GEM 2007 South East Wales Report
21st Jun 2008
The full report is now available to download (Welsh version to follow)
EXECUTIVE SUMMARY
- The Global Entrepreneurship Monitor (GEM) research project analyses entrepreneurial activity across a large and growing range of nations and regions, including Wales. This report examines the level of entrepreneurship in the South East Wales economic area using appropriate data from the GEM 2007 Wales sample survey.
- GEM measures both nascent entrepreneurs - the proportion of the adult population aged 18- 64yrs who are actively participating in the process of start-up - and owners of ‘new businesses – those who are active in running a new business for less than 42 months. Combining these two measures gives the main output index, namely the Total Early-Stage Entrepreneurial Activity (TEA) rate.
- In 2007, the TEA index for South East Wales was measured at 4.3 per cent, as compared to 5.3 per cent for Wales as a whole. This is down from 5.1 per cent in 2006 and 4.7 per cent in 2005, although the decrease is not statistically significant. The rate remains lower than the early stage entrepreneurial activity index for 2007 for Mid-Wales (5.3 per cent), North Wales (7.4. per cent) and South West Wales (5.2 per cent).
- In terms of established business ownership i.e. those who have owned and managed a business that has paid wages or salaries for more than 42 months, the rate in South East Wales is 3.4 per cent, lower than any UK or Welsh region. This demonstrates that neither new nor established entrepreneurship is deeply rooted within the economy of the region.
- South East Wales had an opportunity TEA (i.e. those who start a new business to exploit a perceived business opportunity) of 3.6 per cent in 2007, meaning opportunity driven entrepreneurship constitutes a large majority of early stage entrepreneurial activity in South East Wales.
- Independence remains the core reason for entrepreneurial involvement across all of those pursuing a business opportunity, with 60.4 per cent of opportunity entrepreneurs in South East Wales citing this reason as the key driver in establishing a new business. Compared to previous years, financial motives appear to play a smaller role in starting a business in South East Wales.
- High growth business are more common in South East Wales than the rest of Wales, but still lag the rate found in the UK as a whole.
- In South East Wales, the female TEA activity rate was measured at 2.7 per cent, compared to 3.2 per cent in 2006, both lower than the 3.6 per cent measured for the rest of Wales.
- The highest level of early-stage entrepreneurial activity is found for those aged between 25-34 years, with a TEA of 6.8 per cent, followed by the 45-54 year olds (5.5 per cent).
- In terms of income, those with an annual salary within the upper third of salaries in South East Wales have the highest participation rates in entrepreneurial activity (6.7 per cent – compared to 8.8 per cent in 2006 and 6.0 per cent in 2005).
- One of the least entrepreneurially active groups is those individuals with no formal qualifications, with only 1.9 per cent involved in enterprise activities as compared to 2.6 per cent for the rest of Wales. This lower rate of involvement by those with the lowest qualifications in South East Wales was also found in 2006.
- Life-long residents (3.9 per cent) and in-migrants (4.8 per cent) in South East Wales have lower TEA prevalence rates, whereas immigrants have a slightly lower TEA rate (6.3 per cent) than the immigrant average for the UK or the rest of Wales.
- The percentage of the population with intentions to be involved in entrepreneurial activities in the near future in South East Wales (5.7 per cent) remains behind both the rest of Wales (7.1 per cent) and the UK (7.4 per cent). Both male and female entrepreneurial aspirations are lower in South East Wales than the rest of Wales and the UK as a whole.
- The difficulty in obtaining finance is still the key barrier faced by entrepreneurs in all regions, with 49.5 per cent of respondents maintaining that access to funding prevents them from starting a new business in South East Wales.
- Bank overdrafts are still the most common source of funding for business start-ups, followed by more informal sources such as friends and family.
- The TEA prevalence rate for young people in South East Wales is significantly lower than for the rest of Wales and half that for the UK.
- The majority of 18-24 yr olds in the region consider lack of funding to be a major barrier to entrepreneurial activity, a similar pattern to both the rest of Wales and the UK, which suggests that the of collateral that young people are able to offer is a important factor when they attempt to acquire debt financing.
- Enterprise education is associated with increasing levels of entrepreneurial activity for 18 to 24 year olds, specifically in the young women grouping, supporting the notion that a specific focus of enterprise education courses within schools, universities and colleges in South East Wales, as with Wales as a whole, should be a priority particularly for female undergraduates.
- TEA for those living in the M4 corridor (4.5 per cent) is slightly higher than for those living in the South Wales Valleys (4.2 per cent). Whereas all measures of entrepreneurship are found to be higher in the M4 corridor region, the largest difference is in terms of established business ownership, suggesting a longer term pattern of differences in entrepreneurial activity between the two parts of South East Wales. Entrepreneurial intentions are also much higher in the M4 corridor than the South Wales Valleys.
- The number of people, in terms of entrepreneurial attitudes, that personally know an entrepreneur still remains higher the M4 corridor than those in the Valleys, not surprising given the superior level of business ownership rate in the M4 corridor. This lack of entrepreneurial social capital may form a barrier to increasing the level of entrepreneurial intentions in the South Wales Valleys, and therefore prevent the closing of the entrepreneurial gap in South East Wales.
