Abstract
Plain English summary
Low-income UK entrepreneurs face interconnected barriers, financial, social, human and institutional, that compound one another and are intensified by spatial context (e.g. rural or deprived locations), perpetuating inequality. A scoping review of 46 UK studies found that low-income individuals face significant challenges in accessing these essential forms of entrepreneurial capital. Financial barriers include limited access to loans, insufficient savings, high start-up costs and financial risk. Human capital challenges arise from limited education, inadequate entrepreneurial skills and low confidence in achieving success. Social capital barriers stem from weak networks, reliance on close social connections, and limited access to mentors and role models. Institutional barriers concern distrust in support programmes, perceived discrimination, limited accessibility and bureaucratic hurdles. An integrated framework is presented that shows how these obstacles collectively hinder low-income households from establishing and growing enterprises. Recommendations for policy interventions to reduce the barriers are suggested, and future research areas proposed.
Introduction
This review, focused on entrepreneurship in low-income households, adopts a broad definition of ‘enterprising behaviour’ as any activity undertaken to initiate, sustain or grow income-generating or socially beneficial ventures, whether individually or collectively (Dimov, 2007; Dimov and Shepherd, 2005; Kobia and Sikalieh, 2010). This includes formal entrepreneurship, self-employment (Williams and Williams, 2011; Summer, 2009), social enterprises and community-based initiatives (Buratti et al., 2022; Hermelin and Rusten, 2018). The definition reflects the diverse ways in which low-income households engage in business ownership. In doing so, it captures the reality of entrepreneurship in more deprived settings, where enterprising behaviour functions both as a form of resilience or necessity, and as a pathway towards autonomy, income security and social value (Williams and Williams, 2014).
Entrepreneurship is often presented as a means for individuals to achieve social mobility through the exploitation of gaps and opportunities within markets, to provide new goods and services (Bruton et al., 2013). However, the existing institutional structure in the UK has struggled to support entrepreneurship as a sustainable career option for low-income households (Syrett and North, 2010). This is despite UK government efforts that promote entrepreneurship amongst such groups, through support programmes and schemes, to tackle increasing poverty rates, while reducing welfare dependency (Morris et al., 2020; Slack, 2005). Although there is evidence of active entrepreneurial cultures within deprived communities (Williams, 2006), significant barriers to entrepreneurship remain for those living on low incomes that are often overlooked or inadequately addressed by governments and supporting institutions (Thomas Lane et al., 2016).
However, we currently lack a complete understanding of this failure in public policy. The existing insights into low-income entrepreneurship are fragmented, focusing on specific phenomena, such as urban/rural entrepreneurship, refugees/migrants and gendered aspects (Farmer et al., 2008; Lyon et al., 2007; Murzacheva et al., 2020; Williams and Huggins, 2013). Much of the evidence to date has been empirical in nature, aimed at informing public policy rather than contributing to theoretical development (Rouse and Jayawarna, 2006; Smith et al., 2019; Thompson et al., 2012). Furthermore, the few papers with theoretical insights have been diverse and focus on conceptually framing challenges faced by individuals from low-income households in accumulating specific entrepreneurial resources, such as finance, skills and social networks (Williams et al., 2017; Williams and Williams, 2012). To date, there has been no attempt to bring these empirical and theoretical insights together into a coherent framework that explains the breadth of challenges facing low-income households when they engage in entrepreneurial activities, across different demographic and spatial contexts. Therefore, this study attempts to answer the research question:
We adopt a scoping review methodology to examine the barriers to entrepreneurship in low-income households in the UK (Arksey and O’Malley, 2005; Cubbon et al., 2021). Drawing on the theoretical and empirical insights of 46 papers on low-income entrepreneurship (Frankish et al., 2014; Thompson et al., 2012; Williams and Huggins, 2013; Williams and Williams, 2012, 2017), we develop a framework grounded in entrepreneurial theories of resource accumulation. These theories suggest that entrepreneurs accumulate forms of entrepreneurial capital that enable them to develop the required individual and organisational capabilities to start and grow a business or community venture (Alomani et al., 2022; Alvarez et al., 2024; Leitch et al., 2013; Linder et al., 2020).
Our scoping review contributes to the literature on low-income entrepreneurship via the development of an integrated theoretical framework for understanding the barriers to entrepreneurship (Smith et al., 2019; Thompson et al., 2012; Williams et al., 2017; Williams and Williams, 2011). We bring together the plethora of empirical insights that lack theoretical grounding, as well as limited theoretical papers, into a model which explains the barriers that low-income entrepreneurs face when accumulating human, social, financial and institutional capital, and the importance of spatial context in shaping this process (Ross et al., 2015). We also find key intersections, whereby the accumulation of one form of entrepreneurial capital is partly dependent on the possession of the other three forms. Our development of this framework is an important expansion of the literature in this area because it offers a pathway for future research to provide broader, conceptually grounded insights from their empirical findings, and enables policymakers to address the diversity of challenges that aspiring entrepreneurs from low-income backgrounds experience when starting an enterprise.
