If things don’t change, there could be major consequences for the economy
There is no playbook on how to simultaneously run a business and homeschool your kids during a pandemic. In March, Alex Depledge, founder and CEO of online architectural firm Resi, was acting as a full-time teacher to her children aged two and five, while trying to make big decisions on what to do next: furlough people, cut staff, or chop marketing spend. “You’ve got these really challenging questions and your support network is falling away,” she says.
Depledge’s situation at the start of the pandemic is a familiar one for women running their own businesses. And things are still far from back to normal.
Contradictory messages from the government have meant that Depledge’s cautious and gradual plan for her team’s safe return to the office was rendered obsolete. “It’s constantly shifting. It gets harder every time [the government] brings out more conflicting advice. You have this constant feeling of being completely out of control,” she says. Resi is well funded and continued trading through the pandemic, but the company’s revenue will be half of what Depledge had forecast for this year.
Unlike previous recessions, which affected men more severely, the economic fallout of Covid-19 has disproportionately affected women. Women were around a third more likely to work in a sector that was shut during lockdown. They are more likely to be furloughed and are 47 per cent more likely to have lost or quit their job. And they have shouldered more childcare responsibilities and household work than men.
It’s no wonder the International Monetary Fund has warned that Covid-19 threatens to roll back the last 30 years of economic gains for women. And it’s a similar outlook for women entrepreneurs. The pandemic could halt the already slow progress towards gender parity in the technology industry and exacerbate existing funding inequalities.
Women are more likely to run businesses in areas harder hit by the pandemic, such as beauty, health, social care and retail, and they also tend to be in sectors which have lower productivity. Rates of closures among small and medium businesses during lockdown were higher among those led by women. Female-led businesses also tend to be smaller and have less financial support behind them, making them more vulnerable to economic shocks.
Before the pandemic, women were less likely to apply for funding and when they did, the amounts they received were smaller. For every £1 of venture capital investment in the UK, all-female founder teams get less than 1p, all-male founder teams get 89p, and mixed-gender teams 10p. The data on emergency pandemic funding for female entrepreneurs indicates that this gap has continued to widen. The government launched the Future Fund in April: £500 million worth of convertible loans between £125,000 and £5m.
Half the money given to startups as financial support comes from the government, but their private investors need to match it. Companies applying must have already received equity investment of at least £250,000 in the last five years.
Of the just over 700 companies that applied, the majority (82 per cent) had mixed-gender management teams, but just eight companies had an all-female senior leadership team compared to 181 all-male teams. Funding for female-run businesses totalled £7.2m versus £118.4m for male companies.
Private investors matching government funding have been encouraged to sign the Investing in Women Code, one of the diversity efforts which came out of last year’s Rose Review into female entrepreneurship. So far, an additional 30 VCs and angel investors have now added their names. But VCs have a diversity problem of their own: women make up just 27 per cent of the venture capital industry, and only 18 per cent of investment level roles. This bias is often cited as a reason behind the low levels of funding for female businesses.
Female entrepreneurs who are not yet pitching for VC money are not in a better situation. Earlier stage support through the Self-Employment Income Support Scheme also leaves women with less. Around 79 per cent of eligible men took up the scheme, compared to 71 per cent of women. The average value of the grant was 39 per cent higher for men, averaging £3,200 versus £2,300 for women.
Research from Beahurst, a research firm, found that female founding teams are half as likely to be in a positive situation from the pandemic compared to mixed-gender or all-male teams and they are 1.4 times as likely to be in what it terms “negative impact” territory.
Ute Stephan, professor of entrepreneurship at King’s College London, says businesses led by women were performing at the same level as male-led businesses before Covid-19 hit, but have been disproportionately affected. “There are oftentimes big female-led businesses who excel in a crisis – but it’s true that women entrepreneurs tend to be more vulnerable because they have slightly worse starting conditions,” she says. “I think it’s going to be tough for everyone, but it’s going to be tougher for women entrepreneurs.”
Female entrepreneurs already experience more job-related anxiety, more job-related depression and worse mental health compared to male entrepreneurs, and this pandemic is likely to exacerbate these issues.
As more women turn to entrepreneurship as their only option in a hostile job market, Shelly Bell, the founder and CEO of Black Girl Ventures, believes the support provided to them needs to offer “ongoing support that acknowledges the [gender] gap and actively works to close it”. It won’t be an easy task.
“A pandemic exacerbates the challenges we already had,” says Bell. “We’ve been dealing with the gap for so long that now, trying to push that forward and handle a pandemic, it feels like a lot. I’m just hopeful that things don’t get pushed back further.”
Bell has seen many women pivot their businesses, but some may not survive in a post-pandemic world. Women have to ask themselves how their businesses and industries have changed because of Covid-19, and what new industry might have to emerge because of this new kind of life, says Bell.
The Women’s Enterprise Policy Group (WEPG), a coalition of researchers, women entrepreneurs and business support groups, has warned of a “tsunami” of job losses and business closures if the government fails to address the extra challenges faced by women entrepreneurs.
“If enterprise policy fails to recognise and support women now, then it will have a catastrophic economic impact,” says Nicola Patterson, a member of the WEPG and senior lecturer at Newcastle Business School. “The strongest economies are those built on a diverse and inclusive range of talents. Gender responsive policy reform is critical now to ensure the UK economy does indeed ‘build back better’.”
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