Social Enterprise in the West Midlands Region

Social Enterprises are businesses that compete in the market like any other business, but also: • Trade for social and/or environmental purposes; • Reinvest profit back into their business or community; and • Adopt ownership structures based on participation rather than personal gain. They operate across a wide range of sectors and familiar examples of social enterprises include The Big Issue, Cafedirect, AFC Telford United and Jamie Oliver's restaurant ‘Fifteen'. Social enterprises are technically defined as “businesses with primarily social objectives whose surpluses are principally re-invested for that purpose in the business or in the community, rather than being driven to maximise profit for shareholders and owners” . They include charity trading arms, housing associations, foundation trusts, co-operatives, mutuals and several other organisation structures. Support for the creation and growth of social enterprise has become central to government and regional policy. Social Enterprises can offer valuable lessons on financial independence and sustainability to third sector organisations; provide a viable model for employment and enterprise growth in deprived communities; and present a source of innovation in service delivery. They are an integral element of the backbone of social and civil cohesion, regeneration and economic development. Within the West Midlands, Regional Development Agency, Advantage West Midlands, are committed to providing the infrastructure to support social enterprises as a key component in improving the competitiveness and growth of existing businesses and encouraging the creation of new businesses. Sustainable social enterprise development and support has been mainstreamed within the Agency’s broader enterprise agenda through: • Funding Social Enterprise West Midlands to advise the West Midlands Enterprise Board on social enterprise issues and promote the value of social enterprise throughout the region; • Including social enterprise as a key element of its region-wide suite of business support products; • Provision of access to finance through an increasing network of Community Development Finance Institutions across the region; and • Ensuring Agency investment in both urban and rural regeneration activity encourages partners to include social enterprise in their plans and programmes. In order to gain a better understanding of the scale and characteristics of social enterprises across the West Midlands and gauge their economic value, Advantage West Midlands, working closely with Social Enterprise West Midlands, commissioned mapping and baseline research of the sector. This was undertaken between December 2007 and March 2008. This is a summary of the key findings, outlining the scale of the sector and its economic importance within the region. Further copies can be downloaded from:

www.advantagewm.co.uk.

KEY FINDINGS - Sector characteristics Size and scale

Employment

Turnover

Our research suggests that there are over 5,500 social enterprises based in the West Midlands. Around 1,300 are based in Birmingham & Solihull, with a further 1,200 in Coventry & Warwickshire, but there is also a significant presence across all sub-regions.

• Over 156,000 people run, or work for, social enterprises in the region. Over 105,000 of these are employed full time. This is approximately 6.6% of all employment within the region. In comparison, 5% of our workforce is employed in construction and 2% work in the motor industry.

• Social enterprises generate around £5.7 billion of turnover each year, equating to 6.7% of the regional total. In comparison, financial services contribute £4.5 billion (or 5.3%).

Just over half of West Midlands’ social enterprises serve a local market, one in seven operates regionally and one in ten operates nationally. This re-enforces the view that social enterprises are an important component of a community’s fabric, providing local employment opportunities, but also delivering local services and playing an important role in supply chains.

• Social enterprises also create over 210,000 volunteering opportunities regionally each year.

Services and products

• Government data released in 2006 (the Annual Survey of Small Businesses UK) estimates that social enterprises in the UK generate a combined turnover of £27 billion, suggesting that the West Midlands now accounts for around 20% of the national total.

1,400

Social enterprises by sub-region

1,200

Organisational aims Of all the region’s social enterprises: • 29% are cultural, community or faith based

1,000 800 600 400 200

• 18% are health and social care based

0 Birmingham & Solihull

Coventry & Warwickshire

Black Country

Staffordshire

Worcestershire

Shropshire

Herefordshire

• 13% are sporting and leisure based • 12% are training and educational based

Beneficiary groups Social enterprises in the region serve a wide range of people and organisations. There is, however, a clear emphasis within the sector on addressing the needs of the most vulnerable or disadvantaged people within society. Whilst almost 40% of social enterprises focus on the community in general, many also focus on certain target groups such as children, the disabled, the elderly or families.

Target beneficiary groups amongst social enterprises in the region 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Local community

Children and young people

Disabled people

The elderly

Families

People on low incomes

People with mental health issues

Legal and financial structures Legal status Social enterprises can be established in a wide variety of legal forms and our research suggests that over 40% operate purely as registered charities whilst 37% are companies limited by guarantee. .