Methods
This scoping review was conducted according to the methodological framework developed by Arksey and O’Malley (2005), which includes five key stages: (1) identifying the research question, (2) identifying relevant studies, (3) study selection, (4) charting the data, and (5) collating, summarising and reporting the results. As demonstrated by Figure 1, the review has been reported in accordance with the Preferred Reporting Items for Systematic Reviews and Meta-Analyses methodology extension for scoping reviews (PRISMA-ScR), as described by Tricco et al. (2018). PRISMA flow diagram of the study selection process for this scoping review, which included searches of databases, registers and other sources. From: Page MJ, McKenzie JE, Bossuyt PM, Boutron I, Hoffmann TC, Mulrow CD, et al. The PRISMA 2020 statement: an updated guideline for reporting systematic reviews. BMJ 2021;372:n71. doi: 10.1136/bmj.n71. For more information, visit: https://www.prisma-statement.org/.
Eligibility criteria
The literature search focused on studies that examined barriers to entrepreneurial activity in adults from low-income households within the UK; it did not include research on non-UK countries or non-disadvantaged populations. The search focused on original papers and review articles, including pre-prints, written in English, and published from 2000 onwards. Abstract-only papers, book chapters, books, conference papers, newspaper articles and opinion articles were excluded. We only included studies from the year 2000 onwards due to changes in policy by the Labour government, which focused on facilitating self-employment and entrepreneurship amongst the unemployed and welfare recipients. This significantly changed the policy landscape and culminated in the New Entrepreneur Scholarship, which gave grants and training to aspiring entrepreneurs on welfare; this was subsequently replaced by the New Enterprise Allowance scheme in 2011, which focused on mentorship and providing a steady income (Department for Work and Pensions, 2022; Slack, 2005).
This scoping review considered all types of quantitative studies. Qualitative studies including, but not limited to, designs such as phenomenology, grounded theory, ethnography, qualitative description, action research and feminist research were also considered. In addition, relevant systematic reviews that met the inclusion criteria were considered and reviewed as part of the process. Grey literature, such as government documents and survey reports, were included in the review to capture insights from relevant organisations, that is, those that are involved in supporting entrepreneurial activity in the UK.
Information sources
A search of the EconLit, Business Source Complete (EBSCOhost), Applied Social Sciences Index and Abstracts, International Bibliography of the Social Sciences, Sociology Database (ProQuest), PsycInfo, Social Policy and Practice (OvidSp), and Social Science Citation Index (Web of Science) databases was conducted, alongside a comprehensive journal search using Scopus. This search was completed on April 11, 2024.
The database search was supplemented by a manual search of potentially relevant ‘grey literature’ (e.g. reports, working papers, government documents, white papers and evaluations) for additional insights. The latter were identified via several routes; for example, using alternative search engines (e.g. Google Scholar), targeting relevant organisations (e.g. the Federation of Small Businesses, Gov.UK, Office for National Statistics, National Housing Federation, Local Enterprise Partnerships, Tenant Participation Advisory Service, Housing Associations’ Charitable Trust), searching grey literature databases (e.g. Open Grey, National Grey Literature Collection), browsing potentially relevant survey reports (e.g. Poverty and Social Exclusion surveys, Breadline Britain surveys, Opportunity for All reports, and Social Exclusion Unit reports), and following consultation with other researchers and experts in the field. Grey literature searches were conducted on May 15 and 16, 2024. The research string used to identify potentially relevant articles is provided in Appendix I.
Study/source of evidence selection
The abstracts of each eligible manuscript were screened by two researchers, to determine the papers’ relevance and suitability for inclusion in the review. Following the search, all identified citations were collated and uploaded into EndNote 21 (Clarivate Analytics, PA, USA) and duplicates removed. The reference lists of all extracted sources of evidence were inspected for additional potentially eligible articles. The resources were retrieved in full and assessed in detail against the eligibility criteria. Reasons for the exclusion of sources of evidence that did not meet the eligibility criteria, at the full-text search stage, were recorded. Any disagreements between the reviewers at each stage of the selection process were resolved through discussion or consultation with additional reviewer/s. The results of the search and the study inclusion process are reported here and presented in a PRISMA flow diagram (Figure 1). Each stage of the screening process (title-abstract and full text) was piloted to ensure consistency between reviewers.
A data-charting form was created to aid extraction of the following data: year of publication, country of origin, study aims, definition of entrepreneurship, population studied, sample size, methodology, intervention/comparator details, barriers identified, outcome measures, other relevant key findings and any solutions posited. Data were initially charted in an Excel spreadsheet, with each variable assessed and corroborated by at least two researchers for each paper identified. As this was a scoping review, risk of bias was not assessed.
Data analysis and synthesis
We first conducted an initial thematic analysis on our data extraction, extricating any information regarding barriers to entrepreneurship. We found that most barriers concerned resources, such as skills, finance and mentors. We then referred to the literature on resources in entrepreneurship and identified a stream of literature that explores the process of capital accumulation and its importance to business startup and growth (Eesley, 2016; Leitch et al., 2013; Linder et al., 2020). According to Linder et al. (2020), the development of a venture is dependent upon the capital the entrepreneurs possess, to be able to exploit an opportunity in the market. We adopt this approach, as those living with low-incomes and in deprived socio-economic situations are likely to experience acute challenges to acquiring forms of entrepreneurial capital (Thompson et al., 2012; Williams and Williams, 2012).
