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How the social economy is key to the build back better drive

Now is the time to champion small, socially minded businesses, and support them to create change in their communities, writes School for Social Entrepreneurs’ (SSE) chief executive, Alastair Wilson (pictured).

The UK’s economy is at an extraordinary moment. It presents both concern and opportunity for those of us working for recovery. Entire industries such as hospitality and tourism have been braced for catastrophe. Many of the markets that form the bedrock of our economy are reeling from the impact of coronavirus. As CBI Director-General Carolyn Fairbairn warned in her letter to the PM: ‘Without immediate intervention, pre-crisis inequalities across regions, gender and race will worsen.’

We know it will be small enterprises that will be hardest hit for years to come.

Having worked alongside some of the most innovative entrepreneurs for 20 years, I know how this crisis is hitting the ‘little person’. When our economy fully reopens, rebuilding our SMEs and social enterprises will be a monumental task.

At the School for Social Entrepreneurs, we work with small social enterprises, community businesses and trading charities whose raison d’etre is to create social or environmental impact. Despite noble intentions, these organisations have been as vulnerable to the lockdown as any other business. In fact, often the higher costs of creating systemic change makes them more susceptible to failure.

Collectively, social enterprises contribute £60 billion to the UK economy and employ an estimated 2 million people. Many of those employees come from the most vulnerable parts of society. 35% of social enterprises serve communities within the top 20% of the most deprived areas of the UK. Source: SE UK

Over the past 20 years, the focus has been on seeding and growing more autonomous and less grant-dependent organisations. Generating income from trading is vital to these organisations. These businesses seek to stand on their own two feet by trading (whether B2B or B2C) to create an engine of income with minimal support.

These social enterprises and the network of organisations that support them, understand how to create change in these markets, helping them to start functioning as ‘normally’ as possible. At SSE we’ve created a suite of tools, from business support to innovative grant funding. The aim is to help social entrepreneurs find the right balance between financial resilience and social impact.

We’ve been providing Match Trading grants to social enterprises since 2017. These grants match an annual increase in income from trading with a grant, pound for pound. As charities have match funding, social enterprises now have Match Trading. And it works. Every pound of grant generates £2.40 of additional traded income. In terms of trading uplift, those receiving Match Trading grants outperform those receiving traditional grants by 2.5 times. (Source: Match Trading evaluation Jan 2020)

These grants were born out of two factors:

1) Social impact costs money. So grants are necessary to help traded propositions stack up.

2) Grants need to be administered in a way that encourages the trading ambitions of social enterprises and reduce grant dependency.

However, right now, most social enterprises find themselves in a ‘double whammy’ of a broken market within a broken economy. We’re in danger of losing their contribution to the economy, their quality jobs and social impact. SSE has needed to re-imagine Match Trading for these extraordinary times.

We’ve created Trade Back, to better support businesses to ‘trade back’ to pre-Covid-19 levels over the recovery phase. With Trade Back grants, income from trading is matched with grant when it represents an increase over the Covid-19 period. We aim to accelerate recovery efforts while supporting organisation’s self-determination and autonomy.

These tools enable a more efficient use of scarce funds. We use the principals of nudge economics to incentivise the innovation and diversification needed to reacquire customers when markets are dysfunctional.

Despite growing public opinion that we must ‘build back better’ (‘only 6% want a return to pre-Covid economy’), we are in danger of losing some of the shining lights of a new economy in action.

What if, as we plan long-term recovery, government were to adopt some of the tools and strategies from the social economy and recast the relationship between citizen and state?

What if we, as a society, championed social impact being driven by small, socially minded businesses, and supported them to create change in their communities?

SSE is working with the funding community to explore new collaborative opportunities to make Trade Back grants more widely available.


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