Women are entering entrepreneurship in record numbers, but new analysis from Prowess shows a sharp decline in women-led employer firms since the pandemic. The problem isn’t ambition — it’s access to finance, policy misalignment and a system that still makes growth harder for women.
Women’s entrepreneurship in the UK has reached a turning point, and not the one policymakers expected.
While more women than ever are starting businesses and entering self-employment, the number of women-led businesses with employees has fallen sharply since the pandemic. A new report from Prowess – the State of Women’s Enterprise 2025 – shows that growth-potential firms led by women are being squeezed out just as the UK economy needs them most.
A strong pipeline in a weak scale-up environment
On the surface, women’s enterprise looks healthy. Early-stage entrepreneurial activity among women has risen steadily over the past decade, reaching 9.2% of the adult population in 2025, the highest rate ever recorded in the UK. Women now account for 36% of the self-employed workforce, up from 30% in 2015.
But when we look at firms with employees, the businesses that create jobs and drive growth, the trend reverses.
Department for Business and Trade data show that the share of women-led SME employer businesses peaked at 19% in 2021, before falling to 14% by 2025. In practical terms, that represents a loss of around 70,000 women-led employer firms in just four years.
This matters because productivity gains, exports, and innovation happen in employer firms, not in sole traders. Women are not opting out of entrepreneurship; they are being pushed away from growth.
Why growth-potential firms are falling away
The decline in women-led employer businesses is not about a lack of ambition. It is the result of structural barriers that hit hardest at the scale-up stage.
Many women-led firms operate in sectors that were particularly exposed to post-pandemic pressures including professional services, care, education, hospitality and retail. Rising wage costs, labour shortages and energy prices have made employing staff significantly riskier.
Access to finance compounds the problem. In 2024, just 1.9% of UK venture capital investment went to all-women founding teams. Bank lending tells a similar story: women-led businesses are less likely to apply for external finance, more likely to anticipate rejection, and more likely to be offered smaller sums, limiting their ability to invest, hire and grow.
Government-backed Start Up Loans have helped many women get off the ground, with around 40% of loans going to female founders, but loan sizes are modest, and follow-on capital remains difficult to secure. Growth-stage finance is patient, flexible, and regionally accessible but is still in short supply.
Policy misalignment is holding women back
One of the least discussed barriers to growth is welfare policy. Universal Credit’s Minimum Income Floor assumes self-employed claimants earn the equivalent of full-time minimum wage — a model that bears little resemblance to how growth-oriented businesses actually operate in their early years.
For women running firms with variable income, particularly those balancing caring responsibilities, the result is a strong incentive to stay small, avoid hiring, or exit altogether. This disproportionately affects women-led micro-employers and those on the cusp of growth.
Where the growth potential really lies
The irony is that women are increasingly active in precisely the sectors the UK needs to scale.
The latest data shows strong growth in digital, professional, and green economy businesses led by women, particularly outside London. Older women, in particular, are emerging as a powerful growth cohort, bringing experience, networks, and commercial insight after mid-career transitions or redundancy.
Ethnic minority women also show some of the highest rates of early-stage entrepreneurial activity, yet remain under-represented among employer firms due to persistent finance and procurement barriers.
From participation to productivity
For the past decade, policy success has been measured by how many women start businesses. That target has largely been met. The challenge now is different.
If the UK wants to unlock the full economic value of women’s enterprise, estimated at up to £250bn it must shift focus from start-ups to sustainable, growth-potential businesses.
That means access to meaningful finance once businesses are up and running, not just small start-up loans, but patient capital that enables firms to hire, invest and scale.
Targeted support at the scale-up stage could make the difference between a woman-led business remaining a sole trader or becoming an employer. Women entrepreneurs are not short of ideas, ambition or resilience. What’s missing is a system that consistently backs them to grow.
