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Britain is forfeiting tens of thousands of women entrepreneurs, recent government statistics disclose, in a trend that jeopardizes both economic advancement and diversity.
In spite of years of efforts to motivate women towards business ownership, the latest survey indicates that female-led small and medium-sized enterprises (SMEs) have dropped to merely 14% of the total — a decrease from 19% in 2021.
This translates to tens of thousands fewer women leading companies in the UK. The downturn occurs alongside increasing taxes, escalating wage expenses, and limited access to funding, which specialists assert disproportionately impact women striving to emerge as business leaders.
The Department for Business and Trade’s yearly survey of 8,400 SMEs revealed that only 14% are currently headed by women, falling from 15% in 2023 and 19% just three years earlier.
The magnitude of this reduction is substantial: relying on the DBT’s assessment of 1.42 million small and medium-sized employers, tens of thousands of female-led enterprises have disappeared from the business landscape since 2021.
In contrast, the proportion of entirely male-led firms remains elevated at 43%, while gender-balanced leadership teams have only marginally increased from 25% to 26%.
Reasons Female Entrepreneurs Are Lagging
Taxation and Escalating Costs
The same survey identified that taxation has surpassed energy expenses and market competition as the primary hindrance to SME growth. Sixty-one percent of businesses reported taxes as the greatest challenge, up 16 percentage points from the preceding year. For businesses employing between 10 and 49 individuals, that percentage jumped to 75%.
Hospitality and retail — industries with a higher concentration of female-led enterprises — noted even more pronounced increases in concern. In hospitality, an astonishing 89% of businesses stated tax pressures were compelling them to reconsider their growth strategies.
In addition to taxation, the increasing National Living Wage is impacting sectors that depend on substantial numbers of part-time and lower-paid staff, many of which are female-led. Thirty-one percent of SMEs flagged wage pressures as a barrier, marking a seven-point increase from 2022.
Access to Funding and Investor Prejudice
Debbie Wosskow, co-chair of the Invest in Women Taskforce, contends that the funding ecosystem is not configured to assist women founders.
“Certain sectors that are most likely to feature women-led businesses — health, education, food — do not receive the same investor attention or ‘excitement’ as tech or fintech,” she stated. “This isn’t merely about diversity; female-led enterprises yield higher returns. Investors are letting opportunities slip away.”
Studies consistently reveal that women obtain a fraction of venture capital financing in comparison to men. A 2023 British Business Bank analysis indicated that less than 2% of VC funding was allocated to all-female founding teams.
This funding disparity forces numerous female entrepreneurs to depend on personal savings, family support, or loans — options that are constrained, especially in a climate of high interest rates.
The Confidence and Perception Divide
Surveys also underscore a confidence deficiency among female founders. Many express a lack of visible role models, enduring stereotypes concerning women in leadership, and systemic barriers in networking and mentorship.
The notion that entrepreneurship is perilous — particularly amid economic instability — can also deter women, who are more likely to shoulder primary family and caregiving duties, from launching or scaling businesses.
Why This Matters for the Economy
The decline in female-led firms is not solely an issue of equality; it poses an economic dilemma. The government-supported Invest in Women Taskforce has assessed that if women initiated and expanded businesses at the same rate as men, the UK economy could gain an extra £250 billion.
However, rather than bridging the gap, the latest statistics suggest Britain is regressing. With female-led SMEs diminishing as a share of the business base, chances for innovation, job creation, and regional revitalization are being forfeited.
Rachel Reeves, the Chancellor, has consistently emphasized her desire to make Britain “the premier location in the world for female entrepreneurs.” But for numerous founders, rising taxes and constrained consumer demand are presenting the contrary reality.
Britain’s downturn in women-led firms sharply contrasts with trends in other advanced nations. In the US, women-owned businesses are among the rapidly growing demographics, increasing by more than 20% over the past decade.
France has implemented dedicated financing programs for female entrepreneurs, while Scandinavian nations — with higher female employment rates overall — are witnessing stronger growth in women-led SMEs.
Experts highlight structural support, including affordable childcare, investment incentives, and focused mentoring programs, as factors behind these achievements.
What Needs to Transform
Targeted Investment Reform
The most significant lever is capital. Wosskow and others advocate for new funding mechanisms specifically designed to support women-led enterprises. These could encompass government-backed venture funds, tax incentives for investors who assist female founders, and mandatory disclosure of diversity data by VC firms.
Tax and Wage Policy Relief
While Reeves has limited latitude in her November Budget, targeted tax relief for SMEs — especially in sectors with high female participation — could help mitigate the decline. Business groups advocate for a reevaluation of wage thresholds for smaller employers.
Infrastructure and Support
Affordable childcare and flexible working continue to be critical enablers for women balancing entrepreneurship with familial responsibilities. Enhancing state-backed childcare provisions could potentially contribute more to female entrepreneurship than many business-specific policies.
A Cultural Shift
As Wosskow pointed out, female-led enterprises should not be confined to a diversity initiative. They represent commercial possibilities with significant growth potential. Shifting the narrative from equality to economic advantage may be essential in garnering investor backing.
The Path Forward
The reduction in women-led SMEs highlights the disparity between governmental declarations and business reality. Despite initiatives like the Invest in Women Taskforce, the structural barriers of taxation, capital acquisition, and cultural bias remain firmly established.
Tina McKenzie, policy chair of the Federation of Small Businesses, has urged the government to establish an ambitious target: ensuring half of self-employed individuals are women by 2035. That would symbolize a remarkable transformation from the current figures.
Nevertheless, unless Reeves leverages her November Budget to tackle the financial pressures burdening SMEs — from tax increases to wage expenses — female entrepreneurs may keep disappearing from the business landscape, dragging down Britain’s growth prospects with them.
