16th October 2010

A new survey by the Leicestershire Asian Business Association (LABA) conducted among nearly 500 businesses, between May to August 2010, shows that the failure of high street banks to lend to Asian entrepreneurs is the major cause of business failures in the region. Respondents to the qualitative survey also stated that the disappearance of relationship banking, i.e. face-to-face, was a crucial trigger of the downward journey towards business failure. In addition, respondents accused banks of applying a post-code lottery and stereo-typing.

“The survey showed” said Mr. Jaspal Singh Minhas, the President of LABA “that causes of business failure are led by insufficient access to capital from the banks and lack of working capital, a lack of business advice, planning and training, limited business intelligence and access to procurement opportunities”.

The good news for Local Authorities is that one of the few areas that respondents had confidence in was dealing with local councillors whom they found accessible. When closing their businesses, only 30% of companies took advice from Government Departments and nearly half (48%) borrowed money or re-mortgaged family properties to pay off business liabilities as an exit strategy. It is important to note that this does not appear as a business failure in government national statistics therefore the true number of companies folding with outstanding debts is much higher.

A sad reflection of the way we treat business failures in the UK is highlighted by respondents when they say they are stigmatised and discouraged from starting again – they feel once failed, they are more likely to fail again as have insufficient capital and limited opportunities. As a result, many entrepreneurs from the region have migrated to the USA and UAE and later found success, which has created a multiplier effect for other marginal or failed entrepreneurs.

“The continued lack of general confidence in the business community is hampering future economic well-being of communities. As a result there has been a steep rise in cases of heart disease, diabetes and alcoholism noted in British Asian communities” confirmed Jaspal Singh Minhas. “A real challenge to the coalition government who has placed job creation and economic recovery at the doorstep of the SME’s. Referring to previous attempts to turn this around, many in the region feel that enterprise programmes were often ad-hoc, driven by short-term funding and political priorities and without a clear economic framework. They argue that simple measures, such as access to localised lending would make a real difference."

Mr. Minhas “urged the Business Secretary of State Vince Cable MP to take notice of the research and engage with LABA to develop solutions to the business challenges. I hope the localism agenda does include the diverse business communities as well”. In order to turn things around, respondents to the survey urged the Government and the banks to place more value on self-employment, which is currently seen as a last resort activity for economic wellbeing.

The survey of 480 British Asian businesses in the Leicestershire area was carried out by LABA members, researchers and volunteers between May and August 2010, and was led by LABA’s Vice President Uday K Dholakia. For further information about LABA visit www.labauk.org