Considering the concepts used within this stream of literature, and our initial findings within the scoping review, we coded our papers in terms of barriers to four forms of entrepreneurial capital: human, social, financial and institutional. Upon reviewing our data analysis, we determined there was a significant factor overlook within our approach, namely the spatial context in which low-income entrepreneurs accumulate entrepreneurial capital. Therefore, we included this within our framework development. A final review of our evidence determined there are intersections between the accumulation of human, financial, social and institutional capital, in that the accumulation of one form of capital affects the accumulation of the other three. This was added to our framework to form an integrated model of the barriers to entrepreneurship in low-income households.
Results
Descriptive summary of the studies included in this review.
In this section, we present the findings from our synthesis of 46 papers on key barriers to entrepreneurship among low-income households, arranged within an integrated framework of capital accumulation shaped by spatial context. Following this, we examine the intersections between the four forms of capital and explore how they influence the challenges associated with accumulating each type of capital.
Financial capital
By financial capital, we refer to the finances that entrepreneurs invest to start-up or grow a business venture. Financial capital is critical for business success as it is used to purchase equipment or sellable goods, hire or buy premises, and employ workers; it allows the entrepreneur the chance to pursue business opportunities that reflect their passions (Linder et al., 2020). Financial capital is a particular challenge for low-income households, as they face additional financial barriers compared to the general population. Without sufficient personal financial capital, entrepreneurs are more likely to encounter economic difficulties, lowering their chances of achieving and maintaining business success (British Business Bank and Oliver Wyman, 2020). This can result in self-exploitation, where the responsibility for guaranteeing an income is passed from the employer to the individual, who, even if their business does not fail, can end up in a more unstable socio-economic predicament than before (Atherton et al., 2018; Williams and Huggins, 2013).
The impact of financial limitations is particularly evident among young, disadvantaged individuals. According to Innovate UK (2017), 79% of young people cited a lack of money as the main barrier to starting their own business. This financial barrier prevents them from accessing the necessary resources, training and networks, further compounding the challenges posed by their limited social and human capital. Metcalf and Benson (2000) reported that unemployed individuals, particularly those from lower-income backgrounds, face even greater challenges in accessing commercial loans due to their poorer financial position and lack of personal savings. This negatively impacts their capacity to raise the financial capital to start and grow their businesses. Rouse and Jayawarna (2006) observed that participants in the New Entrepreneur Scholarships programme, which provides entrepreneurs from disadvantaged backgrounds with start-up funding, joined the scheme due to their limited opportunities to access finance to start a business.
The consequences of limited personal savings are also evident in specific demographic groups. For instance, Broughton (2015) discussed how Black Caribbeans and Black Africans in the UK face financial barriers to self-employment and starting businesses. Similarly, Mendy and Hack-Polay (2018) found that migrant entrepreneurs have been disproportionately affected by the post-2008 UK economic downturn, as this group faced acute barriers to accessing credit due to limited information and their immigration status. Rouse and Kitching (2006) found that the lack of personal savings among disadvantaged mothers significantly hindered their ability to maintain their businesses. Professional childcare services were unaffordable, and informal childcare was often irregular and unreliable. This forced them to juggle business responsibilities with childcare, often leading to business closure. Marlow (2006) discussed the challenges faced by benefit-dependent lone mothers, where the risk of losing the safety net provided by benefits makes self-employment a daunting and risky venture.
Limited access to credit is another significant financial barrier for low-income entrepreneurs. Smith and Air (2012) examined the working classes and discussed how this group is socially constructed as ‘dangerous and unemployable’, leading to their exclusion from legitimate enterprise culture. Danson et al. (2021) found that the financial system for self-employed individuals, especially those without entrepreneurial skills or experience, and with precarious incomes, is obstructive and complicated. The lack of meaningful consideration regarding access to training and finance at a policy level exacerbates the financial instability of low-income entrepreneurs. Metcalf and Benson (2000) further highlighted the significant disadvantage faced by unemployed individuals in accessing loans due to an unfamiliarity with banks, which are often perceived as alien institutions, coupled with indirect disadvantages in lending criteria. Reduced access to loans is particularly problematic for individuals from low-income households, who are overrepresented among the unemployed. This results in feelings of intimidation and nervousness, leading to poor presentations to lending officers and a higher likelihood of loan rejection. Moreover, credit rating systems reflect negatively on those with low-incomes and high debt burdens, further limiting access to loans, especially for those with little or no employment or management experience (Metcalf and Benson, 2000).
High start-up and maintenance costs are another critical financial barrier that disproportionately impacts low-income entrepreneurs, particularly those with low social and human capital. Jackman et al. (2021) found that individuals with disabilities or long-term health challenges face significant financial burdens when starting and maintaining their businesses. These individuals often perceive entrepreneurship not as a positive option but as necessary for survival, with the costs of enterprise being a central concern (Jackman et al., 2021). The anxiety caused by the lack of social and economic protection in entrepreneurship, such as rights to paid leave and the burden of obtaining clients at times when they are experiencing poor health, further exacerbates these financial challenges. The high costs associated with running a business are particularly burdensome for those with health issues, who may already face limited access to networks and resources (Jackman et al., 2021).
