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A report by the Federation of Small Businesses (FSC) says the government must do more to help BAME-led enterprises get access to finance, despite businesses run by black and minority ethnic owners contributing £25 billion a year to the UK economy.
Various barriers hinder their growth, the report has found.
Businesses run by black and minority ethnic individuals are generally more innovative than those run by their white counterparts, with 30 per cent of BAME-led firms engaging in recent product or service innovation - this rate is 11 per cent higher than for non-ethnic minority firms.
Due to the structural inequalities in the UK that have been brought about and amplified by COVID-19, many BAME businesses owners, particularly of corner-shop stores and food companies at the forefront of serving their local communities, have been negatively impacted.
Moreover, many BAME entrepreneurs have struggled to access external finance to help their business survive and prosper.
The FSC report also found that they are often detached from mainstream business support.
Over the past 16 years, nearly 30 per cent of people on average in the UK's BAME population was thinking about, in the process of setting up or operating a business venture, nearly twice the level Britain's non-ethnic population
However, only 3 per cent of respondents over that time period have been reported as running a start-up, suggesting that a high number of would-be BAME-entrepreneurs do not realise - or have access to resources that can help achieve - their potential.
The report calls for a comprehensive national study of ethnic minority entrepreneurship in the UK so that business support agencies can better examine trends and identify business support.
Besides the economic contribution BAME-led businesses make, these enterprises also play a vital role in the social value, cohesion and welfare of many communities by creating jobs and wealth but also "enhancing the social fabric in our society, something which is much harder to quantify but has been demonstrated during the COVID-19 pandemic", according to Mike Cherry, FSB National Chairman.
Unlocking opportunities for ethnic minority entrepreneurs will benefit the UK as a whole.