Invest in social enterprises to create jobs and inspire innovation

Social enterprises are out-performing standard SMEs. By Lucy Blackley

​SEUK’s Social Enterprise State of the Sector report, released last month, finds a sector growing and thriving. On key measures of business success such as turnover growth, job creation and innovation, social enterprises are outperforming mainstream small and medium enterprises. Over half of social enterprises grew their turnover in the last year. This compares with only 40% of mainstream SMEs. And, excitingly, social enterprises are innovators. Nearly two-thirds of social enterprises introduced a new product or service in the last 12 months (59%), an increase from 53% in 2013. Among SMEs this has fallen to 38%. This suggests that organizations like Innovate UK and LEPs across the country should be looking to invest in social enterprise to drive innovation in the UK.
 
In this high-performing sector, there is also extraordinary growth in the proportion of social enterprise start-ups. Over a third of all social enterprises have been trading for three years or under (35%), up from 29% in 2013. The proportion of start-up SMEs in comparison was 11% in 2014. The report explores whether mature social enterprises are proportionally failing and concludes there is some evidence they are still there, just out-numbered by the growth in start-ups.
 
And there is good news about job creation in the sector which is significant since many local economic strategies are based on creating jobs. 41% of social enterprises created jobs in the last year, compared with only 22% of SMEs. Of course, social enterprises offer added benefits – the report sets out how they trade for good, often employ people from disadvantaged backgrounds and work in the most deprived areas.  Leadership of social enterprises is inclusive and diverse - 40% led by women, 31% have black and minority ethnic directors, 40% have a director with a disability. If we want good jobs in the most disadvantaged communities, in ethical businesses, this research suggests the social enterprise sector can deliver.
 
At a local level, we were proud to see that South West is the 4th highest region for levels of start-ups – after London, West Midlands and the South East. However, the South West only achieves 7th for business confidence (65% of SW Social enterprises anticipate an increase in turnover in the next 12 months). This suggests there is work to do to boost confidence regionally and perhaps increase opportunities to trade.
 
Qualitative research we have recently conducted for a major social enterprise client identified a potential opportunity here. Social enterprises we spoke to were keen to network more with other social enterprises, with the aim of identifying opportunities to collaborate and pitch together for bigger tenders. Initiatives to improve this are found in Plymouth. Our local Social Enterprise Network has created a directory of social enterprises in Plymouth and launched a mobile app to help social enterprises to identify potential partners, suppliers or customers.
 
Our research found a real desire for the good work of social enterprises to be more widely known and understood. SEUK’s report helps us to appreciate the scale and begin to grasp the potential of a sector of approximately 70,000 social enterprises. Most LEP’s have the ambition to inspire innovation and entrepreneurship to create long-term economic growth. With the right support and pro-social enterprise economic policies social enterprises look like a good bet to deliver this, and more.