Martinez Dy et al. (2018) examined digital entrepreneurship, and the barriers faced by women of different social positions, and found that high start-up, maintenance and manufacturing costs were key barriers. Older women did not experience the benefits of digital entrepreneurship, such as access to market research, use of digital platforms and greater access to established sales channels, due to the high costs associated with products that enable web presence and digital marketing (Martinez Dy et al., 2018). This was in contrast to younger women with more experience and resources, highlighting how high costs disproportionately act as a barrier to those with fewer resources and savings. Lockyer and George (2012) found that financial risk to be a major concern for women entrepreneurs in low-income areas, who often prefer the stability of a low regular income over the uncertainty and potential debt associated with business start-ups. The fear of financial loss, compounded by inadequate support and training, acts as a deterrent to entrepreneurship. Mone (2016) also identified multiple barriers to entrepreneurship, emphasising that high start-up funding and input costs, such as those needed for utilities and space/premises, can be considerable obstacles. The inflexibility and limited availability of affordable premises and the high costs of utilities are significant burdens for aspiring entrepreneurs.
Risk is another significant financial barrier closely linked with deficits in social and human capital. Danson et al. (2021) reported that microfinance, often seen as a solution for those in poverty seeking self-employment, can actually deepen financial risks by transferring the responsibility for guaranteeing a regular income, from the employer or the state, to individuals who are already in vulnerable financial position. This is especially true for individuals with precarious incomes, who face complex and obstructive systems that lead to ongoing poverty rather than financial stability. The lack of targeted engagement and support for low-income entrepreneurs exacerbates these risks, making it more likely that these individuals will struggle to sustain their businesses. Frankish et al. (2010) found that businesses in deprived areas were more vulnerable to financial instability. This suggests that entrepreneurs in low-income households are more likely to encounter financial risks that can hinder their business’s success.
Human capital
Human capital refers to the skills, knowledge, experience and qualifications that are economic assets; in entrepreneurship, this includes constructs such as education, work and entrepreneurship experience (Marvel et al., 2016). To start a venture, individuals need not only occupationally relevant skills, but also expertise specific to entrepreneurship, such as accounting, marketing, administration and leadership. Those from low-income backgrounds wishing to start a business may experience human capital related challenges such as a lack of educational opportunities, limited accumulation of business-related skills, and low self-confidence in their ability to develop relevant competencies for entrepreneurial ventures (Martinez Dy et al., 2018; Smith et al., 2019; Thompson et al., 2012).
Individuals living in low-income households experience acute barriers to accessing educational opportunities that enable them to build the human capital necessary for starting a business. As Thompson et al. (2012) identified, there is a negative cycle between a lack of education and low socioeconomic status. Individuals from low-income households are less likely to attend college or university, making it more likely that they will experience deprivation as adults. According to Henley (2005), this lack of higher education is a particular issue, as individuals have not had the opportunities to acquire or further develop soft skills, such as self-confidence and self-efficacy that builds risk-tolerance and encourages opportunity-seeking behaviours. Moreover, as Smith et al. (2019) discussed, a lack of employment opportunities compounds the skills gaps in deprived areas, leaving individuals with fewer opportunities to obtain industry specific and business-related skills in the workplace. Low skill levels can then lower the probability of success in self-employment (Broughton, 2015). Entrepreneurial programmes often come with an upfront cost, creating a financial barrier to those wishing to upskill (Smith et al., 2019).
A significant psychological barrier to starting a business is low self-confidence and a belief that entrepreneurship is not for people from low-income households (Galloway et al., 2016; Williams and Williams, 2011). According to a report from Innovate UK (2017), confidence and skills are interconnected within the entrepreneurial process. A cycle exists in which individuals without entrepreneurial skills or experience are unlikely to have the confidence to further develop them (Metcalf and Benson, 2000). According to Thompson et al. (2008), a key aspect in building this confidence is exposing young people to continuous and diverse entrepreneurial education, which they are currently deprived of. For Williams and Huggins (2013) and Innovate UK (2017), this lack of formal entrepreneurial education has resulted in individuals from deprived areas not recognising the skills and traits specific to entrepreneurship that they already possess.
A lack of risk tolerance was another key psychological barrier to engaging in entrepreneurship. For those in receipt of welfare payments or in full-time employment, the risk of losing regular payments, by engaging in entrepreneurship training, was a major barrier (Lockyer and George, 2012).
Upskilling opportunities are also hard to access for individuals who do not have the capacity to attend entrepreneurial training or occupational upskilling courses. Both Lockyer and George (2012), and Murzacheva et al. (2020), found that having childcare duties or a disability prevented potential entrepreneurs from accessing additional training. As Martinez Dy et al. (2018) found, many bespoke training opportunities, provided by business incubators or supporting institutions, need to be self-funded, which is often beyond the capability of entrepreneurs with lower incomes. Moreover, Thompson et al. (2012) found that people are unlikely to seek these opportunities outside of their own areas, highlighting the need for more localised training opportunities.
Social capital
Social capital refers to the networks of relationships between people and groups that allow for the effective transfer of knowledge and opportunity. The literature distinguishes between bridging social capital and bonding social capital. Bridging social capital refers to networks of relationships between diverse groups and people from different backgrounds, while bonding social capital refers to the networks of relationships between people with similar backgrounds or from the same groups. A lack of an entrepreneurial ecosystem may also deprive areas of much-needed social networks and role models, who can inspire others with similar backgrounds to pursue entrepreneurship as a career option and mentor them, informally or formally, through the start-up process (Anderson and Miller, 2003; Mone, 2016; Slack, 2005; Thompson et al., 2012).
