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What is the Future Role of Social Enterprise in Wales?

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Covid-19 has caused an unprecedented shock to the economy, sending demand and activity plummeting, and we are likely to be feeling the effects of that for years to come.

But it also had an equally profound social impact too, that many people have observed and commented on. Enjoined to stay at home, save lives and protect the NHS, the majority of us seem to have accepted the restrictions to our social and working lives in a spirit of social solidarity and good neighbourliness.

For the most part, people observed social distancing and travel restrictions, stepped outside every Thursday evening at 8 to applaud NHS staff, connected with family and friends through video chats and accepted the hardship of not being able to see loved ones in person. Small wonder, given this willingness of people to accept limitations for the sake of others’ wellbeing as well as their own, that commentators have talked about the birth of a kinder, more caring society.

Many people also appreciated the improvement in the environment as air pollution dropped and previously congested roads suddenly cleared. The skies too were suddenly clear of aircraft trails. Perhaps not just a kinder, but a greener society was in the making.

As the lockdown is gradually lifted, it remains to be seen how much has really changed in the way we live. It’s likely that many people will want to go back to their old habits quite quickly. But equally, there will be lessons to learn and conclusions to be drawn about how we could use the experience to make a better economy and society if we choose.

One impact could be on the spread of social enterprises.

Already, in the years before the pandemic, there had been a growth in the number and importance of social enterprises in the Welsh economy. The Mapping the Social Business Sector report, published by Social Business Wales in 2019, revealed there were 2,022 social businesses in Wales, nearly 20% more than at the time of the previous report in 2016. The sector employed 55,000 people in 2019, 36% more than in 2016, and was valued at £3.18 billion, 34% more than 2016.

The term social enterprise covers a very wide range of businesses, from mutual and co-operative societies and employee-owned concerns to privately owned businesses run on a not for personal profit basis and with a social or ethical purpose. What they have in common is that they are not run solely for the personal profit of shareholders, but have a wider social purpose either in their ownership model or their reason for operating, or both.

Other findings of the 2019 report demonstrate this. More than half (57%) of social businesses reported that their primary objective was to improve a particular community, either geographically defined or identified by a common characteristic. 46% gave their mission as supporting vulnerable people, and 45% improving health and wellbeing.

86% of social businesses provide volunteering opportunities, and 76% pay their staff the Living Wage.

Most reinvest their profits into the business, with a quarter investing in their community, social or environmental objectives. Mostly they employ local people, with 57% of the enterprises’ workforce living within 10 miles of work.

In Wales, these aspects of social enterprises fit in well with the goals of the Wellbeing of Future Generations Act, which lays out a range of social, environmental and cultural objectives as well as economic ones. They also fit in with the idea of a wellbeing economy, which has recently gained traction in countries as widespread as New Zealand and Iceland. A wellbeing economy can be defined as one that serves people and communities. The idea gained notice last year when New Zealand’s Prime Minister Jacinda Ardern unveiled a Budget that had wellbeing as its focus rather than economic growth.

So social enterprises and the concept of wellbeing as a focus of economic policy were both gaining in popularity before the coronavirus struck. But can social businesses continue to prosper in the wake of the pandemic? On the one hand, there is a lot in their favour. There is the heightened social awareness and the wish for a better society that’s already been mentioned. More concretely, the crisis increased interest in local supply chains, in food for example. This is a sector where social businesses, with their local community focus, can do well in. Social enterprises with a manufacturing focus have also shown they can step up to the plate and help fill the voids in the supply chain exposed by COVID.

On the other hand, social businesses can be vulnerable financially, relying on a funding matrix of loan, grant and traded income to grow and thrive. The 2019 report revealed a very positive trend towards financial sustainability in recent years, with 56% of social businesses generating more than three quarters of their income from trade, compared to 41% in 2014. Trading with the general public had replaced public sector grants as the primary source of income for social enterprises.

Nevertheless, difficulty in getting finance was identified as the main barrier to growth, mostly due to the lack of accessible grant, loan and capital funding options available. Grant awarding trusts and foundations have become increasingly important as public sector funds have shrunk, and many social businesses are worried about the withdrawal of EU funding which has been an important source of finance.

Support agencies and government funded programmes have also had a critical role to play over recent months in the survival and diversification of social enterprises. Social Business Wales (SBW), funded by the European Regional Development Fund and delivered by the Wales Co-operative Centre, provide help with enquiries on cash flow, HR, digital marketing and a range of other areas which need re-thinking in light of the current situation. The SBW New Start programme has also provided advice and support to enterprises and social entrepreneurs at the start up and early stages of their businesses during the pandemic. Many have used this support to refine their business planning and review their financial modelling as they intend to progress with developing their enterprise plans.

So what does the future role of social enterprise look like in Wales? Can they help us build back better?

On the one hand, they are likely to have an increasing role to play in a society that is looking for ways to build on the positive social values expressed during the lockdown, and if this concept of a wellbeing economy gathers any momentum. On the other, many at least are likely to struggle to thrive or get off the ground if recession tightens the purse strings of consumers, local authorities and government. With the right support and vision, the long-term picture for social enterprise looks hopeful; the short term may prove challenging.