Wednesday, 9 November 2011

Down but not out: Reporting from the Guardian social enterprise conference 2011

Rt Hon Nick Hurd speaking to Patrick Butler of the Guardian

Yesterday I spoke at the very well organised Guardian social enterprise conference, where some good debates were held and I got to meet up with lots of my social enterprise colleagues. Since the cuts began in earnest, events have become rare so you would expect a heightened buzz, but unless it was just me, I wasn't getting that. I think it's fair to say folk were subdued, was it battle fatigue?

Keynote speaker Nick Hurd, our Minister, was interviewed by Patrick Butler editor of Guardian Society, where he spoke of the need to create a level playing field for social enterprise, his regret that Central Surrey Health lost out to the private sector, his understanding of the frustrations many have had with the Work Programme and unhelpful public sector commissioners who still don't get it. All pretty hot topics and yet when he had finished, no hands went up for questions. Patrick had to press people for a response - that's not like us is it? Speaking to delegates I realised how measured most people have become and although there was still the usual social enterprise optimism with people pitching their ideas to one another, there was something else in the air. Was it caution?

I think it is fair to say that while public sector outsourcing is a big part of our agenda, especially in the way in which we can support those public sector workers who are looking to spin out their services as mutuals, for those social enterprises looking to tender their services into the public sector, business can be bonsai slow.

There was much talk about money being made available, with Nick O'Donohoe from Big Society Capital (formerly Big Society Bank) outlining the opportunities for borrowing there, but again this did not get the audience response he was perhaps expecting.

I spoke over lunch with another one of the big investors attending the conference who told me of the pressure he was under from his lords and masters to lend but was struggling to do so. He explained this by making a point I made in my last blog: getting the money out was a problem because potential borrowers did not have the right level of business support.

Our market is still young and, not only that, it is complex. Manufacturers have ideas that are often so innovative they look too risky to back. Contracts in the commercial sector, as elsewhere, are scaling up to take advantage of economies of scale and as such are proving too big for fledgling SMEs who can do part but not all of a potential order, and public sector spin-outs cannot borrow without an established, fully constituted asset-holding governance structure in place. And without investment they struggle to get that far.

Even for those who have spun out, public sector contracts that carry no recognition of social value and just look at price fail to recognise the added social value of social enterprise that is so integral in Chris White MP's bill which I discussed with him at the House on Monday. Without an increased understanding of the economic and societal advantage of social value - getting the disabled people employed, the unemployed young people returned to work, the environmental damage reduced, the vulnerable families supported - these will all get put to one side as government discounts are driven upward and the lowest unit price wins.

If we are not going to miss out as a society we must decide what we want our future private and public sectors to look like and then we have to invest not just capital but also expertise to create that vision. Social enterprise offers a unique blend of self-help, innovation and inspiration but as it has an uncomfortable relationship with both the traditional public and private sectors, someone has to nurture it and given the government has most to gain from its growth, that would be a logical place to start. The Japanese turned a rural economy into a leading global industrial nation in 50 years through smart thinking; we bounced back from the Second World War in 20 years because our successive governments shared a vision of a prosperous nation. The challenges we face are no less monumental and only a big vision for economic growth that leaves no-one behind will snatch glorious victory from the jaws of incremental decline.


  1. Completely agreed with the point made in the last post and echoed here - that financial support is not enough on its own. That is the same lesson taught in the microfinance industry, and it makes logical sense in social enterprise too - but the movement to encourage an earned revenue model in charities has mostly looked at financing and not much else.

    I also agree with your point that the public sector should look at other ways of supporting social enterprises. One unexplored area is social procurement or social purchasing, which Sherri Torjman raised on the blog recently. Instead of supplying capital in the form of investment, the public sector can look at funding enterprises by providing business - by actually buying the products that social enterprises. I am not familiar with the scope of social purchasing in UK, but I do know that an excellent whitepaper was produced on it last year:

    Would love to know what you think of the concept!

  2. Social purchasing is fascinating and makes perfect sense in the context of bungee jumping at the weekend, how that would work for social enterprises in the form of social procurement is something else. It isn't a subject I know much about but I will look into it and give it some thought. Thanks for lead and for your observations.

  3. Agree about the subdued atmosphere. I think they should have called the conference 'After the goldrush'.

    There's lots of questions about Big Society Capital but, even if we're cautiously optimistic about its impact on the investment side of things, it doesn't solve the problem of revenue.

    I think elephant in the room on Tuesday was the question of who's actually going to pay for social enterprises to do stuff.