Lee and Tuselmann (2013) found that the particular industry or sector that an entrepreneur operates in can affect the volume and quality of network resources available in deprived areas. They found that entrepreneurs operating in professional and technical fields had access to higher levels of bridging social capital and diverse resources compared to entrepreneurs operating in ‘non-professional’ fields. Professional entrepreneurs have higher aspirations and a profit-driven orientation, which means they seek out networks that support their goals. This is compared to non-professional entrepreneurs, who are more likely to be inward-looking, and this is reflected in the homogeneity of their networks (Lee and Tuselmann, 2013). A lack of bridging social capital echoes findings elsewhere in the literature by Lee et al. (2011) and Williams et al. (2020), both of which also identify an over-reliance on bonding social capital by entrepreneurs residing in deprived areas. Lee et al. (2011) highlight that this over-reliance on bonding capital can lead to redundant resource acquisition by replicating the same forms of support over and over. This limits the usefulness of social networks by preventing these entrepreneurs from connecting with a diversity of businesses, people and support mechanisms, limiting their access to forms of entrepreneurial capital and links to business ecosystems that enable the growth of their business beyond their immediate location (Williams et al., 2020). Those from a minority ethnic background, or who have refugee status, appear to experience this homogeneity of social networks more acutely (Lyon et al., 2007).
Another important aspect of having access to good-quality social capital is the availability of local role models, which can help motivate entrepreneurs and allow visualisation of themselves as successful entrepreneurs. The positive contribution of role models to successful entrepreneurship is highlighted by Williams and Williams (2012) and Innovate UK (2017). In areas with an established entrepreneurial culture, entrepreneurs act as role models to individuals wishing to start a business, by demonstrating pathways to venture creation that people can replicate (Williams and Williams, 2012). Policy makers in the UK appear to be aware of this positive effect and have promoted mentoring to potential entrepreneurs as part of their efforts to improve business creation amongst low-income households (Slack, 2005). Evaluations of mentoring show that it is an effective way to promoting bridging beyond their communities, enabling low-income entrepreneurs to make connections, learn new skills and access business opportunities they would not otherwise have access to Lee et al. (2011). Conversely, the detrimental effect of only having access to unattainable role models is also discussed in the literature, as unachievable role models can lead to a sense of futility and disconnect (Watson, 2004). Moreover, having role models with lower socio-economic backgrounds or without entrepreneurial skills may also have negative impacts on potential entrepreneurs, as they may make decisions based on advice that is less favourable to business growth (Lockyer and George, 2012).
Institutional capital
Institutional capital refers to the support and resources provided to entrepreneurs by formal institutions, including local and national governments, business associations, universities and research institutions (Leitch et al., 2013). Institutional capital is an important source of human, social and financial capital for entrepreneurs who lack these capital endowments. The literature on low-income entrepreneurship shows that institutional support schemes that provide financial capital in the form of business grants and loans, opportunities to build social capital through mentors and networking opportunities, and chances to develop human capital through education and training opportunities, are key for those with low incomes to overcome their lack of entrepreneurial capital (Danson et al., 2021; Lockyer and George, 2012).
The main barrier to accessing institutional capital identified in the literature is a lack of trust by potential entrepreneurs from low-income backgrounds in the institutions providing entrepreneurial support. This appears to emerge from the breakdown in confidence of local financial and governmental institutions, driven by past negative experiences that low-income individuals have had in their interactions with both local and national organisations. Danson et al. (2021) identified a fundamental disconnect between individuals living in poverty and support services designed to facilitate venture creation. Some participants felt that the government and state institutions, such as job centres, did not support people living in poverty to start enterprises, while other people ‘wouldn’t go near’ any of the agencies providing support programmes (Danson et al., 2021: p. 9). Others felt that formal support programmes were not intended for people from low-income backgrounds (HM Treasury, 2005). Lockyer and George (2012), in their study of women entrepreneurs in low-income areas, found that many participants were unaware of supporting institutions. When participants did engage with these institutional support programmes, they felt the support offered, particularly financial grants or loans, was insufficient.
Moreover, individuals from low-income backgrounds, particularly those with a minority status, were more likely to have experienced perceived discrimination from local or national government, creating distrust that discouraged acceptance of institutional support (Danson et al., 2021). When they do seek support, they are more likely to experience exclusion by supporting institutions, such as financial institutions, which are less likely to give them loans (Murzacheva et al., 2020). Distrust of institutions was found in refugee communities within London (Lyon et al., 2007). With some participants having distressing experiences when interacting with government institutions while claiming asylum in the UK, leading to a distrust of government services more generally. This also affected their relationship with local councils, which they felt would ask too many questions or waste their time. The sense of ‘otherness’ created by their minority identity exacerbated this distrust. To fill the gap created by this distrust, refugees relied more heavily on community organisations that often lacked the specialist expertise required to support venture creation.
