Skip To The Main Content

The value of social enterprise on the UK economy


By Phil McCabe, FSB Development Manager

Public policy, civil society and markets are not always seen as the happiest of bedfellows – but the social economy is the crossroads at which they meet. 

From a macroeconomic perspective, the perception persists that social enterprises are more like charities than ‘proper’ businesses responsible for significant job creation.

While it’s true they still account for just 5.6% of UK employment, mainly from the voluntary and community sector, this view is being challenged by changes to recruitment fuelled by demand for their services, and new funding options available for social enterprises that deliver.

The evidence suggests that social enterprises are doing rather well, in fact, and playing an increasingly important role in economic growth. 

The SEFORIS project, the world’s largest panel for the study of social enterprises, has found that organisations delivering ‘inclusive growth’ are experiencing unprecedented revenue growth, working with fewer volunteers and creating more jobs than ever before.

Its 2016 study found that the 135 UK social enterprises surveyed generated £450m in revenues, with almost half (46.5%) reporting revenues exceeding £1m, and employing 13,705 people - 10,482 full-time.

The social economy is growing because businesses with social and environmental aims at the core of their activities are best equipped to meet the demand for social change and sustainability. A recent report from the Joseph Rowntree Foundation has identified where the social economy has been shown to promote inclusive growth: (1) Creating jobs, strengthening skills and employability; (2) Building diversified local economies; (3) Contributing to wider economic and institutional transformation.

The report argues that enabling factors for social economy development often rely on an ‘ecosystem’ of support provision and collaboration between actors, both within the social economy and the public and private sectors. 

However, the UK is playing catch-up. UK cities lag behind some of their international counterparts, not least in terms of employment in social enterprises, and there are fewer organisations with alternative governance models, such as co-operatives, or employee-owned businesses. 

Over-centralisation of UK political decision making, as well as fragmentation and lack of collaboration within the social economy, are cited as likely contributory factors - yet the devolution of economic and social policy to cities opens up new opportunities for the social economy and for more mainstream engagement and collaboration at city level.
Social enterprise investors appear to agree. Founded in 2013 as a national initiative, the Social Stock Exchange provides access to the world’s first regulated exchange dedicated to businesses and funders who are seeking to achieve a positive social and environmental impact.

A city-region pilot, the Liverpool and Wirral Social Stock Exchange, was launched at the International Festival for Business 2016. Local businesses, charities and investors surveyed indicated overwhelming support, with an average of 92% believing it will benefit the economy.

Social Stock Exchange Chief Executive, Tomás Carruthers said: "We have already seen how a social stock exchange can work at a national level, but the research we have conducted shows that there's clear demand – both from companies wanting finance and from investors – to roll this out at a local level.”

The social economy is already playing an important role in the city’s economy. The University of Liverpool’s Heseltine Institute of Public policy and Practice identifies 1,400 social organisations in Liverpool City Region, which have a collective asset base of £4.4 billion, generating an income of just under £3 billion and directly employing 45,000 people. To put this into context, Liverpool City Region’s visitor economy has an estimated impact of £4 billion, supports over 50,000 jobs and is rightly seen as a major local industry.

Social enterprises are also increasingly where innovation happens. The potential is huge. Much will depend on how the social economy is understood, legitimised by national and local policymaking and championed by influential figures such as the new ‘Metro’ Mayors.

Liverpool City Region Mayor Steve Rotheram said: “Social enterprise is delivering social improvement alongside sustainable and inclusive growth so it clearly has a vital role to play in delivering my vision for a prosperous and fair City Region. At the same time devolution provides a model of place-based leadership with the potential to mainstream the social economy. We already have a particularly vibrant social economy but by nurturing an ecosystem that provides peer, together with public and private sector support, we can become a national and indeed international beacon for collaboration with the social economy.”