  4. I agree David, I thought your piece was great by the way. "After the goldrush" maybe implies we have had an ill deserved bonanza, is that the case? Most of the se's I know in scaling back or closing have had to let go of people who are unlikely to work elsewhere and not just because of the work shortages. What many had pre cuts were, for the most part contracts to deliver things that were in the interest of wider society, like the Future Jobs Fund, now even our largest number are getting caught out through things like the work programme with smaller se's failing to find much opportunity at all.

    As you say borrowing will be limited by revenue and revenue for many has fallen off a cliff. Nick Hurd spoke of how only 70% of civil societies were in receipt of Government money but I would hazard a guess that social enterprises are a large chunk of the 30%.

    I don't think doing things that require Government contract like providing return to work strategies for the young or reducing the carbon footprint whilst employing ex-offenders, are un-entrepreneurial or useless things to do, they are just not a shared priority at the moment so folk will have to find other ways of delivering their social impact.

    Now that will be the alchemy.

  5. I don't think the social enterprise sector had an ill deserved bonanza. I don't think New Labour's spending was all especially well targeted.

    While the more specialist support that was funded - including SEL's - was extremely good, there was a lot of funding finding its way to consultants offering non-specilised support of limited value to people who didn't care because they weren't paying for it.

    And while doing this, New Labour crucially failed to take practical action to embed social value in government commissioning or support social enterprise as a way of doing business in the mainstream consumer economy.

    The result being that the proportion of business plans written at taxpayers' expense to actual businesses created wasn't what it should've been.

    I think the figures about the percentage of civil society orgs. receiving government money are important but I don't think they show us what politicians imply they show us.

    The majority of unfunded civil society organisations are people coming together in their spare time to do things that they want do and think are worthwhile.

    Lots are focused on arts and recreational activities, those that are focused on providing social services - such as small church-run soup kitchens - are likely to have made an active choice not try and scale up and provide a wider range of professionalised services (and would've need some state funding or private grant funding to do so if they had wanted to).

    It would be interesting to know what percentage of civil society service delivery is currently funding through donations and non-state trading income.

    This research from last year is interesting in terms of charities:

  6. As I home educate one of my five children and having worked on a one to one basis with SEN children I briefly investigated the prospect of setting up a social enterprise to work with families for whom school based education doesn't work. Setting up a small free school didn't seem to fit the bill after investigating via the New schools network. It was extremely difficult as a lay person to find information about starting up a social enterprise. More should be made of making the general public aware of what social enterprise is and how advantageous as social enterprise can be for a local community. The average person probably couldn't name a social enterprise if they were asked. I hope that a way can be found despite the current economic climate to push social enterprise to the forefront.

  7. An interesting point from Nabeel above about microfinance and support. Prior to introducing our earned income approach the UK, we'd sourced an experimental microfinance initiative in Russia and one of the elements regarded as having been key to the success of this project was the one-stop shop for hand-holding would be micro enterprise owners. These 'Transformational Lending' programmes are distinct because they combine access to credit with more comprehensive business assistance services to help microentrepreneurs address the challenges of operating a larger enterprise. The technical assistance may focus on general topics, such as cash flow management, personnel, market development, and production technology. Alternatively, it may focus on the market information and technology needed to develop particular business sectors.
    It was of no interest to the APPGs on microfinance and social enterprise when approached in 2004 with an offer to present on the success of the Tomsk project. The impact of a looming economic crisis had been seen at first hand and in hindsight, suggesting capitalism was inadequate must have seemed eccentric, hence we missed an opportunity to act in ways which could have softened the blow of the 2008 crisis.
    Social value, or as we have described it, economics which are "measured and calibrated in human terms", was the theme of my report for the RBS SE100 index. They didn't include us, I presume because revenue had halved since being included last year.

    We saw funding going to a plethora of support organisations and consultancies and by and large the social enterprise movement has been about the kind of conference above. We saw some of our customers investing in this culture while leaving our invoices unpaid. The Guardian's Manchester Evening News being a classic example.

    Business plans developed at our own expense typically met the 'not invented here' response, while seemingly being in competition with publicly funded agencies.

  8. David I totally agree that the open goal Labour managed to miss was embedding social value within commissioning. Acting a bit like a corporate social enterprise remained an act of CRS for the last Government, an add on albeit one they increasingly found attractive. Wether this Government takes a more strategic view by adopting social enterprise principles in the way in which they commission we shall have to wait and see, although sadly, not for long I suspect.

    I live in hope.

    I am sorry Caroline you have found information so hard to come by on schools and social enterprise, but if you email me at I will try to put together for you any sources, information or contacts that you might find helpful.

    Jeff I think everyone is increasingly tiring of the 'not invented here' approach. It seems particularly unforgivable given the restricted resources we are all trying to deploy. My sincerest hope is that these difficult times will lead to more collaboration and less needless competition.