A second barrier to institutional capital for low-income households is a lack of accessibility to business support programmes. According to Devins (2009), there is a general lack of good-quality business support for individuals from low-income communities, from both local and national institutions, which deprives them of opportunities to learn about aspects such as marketing and finance. Both Williams and Huggins (2013) and HM Treasury (2005) found that services designed to support entrepreneurship are scarcer in deprived communities. In particular, the lack of mentorship programmes was identified as a key issue for entrepreneurs navigating the complexities of nascent entrepreneurship (Williams and Williams, 2011). Where support programmes do exist, they may not meet the specific needs and challenges of entrepreneurs in deprived areas. Indeed, some entrepreneurs feel that the offerings from government institutions are too generic and do not provide enough financial support (Kempson and Mackinnon, 2002), leading them to opt for private sector support or no support at all (Slack, 2005; Williams and Huggins, 2013). This also extends to educational institutions. Smith et al. (2019) highlight an overall low level of entrepreneurial education in schools and higher education in the UK. They suggest that even though successive UK governments have introduced self-employment or entrepreneurial schemes, that include some education and training, the generalised and non-specific training they provided has compounded low-incomes, by pushing individuals living in deprivation towards unsustainable, low-paying sole trader jobs.
Further barriers to institutional capital include the need to navigate the bureaucracy required to access support provided by institutions. Successive UK national governments have implemented programmes to support low-income and unemployed individuals through the start-up process. The most notable recent programmes were the New Entrepreneur Scholarship (NES) and the New Enterprise Allowance (NEA) schemes, designed to enable nascent entrepreneurs to build their human, social and financial capital endowments (Slack, 2005). However, the literature suggests that the complexities involved in applying for these programmes was a barrier to accessing these schemes, discouraging low-income individuals who lack the necessary entrepreneurial human capital. As Cairns et al. (2024) state, engagement with government institutions can be frustrating and time-consuming, and low-income individuals may lack the administrative skills to navigate the process (HM Treasury, 2005). For those transitioning from welfare to self-employment, excessive form-filling, a lack of understanding about how the transition works, and fears of negative financial repercussions further discourage individuals from seeking institutional support (HM Treasury, 2005).
Spatial context
Our scoping review of the literature also revealed significant spatial variations in the accumulation of these four forms of capital, with the level of entrepreneurial support dependent on the institutional characteristics of the area in which they operate. Some areas have a greater abundance of higher quality supporting institutions, such as universities and development agencies (Cairns et al., 2024). Socio-economic issues, such as low-income, low educational attainment and high rates of unemployment, can be concentrated in deprived areas. This provides a further barrier to low-income individuals, who are more likely to live in deprived neighbourhoods. It restricts their access to training and educational opportunities, and talented potential employees, and causes a lack of demand for new businesses (Frankish et al., 2010; Williams et al., 2017). Some areas may have stronger entrepreneurial and professional networks, particularly in places with diverse business relations (Lee et al., 2011; Williams et al., 2020). This may provide opportunities for low-income households to acquire important bridging social capital, outside of their close bonds (Williams and Williams, 2012).
The availability of institutional support is largely dependent on whether entrepreneurship is strategically valued by governments. Local governments have varying degrees of support for entrepreneurs, depending on their local economic strategy, which contributes to an existing localised entrepreneurial ecosystem (Cairns et al., 2024). Rural and urban areas may also vary significantly when it comes to barriers to entrepreneurship. While urban areas are characterised by more diverse networks and opportunities to access bridging social capital (Williams and Williams, 2012), rural areas often lack the entrepreneurial ecosystem to provide significant high quality social capital. Despite this, Farmer et al. (2008) found that the embeddedness of business relations in local communities, characterised by strong networks, enables businesses to support each other through resource-sharing. Bates et al. (2009) found that entrepreneurship within rural economies is hindered by a weak local economy, with fewer employment opportunities, and a lack of transport infrastructure. Urban centres, on the other hand, have stronger local economies and infrastructure, which encourage entrepreneurship through greater access to finance, higher quality social capital and better economic demand for new business (Lyon et al., 2007; Williams and Williams, 2011).
Interdependencies
Our model, summarised in Figure 2, illustrates how the accumulation of the four forms of entrepreneurial capital (financial, human, social and institutional) works as an interdependent process for low-income households considering a business or community venture. In other words, accumulating one type of entrepreneurial capital can provide advantages in obtaining the other three (Rouse and Jayawarna, 2011). In terms of human capital, the extensive bureaucracy involved in applying for financial resources, such as loans and business grants, requires specific business skills and experience, which can present barriers for low-income individuals (Rouse and Jayawarna, 2011). This can also be true for the bureaucratic processes involved in institutional support programmes, which discourage individuals without administrative skills from applying (Cairns et al., 2024; HM Treasury, 2005). A lack of human capital may also act as a barrier to acquiring high-quality social capital. Low educational and skills attainment pools in deprived areas, meaning the bonds individuals create do not provide them with the necessary human capital (Williams et al., 2017). Financial capital is a key barrier to increasing human capital levels, as training and educational courses often require financial investment from the individual, which those in deprived areas cannot afford (Smith et al., 2019). Additionally, without high-quality bridging social capital, individuals may struggle to find investors to support their nascent ventures (Lee and Cowling, 2013). Institutional capital is critical for low-income entrepreneurs to access training and educational opportunities in order to develop human capital, as well as grants to improve their financial situation (Danson et al., 2021; Slack, 2005). Having access to local financial institutions that support, rather than exclude, individuals from business loans is also key. Local institutions that support the entrepreneurial ecosystem enable networks of entrepreneurial individuals to build their social capital by developing bridging ties within the business community (Williams et al., 2020). An integrated framework for understanding barriers to entrepreneurship in low-income households.
