Britain is losing tens of thousands of female entrepreneurs, new government figures reveal, in a trend that threatens both economic growth and diversity.
Despite years of initiatives to encourage women into business ownership, the latest survey shows that female-led small and medium-sized enterprises (SMEs) have fallen to just 14% of the total — down from 19% in 2021.
That equates to tens of thousands fewer women at the helm of companies in the UK. The decline comes against a backdrop of rising taxes, mounting wage costs, and restricted access to finance, which experts say disproportionately affect women trying to break through as business leaders.
The Department for Business and Trade’s annual survey of 8,400 SMEs found that only 14% are now led by women, slipping from 15% in 2023 and 19% just three years ago.
The scale of this decline is significant: based on the DBT’s estimate of 1.42 million small and medium-sized employers, tens of thousands of female-led firms have vanished from the business landscape since 2021.
By contrast, the percentage of entirely male-led firms remains high at 43%, while gender-balanced leadership teams have inched up only marginally from 25% to 26%.
Why Female Entrepreneurs Are Falling Behind
Taxation and Rising Costs
The same survey found that taxation has overtaken energy costs and market competition as the number one barrier to SME growth. Sixty-one percent of firms said taxes were the biggest obstacle, up 16 percentage points from last year. For firms employing between 10 and 49 staff, that figure rose to 75%.
Hospitality and retail — sectors with a higher concentration of female-led businesses — reported even sharper increases in concern. In hospitality, a staggering 89% of businesses said tax pressures were forcing them to rethink their growth plans.
On top of taxation, the rising National Living Wage is hitting sectors that rely on large numbers of part-time and lower-paid staff, many of which are female-led. Thirty-one percent of SMEs cited wage pressures as a barrier, up seven points on 2022.
Access to Capital and Investor Bias
Debbie Wosskow, co-chair of the Invest in Women Taskforce, argues that the funding ecosystem is not set up to support women founders.
“Some of the sectors most likely to have women-led businesses — health, education, food — don’t receive the same investor spotlight or ‘buzz’ as tech or fintech,” she said. “This isn’t just about diversity; female-led businesses deliver higher returns. Investors are leaving money on the table.”
Research consistently shows that women receive a fraction of venture capital funding compared with men. A 2023 British Business Bank study revealed that less than 2% of VC investment went to all-female founding teams.
This funding gap forces many female entrepreneurs to rely on personal savings, family backing, or debt — options that are limited, particularly in an era of high interest rates.
The Confidence and Perception Gap
Surveys also highlight a confidence gap among female founders. Many report a lack of visible role models, persistent stereotypes about women in leadership, and structural barriers in networking and mentorship.
The perception that entrepreneurship is risky — especially amid economic turbulence — can also discourage women, who are more likely to bear primary family and caregiving responsibilities, from starting or scaling businesses.
Why This Matters for the Economy
The fall in female-led firms is not just an issue of equality; it is an economic problem. The government-backed Invest in Women Taskforce has estimated that if women started and grew businesses at the same rate as men, the UK economy could gain an additional £250 billion.
Yet rather than narrowing the gap, the latest figures suggest Britain is moving backwards. With female-led SMEs shrinking as a proportion of the business base, opportunities for innovation, job creation, and regional regeneration are being lost.
Rachel Reeves, the Chancellor, has repeatedly stressed her ambition to make Britain “the best place in the world to be a female entrepreneur”. But for many founders, rising taxes and squeezed consumer demand are delivering the opposite reality.
Britain’s decline in women-led firms contrasts sharply with trends in other advanced economies. In the US, women-owned businesses are one of the fastest-growing demographics, with numbers rising by more than 20% over the past decade.
France has introduced dedicated financing schemes for female entrepreneurs, while Scandinavian countries — with higher female employment rates overall — report stronger growth in women-led SMEs.
Experts point to structural support, including affordable childcare, investment incentives, and targeted mentoring schemes, as factors behind these successes.
What Needs to Change
Targeted Investment Reform
The biggest lever is capital. Wosskow and others argue for new funding vehicles designed specifically to back women-led businesses. These could include government-backed venture funds, tax incentives for investors who support female founders, and mandatory reporting of diversity data by VC firms.
Tax and Wage Policy Relief
While Reeves has little room for manoeuvre in her November Budget, targeted tax relief for SMEs — particularly in sectors with high female representation — could help stem the decline. Business groups also want a re-examination of wage thresholds for smaller employers.
Infrastructure and Support
Affordable childcare and flexible working remain critical enablers for women balancing entrepreneurship with family responsibilities. Expanding state-backed childcare provision would likely do more for female entrepreneurship than many business-specific policies.
A Cultural Shift
As Wosskow noted, female-led businesses should not be pigeonholed as a diversity initiative. They are commercial opportunities with high growth potential. Shifting the narrative from equality to economic benefit may be key in winning investor support.
The Road Ahead
The decline in women-led SMEs underscores the gap between government rhetoric and business reality. Despite initiatives like the Invest in Women Taskforce, the structural barriers of taxation, capital access, and cultural bias remain firmly in place.
Tina McKenzie, policy chair of the Federation of Small Businesses, has urged the government to set a bold target: ensuring half of self-employed individuals are women by 2035. That would mark a radical step-change from today’s figures.
But unless Reeves uses her November Budget to address the financial pressures squeezing SMEs — from tax hikes to wage costs — female entrepreneurs may continue to vanish from the business landscape, dragging Britain’s growth prospects down with them.