Income generation Over 60% of social enterprises earn at least three-quarters of their income through trading (of which almost 2,000 have no other source of income).

4%

Registered charity only

5%

6% Company limited by guarantee 7%

41%

Industrial and provident society

The medium-term stability of the sector appears sound. More than three in five organisations have reported that overall income levels have increased since 2005 and a similar proportion expect income levels to increase further.

Community interest company Company limited by shares Other

37%

Support provision & requirements Collaboration

Financial support 56% of social enterprises have sought some form of financial support over the past five years, primarily in the form of grant funding. Of those that had made applications, over 60% had been successful. In addition 10% of the region’s social enterprises have utilised some form of finance specific to their local area or sub-region during the period. Three in five social enterprises within the region say they require financial support of some kind moving forward. The overwhelming majority of these (85%) say they want this in the form of direct financial support by way of a grant, with the remainder requiring a combination of financial management support and help in accessing ‘finance’ from private institutions and other providers.

Non-financial support Only 22% of social enterprises have accessed any business support over the past year, with just over half of this

being specialist support tailored specifically to social enterprise or the sector in which they operate, with the remainder being generic support open to all businesses and sectors. Business Link is the single biggest source of this support, but other providers include Local Authorities and other social enterprises. Over 20% of social enterprises regard a lack of non-financial support as a key inhibitor to growth. The main areas identified within the research where social enterprises required support were business planning advice and marketing. Other areas included training and recruitment. Increasing opportunities for social enterprises to earn income from delivering public services has led to an increase for support in gaining better understanding of public sector procurement. Equally important is the need for education within the public sector of the benefits and added value that social enterprises can deliver.

Collaboration among the region’s social enterprise sector appears low, with less than one in four working with other social enterprise partners on a regular basis. Evidence suggests that those social enterprises that do collaborate experience fewer financial and operational issues, and that collaboration is highest in the urban centres.

CONCLUSIONS The social enterprise sector across the West Midlands is a very significant part of the region’s economy. It consists of over 5,500 businesses supporting in excess of 156,000 jobs and generating £5.7 billion of turnover. The community focus of social enterprises means they play a crucial role within local economies whilst at the same time helping to address deep rooted social issues.

Next Steps: To ensure the sector is provided with the best opportunities to continue to grow, this research has identified the need to: • find the most appropriate means of facilitating collaboration amongst social enterprises; • help to increase the capacity of the region’s social enterprises to successfully secure contracts from public sector bodies; • raise awareness of the potential benefits of the social enterprise model and ways to adopt it amongst voluntary and community organisations; • support social enterprises in developing additional income generating activities, helping to expand the size of potential markets and reduce dependency on grant funding and donations as income sources; and • review the range and complemen tarity of financial and non-financial support packages available to social enterprises Advantage West Midlands, Social Enterprise West Midlands and regional partners are now reviewing these recommendations to develop an action plan for supporting social enterprises in the West Midlands from 2009.

How the research was conducted The baseline review of social enterprises in the West Midlands was funded by Advantage West Midlands and conducted by WM Enterprise. The research used a bespoke database of organisations that meet the definition of a social enterprise and a telephone based survey of almost 400 organisations. This research was supplemented by a series of focus groups within the sector, to explore in more depth the key issues affecting social enterprises. The database included incorporated social enterprises that met four key criteria: • Their regular, everyday, activities involve providing products or services in return for payment; • At least 25% of their funding is generated from trading (in the direct exchange for goods and services); • They have a primary purpose of pursuing a social or environmental goal (as opposed to being purely or mainly profit driven); • They re-invest any profit or surplus that is made in the organisation or community to further their social or environmental goal. Copies of the Executive Summary and Full Report can be downloaded from www.advantagewm.co.uk. For more information, please contact Alison Lawson on: [email protected] or 0121 380 3504.

Advantage West Midlands 3 Priestley Wharf Holt Street Aston Science Park Birmingham B7 4BN

Photos courtesy of Alun Severn / Third Sector Services

Tel: +44 (0) 121 380 3500 Fax: +44 (0) 121 380 3501 Email: [email protected] www.advantagewm.co.uk