As well as these interdependencies, there are also instances where the accumulation of one form of capital negates the requirement for another. This means that it is not always the case that low-income entrepreneurs need all four types of entrepreneurial capital to engage in enterprising activities. In particular, our data analysis suggests that social and institutional capital are primarily enabling resources, which allow low-income entrepreneurs to obtain financial and human capital (Devins, 2009; HM Treasury, 2005; Lee and Cowling, 2013; Lyon et al., 2007). Our reviews suggest that there are instances where social or institutional capital might not be required as an enabler (Lee and Cowling 2013), for example, those who have sufficient endowments of human capital from their educational background, or who access financial capital through social networks and close bonds rather than institutions (Lawlor and Nicholls, 2008; Martinez Dy et al., 2018). This suggests that institutional and social capital may be somewhat interchangeable for low-income entrepreneurs. When they have high endowments of institutional capital, there may be less need for social capital, and vice versa. In fact, it is possible that institutional capital maybe more desirable in instances where individuals are overly reliant on close bonds (Williams et al., 2017). Despite this, institutional support programmes such as the New Enterprise Scholarship do promote social capital development, suggesting it is beneficial for entrepreneurs to have both to maximise their opportunities to accumulate human and financial capital (Rouse and Jayawarnam, 2011; Slack, 2005).
Discussion and future research
In this scoping review, we have gathered the evidence on low-income entrepreneurship and presented it in an integrated manner, within a holistic framework, focusing on the accumulation of four types of entrepreneurial capital: human, social, financial and institutional. The barriers to accumulating capital are shaped by the spatial context in which low-income households aspire to start a business. In this section, we provide more detail on our contributions, before outlining some directions for future research.
Through our scoping review, we have made two specific contributions to the literature relating to entrepreneurship in low-income households. First, we contribute a holistic framework explaining the barriers to entrepreneurship in low-income households, which will enable researchers to better theoretically position their empirical insights. The existing literature is predominantly empirically focused, and the limited theoretical insights are fragmented (Murzacheva et al., 2020; Williams et al., 2020; Williams and Huggins, 2013). However, our scoping review revealed a principal focus on the accumulation of four forms of entrepreneurial capital. Each paper addressed one or two of these four forms of entrepreneurial capital (Lee and Cowling, 2013; Murzacheva et al., 2020; Thompson et al., 2008; Williams and Huggins, 2013). Using our scoping review and drawing upon resource-based theories within entrepreneurship, we have integrated these findings into an overall framework. Our framework shows that, due to their socio-economic conditions, those within low-income households begin the process of establishing an enterprise from a position of disadvantage, in terms of their accumulation of these key capital endowments. They lack the core components required to start a business, even before they enter the market and negotiate economic factors. Moreover, the barriers to accumulating these four forms of entrepreneurial capital should not be understood separately – they are mutually interdependent, such that the accumulation of one form of capital facilitates the accumulation of another. This suggests that although all four forms of capital are required to establish an enterprise, having an abundance of one of these forms of capital can have a snowball effect as it enables them to overcome barriers to the other forms.
Second, we also broaden spatial insights within the literature on low-income entrepreneurship, by showing that the accumulation of entrepreneurial capital is embedded within place. The existing literature evaluates the impact of spatial context on the motivations and resources of aspiring entrepreneurs in low-income households. Murzacheva et al. (2020) highlighted how deprivation pools within specific areas and how this limits resources, such as wealth, education and local infrastructure, which are critical for starting and growing an enterprise. In the other seminal paper in this field, Williams and Williams (2012) found that the motivation to engage in entrepreneurship is contingent upon perceptions relating to the prevalence of entrepreneurial opportunities locally. We broaden these insights by showing that the process of starting an enterprise for low-income households is spatially embedded, as the availability of entrepreneurial capital is dependent upon the quality of local business relations. This is because deprived areas tend to have lower rates of entrepreneurship and business growth (Murzacheva et al., 2020; Thompson et al., 2012), so that the pool of human, social, financial and institutional capital is limited within these locations. Furthermore, the characteristics of a particular context, such as local demographics, the density (or sparsity) or business relations and households, and the quality of local institutions, in terms of their business support offering, all affect the accumulation of entrepreneurial capital. This appears to create layers of disadvantages, in which some low-income entrepreneurs must negotiate their own socio-economic conditions, the barriers living within a deprived area, and barriers relating to the quality of the local business relations and institutional support.
Based on this, we propose several areas for future research. Practitioner-focused research could use our model to develop holistic solutions that support low-income households to access the four capital endowments presented in this scoping review. A key aspect of this will be investigating how supporting institutions can build more bespoke models of support that enable the accumulation of all four forms of entrepreneurial capital. In this aspect, more research is needed to understand the synergies between the forms of entrepreneurial capital; in particular, exploring in what aspects they intersect, enabling spillover in which the accumulation of one form of capital results in the accumulation of others. Doing so will significantly improve policy suggestions in this area. We also propose further research into the spatial aspects of our model, which focuses predominately on urban or rural contexts. We suggest that spatial impacts on low-income households are more varied than this dichotomy. Future research could examine other economic settings, such as small- and medium-sized towns, coastal areas, and local post-industrial economies. The entrepreneurial ecosystems, institutional arrangements, economic circumstances and local cultures are all likely to have wide-ranging impacts on the availability of social, financial, human and institutional capital.
