Social enterprises outperform private sector in Britain

by Astrid Zweynert | azweynert | Thomson Reuters Foundation
Tuesday, 9 July 2013 08:50 GMT

Newspaper clippings displayed at the offices of Social Enterprise UK in London show articles about social enterprise in Britain. THOMSON REUTERS FOUNDATION/Shanshan Chen

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Prioritising profit does not always yield the best results, according to findings from the latest survey of social enterprises in the UK

By Astrid Zweynert

LONDON (Thomson Reuters Foundation) - Businesses that do not prioritise profit outperformed the private sector in Britain last year, according to findings released Tuesday of the largest survey of social enterprises in the UK.

In the past 12 months, 38 percent of social enterprises surveyed saw an increase in their turnover compared with mainstream small- and medium-sized businesses (SMEs), umbrella body Social Enterprise UK found.

“Whatever way you cut it, social enterprise is good for society," Peter Holbrook, chief executive of Social Enterprise UK, told Thomson Reuters Foundation. "Social enterprise is steadily proving that it has an important role to play in bringing about an economic recovery and lasting social change,”

“Entrepreneurs are using business to regenerate and rebuild their local communities, often where it’s needed most urgently to tackle the causes and effects of deprivation.”

Social enterprises focus on addressing social problems or helping the environment but unlike charities, need to make a profit.

There are 70,000 social enterprises in the UK, contributing £18.5 billion to the economy and employing almost 1 million people, Social Enterprise UK said. They include celebrity chef Jamie Oliver’s Fifteen restaurant chain, The Big Issue magazine sold by homeless people and Belu Water, a bottled water company that gives a large share of its profits to charity WaterAid.

MORE DIVERSITY

“The People’s Business” report found that more than a third (38 percent) of social enterprises have a female chief executive or leader, compared with 19 percent of SMEs and just 3 percent of companies listed in the FTSE 100 index of leading UK companies.

They are also twice as likely to be led by an ethnic minority, according to the survey. More than a third (38 percent) work in Britain’s most deprived communities, compared with 12 percent of mainstream SMEs.

Half of social enterprises (52 percent) employ people who struggle to find a job in the mainstream economy, the survey found.

“It is particularly striking to see the diversity of both the leadership and workforce of social enterprise,” said Susan Allen, chief executive of the customer solutions group at Royal Bank of Scotland, which helped fund the report. ”It seems that the sector is not just ‘changing the way we do business’ but also changing ‘who’ does business.

“This report shows some impressive growth and optimism within the sector and highlights some areas where, arguably, social enterprise is leading the way for how to do business in the 21st century,” Allen said in a statement.

Two-thirds of social enterprises trade with the public - the biggest source of income (32 percent), up from 27 percent in 2011 when the last survey was conducted. For just under a quarter (23 percent), the public sector has become the largest source of income, up from 18 percent - a sign that the public sector is increasingly turning to social enterprise to deliver services.

Access to finance is one of the biggest hurdles for social enterprises. The average amount of finance sought by social enterprises is £58,000 - below the minimum threshold of many specialist investment vehicles, the report said, and 39 percent cited access to finance as the biggest barrier to their development.

"The People's Business" is based on a survey of 878 social enterprises carried out in February and March 2013.

NEW WAY OF DOING BUSINESS

The UK government is supporting ideas that look beyond traditional business models to drive growth. The report is being launched on Tuesday by Business Secretary Vince Cable.

The Treasury launched a consultation last week on giving £50 million worth of tax breaks to employee-owned companies. The number of co-operatives grew 4 percent in 2012, with a turnover of £36.7 billion, up 3.3 percent on the year.

A new alliance backed by government ministers was formed last month to push for a “social economy” built around social enterprises and co-operatives in the run-up to the next general election in 2015.

The Social Economy Alliance aims to provide an antidote to a UK economy in the throes of severe public spending cuts and dominated by a corporate philosophy driven by profit, with leading companies having come under fire for avoiding taxes.

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