from a radically poorer financial position than their male counterparts lies at the heart of the UK’s woeful figures on women in business, comments AXA Business Insurance. In a new study*, the insurer suggests that shaking up business funding and addressing the abandonment of self-employed women when it comes to maternity pay are vital next steps in policy.
While it is widely reported that women fill only 29% of positions on FTSE 100 boards, the situation is even worse at the SME level – just one in five of these 5.4m businesses are led by women. Appetite is not lacking: the study found that 12% of women are now involved in start-up activity, doubling since 2016.
Their starting point varies considerably from male entrepreneurs, however: 63% of men start their business straight out of a full-time job. A minority of women can say the same – just 38%. This figure reflects the greater number starting out from lower status part-time jobs (three times more), or a long period out of the workplace (12 times more).
This connection to the business world and more robust financial history has profound implications for the early days of a business. Fifty one per cent of men who start a business maintain contact with their previous employing company (getting clients from them, taking on freelance work for them or continuing to network).
This figure crops up again when you look at their new business’s customers: 51% of men say their customers are drawn from mid-sized and large companies, meaning the more lucrative contracts in the self-employed world. Just 28% of female-led businesses cater to this market.
“What this means is that the professional and financial starting point for men and women is very different”, comments AXA’s Marie McKelvie, who will present on Women in Business at the Startups 100 Awards later this month. “Coming out of a full-time job, you have professional networks in place, a better financial record that will help you access finance like loans, overdrafts, business accounts, and even things like pension schemes are more likely to be in place. It also means you have a strong connection to the corporate world, a foot in when it comes to pitching for contracts, being up-to-speed on current thinking, and the option to acquire customers from employer networks.”
The difference is also reflected in the hourly rates commanded by female and male entrepreneurs (in businesses where customers pay per hour. Male business owners give their hourly rate as an average of £30, female - £22 per hour.
A few points demonstrate the difference in access to financial tools too:
43% of today’s start-ups led by a man will access formal business funding, compared to 26 per cent of female-led start-ups.
Just 25% of self-employed women pay into a pension scheme, compared to 34% of men
More women also report that self-employed status makes it harder to access things like mortgages (a quarter versus 15% of men), credit (a quarter versus nine per cent of men) and even rental accommodation (three times more).
Many women having spent time out of the workplace means that their demand for support when starting a business is higher than men’s: three quarters of women at the start-up stage say they need education and training if they are to succeed. The decline in further education in the UK is thus stalling women’s entry into business in a profound way.
Confidence-building through training, mentoring and start-up schemes is more urgently needed by women too: 45% of women who are at the start-up stage said that lack of confidence means they do not ‘fit the image of the entrepreneur’. They were also twice as likely as men to say they are held back from launching their business because they fear ‘people won’t take me seriously’.
Absence of equitable maternity provision
The study found that self-employment can be a good option for women who have children – 75% of whom say they were partially motivated to start their venture as a way of seeking greater flexibility. If a woman goes on to have further children while self-employed, she is suddenly put at a huge disadvantage, however.
While most self-employed women have childcare support in place to cover their working hours (either formally, or from family members), 21% of those starting out today say they do not. This ‘school-runner’ business is hence structured around the school drop-offs and pick-ups, with work often flowing into early mornings and evenings after children are in bed.
But, what happens when a woman has more children after starting her business? The study found that the average maternity leave for a self-employed mum is just six weeks, with 45% saying they had under one month’s leave from work, and 15% taking no leave at all.
Maternity Allowance (MA) is the benefit they can claim, which is a maximum of £145 per week, or 90% of average earnings if that is less. For self-employed people who do not meet the eligibility criteria in terms of number of weeks worked in the previous 16 months and National Insurance Class 2 contributions, this falls to a statutory minimum of £27 per week.
Funding for maternity leave is rarely taken from savings: just 28% of self-employed women say they had savings available, with the partner’s income being the most important support. Two factors lie behind the lack of self-funding: first is lower incomes among self-employed women, and the second the more restricted access to financial tools.
“We know that getting more women to the helm of businesses is a strategic priority for the UK economy, and cited as an ambition by politicians across the board. We also know that eight in ten women in our country will have a child at some point – there is no point in denying basic facts like these. But, as yet, there is no clear plan on how maternity provision for employed and self-employed women will be equalised. It is often forgotten just how crucial this point is if we want to get more women leading the UK’s businesses. We know this issue has been debated in Parliament for several years now, action on this issue should be a matter of urgency just as much as widening access to business funding for women on low incomes or planning a return to work after being at home with the children for some years.” Marie McKelvie, AXA Insurance.