There are also some fruitful research areas outside of our framework; in particular, there is a dearth of research on low-income entrepreneurship and self-employment within online contexts. More insights are required to understand the positives and negatives of online sales and service platforms, such as Etsy and Vinted, and whether they improve or worsen socio-economic predicaments. In the absence of stable employment, are people living in deprivation over-relying on these platforms? As an extension to this, we need a better understanding of the gig economy within these contexts and to examine whether they are a genuine alternative to traditional employment. Finally, another avenue is community enterprises and their potential to improve the socio-economic outcomes of low-income households (Murzacheva et al., 2020; Rouse and Jayawarna, 2011).
Limitations
Although we engaged in a thorough process, outlined in Figure 1, it is possible that some papers were not picked up within the search. Papers that do not explicitly mention synonyms for business or low income in the title or abstract may not have been detected in the initial search. We attempted to mitigate this by conducting an extensive citation search of the papers found in the initial search. Some grey literature, such as unpublished reports or local initiatives, may not have been captured due to limitations in accessibility or database coverage, potentially leading to an incomplete representation of the population of interest. While the review identifies key barriers to entrepreneurship, it does not systematically evaluate potential solutions or policy interventions, limiting the practical applications of the findings. Nevertheless, this paper provides a comprehensive overview of the barriers faced by low-income entrepreneurs in the UK and highlights critical areas for future research and intervention.
Policy implications
This review identifies the need for policymakers to focus on a broader set of potential processes and outcomes than currently used, when considering how to support entrepreneurship for low-income households. In terms of access to financial capital, several papers have found that the main barrier to finance is risk adversity and a lack of skills to negotiate the bureaucracy required to obtain credit (Danson et al., 2021; Lee and Drever, 2014). To tackle this, policymakers must focus on the transition from welfare and employment to self-employment. This may require the government to be more flexible about welfare payments when recipients are starting a business. A phased transition into business ownership would lower the risk for households. One possibility is an initiative that pays individuals a temporary wage for starting a business which may also provide security for low-income households in early-stage entrepreneurship. This period of transition should be used to upskill potential entrepreneurs, possibly in the format of an apprenticeship, allowing individuals to build a business part-time while being paid to work and train. Policymakers could also encourage low-income households to combine entrepreneurship and part-time employment in the early stages. Ultimately, if entrepreneurship is to be used as a policy tool to improve the socio-economic status of low-income households, it should not worsen their situation, even temporarily. What is key here is flexibility; any future policies should recognise the everyday predicaments of those with a low socio-economic status, so that entrepreneurship is built around their lives as an alternative to rigid forms of employment (Danson et al., 2021).
We also recommend that policymakers focus on improving opportunities to build broader social capital. It is clear from the literature that bridging social capital is critical to the success of business ventures (Lee et al., 2011; Lee and Tuselmann, 2013; Williams et al., 2017). For low-income households to move beyond survival-based entrepreneurship and achieve social mobility, policymakers must support links to entrepreneurial ecosystems outside of their communities. This may include regional or national networking events to support entrepreneurship for low-income individuals, business accelerators that connect them to potential investors and partners outside their communities, and assigning mentors to the entrepreneurs. Role models or mentors appear to be critical, as those in low-income households often lack the self-confidence or efficacy, and need direct encouragement or one-to-one support to help them through the initial processes when setting up a business (Lockyer and George, 2012; Slack, 2005; Thompson et al., 2012).
Conclusions
In this scoping review of 46 papers, we have set out to understand the barriers to entrepreneurship for low-income households. We found that individuals from low-income households in the UK face a variety of challenges, which relate to the accumulation of four capital endowments that are critical for starting and developing an enterprise: financial, human, social and institutional capital. The literature shows that, due to their socio-economic predicament, most low-income households suffer from a deficiency of entrepreneurial capital that puts aspiring entrepreneurs at a distinct disadvantage. Those who do choose to start an enterprise struggle to grow their business beyond their immediate communities, with some exceptions. This can result in entrepreneurship further perpetuating socio-economic deprivation and low incomes. This supports the argument made by Blackburn and Ram (2006) that policymakers should be cautious when promoting business ownership as a route out of poverty, and only encourage those business ideas with high growth potential. Despite this, we argue that more could be done by policymakers to support the transition from employment or welfare to business ownership, enabling low-income individuals to build the capital endowments while reducing the personal risks. Finally, future research should broaden the focus to online platforms and different spatial contexts, to better understand the circumstances in which entrepreneurship can improve social mobility amongst low-income households.
Footnotes
ORCID iDs
Funding
The authors disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This event is funded by the Entrepreneurial Futures SPF project, a £5.6 m investment in research, development and innovation (RD & I) activity for businesses based in Cornwall & Isles of Scilly led by the University of Exeter. This project is funded by the UK Government through the UK Shared Prosperity Fund. Cornwall Council has been chosen by Government as a Lead Authority for the fund and is responsible for monitoring the progress of projects funded through the UK Shared Prosperity Fund in Cornwall and the Isles of Scilly.
Review Article
Barriers to Entrepreneurship in Low-income Households in the UK: a scoping review.
Declaration of conflicting interests
The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.