UK businesses that provide targeted support to ethnic minorities to bring them on an equal footing with their white colleagues achieve higher revenues than those that do not, according to new research released today.

The report from the Henley Business School at the University of Reading compared the three-year performances of 100 companies listed on the FTSE 350 and found that those providing additional assistance to ethnic minority staff recorded average revenue 58 per cent higher than those that did not. Researchers added that by actively confronting inequality with practical measures, these organisations were also more likely to benefit from enhanced employee loyalty and creativity.

Lead researcher Naeema Pasha, director of equity, diversity and inclusion at Henley Business School, said the findings show that “racial equity and business success should not be separate conversations”.

“It is critical to any organisation wanting to achieve its aims and ambitions in this challenging world of work,” she said.

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“Of course, we all want to say that racism has no place in business, education or society. But the experience of the pandemic and social movements like Black Lives Matter have shown us that we need to shift our organisation, cultural thinking to ensure we work on racial equity – not just because it is a good thing or seen as worthy, but because it is valuable and essential to organisational success.”

Contrary to the government’s controversial Sewell report earlier this year, which concluded that the UK does not have a systematic problem with racism, the Henley researchers found there are still fundamental issues to address.

“Our research found that racism clearly exists in the workplace, highlighting the need to recognise and address biases as the next step towards progress,” the report said.

“Factors such as perceived cultural differences (cited by 56% of employees and 52% of business leaders) and a lack of diversity in leadership (33% of employees) are driving racial inequality and systematic racism within businesses.”

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Black employees remain the worst off, with 19% having experienced racial discrimination at work. That was more than twice as much as Asians (9%) and mixed ethnic minorities (8%).

In terms of how this manifests, the leading form of discriminatory action cited by the 1,000 employees interviewed during March was in the allocation of work (41%). Verbal abuse was second (33%), followed by inappropriate and unfair application of work policies or rules (29%).

When it comes to recognising racial inequality, white business leaders were significantly less likely to have seen discrimination in their organisation compared to those from an ethnic minority background – 30% versus 47%. Researchers said it therefore “doesn’t bode well” that 70% of those surveyed said their senior leadership was white.

Jon Foster-Pedley, dean of Henley’s business school based in South Africa, described it as thus: “Racism is a silent virus in the software of our minds, whose primary symptom is the capacity to fool its host that it isn’t there.”

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Younger white people between the ages of 18 and 34 were more likely than their older counterparts aged 55 and over to acknowledge that inequality exists in the workplace. Twenty-nine percent of younger white employees agreed there were racial inequities, compared to just 15% of older workers, while 41% of younger white business leaders recognised the problem, versus 15% of their older counterparts.

Fear of being judged was the primary factor cited by 35% of employees as to what is holding back those from ethnic minorities from reporting or accessing support regarding racial inequality. Those from the public sector felt less confident to speak up and challenge than private sector workers (60% versus 71%).

Ms Pasha said the reality is that racial prejudice can creep into an organisation creating division and feelings of disempowerment that leads to staff disengaging. This is true not just of ethnic minorities, she added, but “people of all races who witness such acts”.

“By letting these issues and negative behaviours fester, an organisation may defocus people and alienate staff, which could then affect productivity and creativity,” she said. “For those business, the drain of racism is not only human, but financial too.”