Trading upwards

Entrepreneur Paul Barry-Walsh firmly believes it’s time government took a back seat and left it to charities like his own to support the disadvantaged. Clare Goff meets him

Paul Barry-Walsh, founder of the Fredericks Foundation, outside the charity’s headquarters in Surrey

He’s a businessman who hates big business, a philanthropist who dislikes the term philanthropy and a multimillionaire who now devotes his time to helping the most disadvantaged become self-employed.

Paul Barry-Walsh is founder and chair of Fredericks Foundation, a charity offering microloans to help disadvantaged people start their own businesses. Launched in 2001, Fredericks now covers communities from Margate to Minehead. With an average loan size of less than £5,000 it has helped hundreds of people move from unemployment to employment.

And it has done it at a fraction of the cost that government spends, says Mr Barry-Walsh, who is fiercely opposed to ‘big’ government.

‘At Fredericks for less than £200,000 we can get 100 people into long-term sustainable jobs. If you look at the millions that have been pumped into Birmingham – and the unemployment rate has gone up. Government is so grossly ineffective and expensive at delivering services.’

Fredericks’ first client, an ex-offender, ran off with the money (‘we joked that we’d never see him again and we didn’t,’ he remembers) but since then the charity has had a 75% loan repayment rate.

Success stories include Cathy Madden, who set up her dog training business Cathy’s Canine Capers with the help of a Fredericks loan, after a period of ill health had forced her to close her previous business.

Mr Barry-Walsh says he recently received a phone call from a recruitment consultant in his 50s to say that his new business, funded with a loan from Fredericks, had turned over £100,000 in the last six months.

‘He’d fallen on hard times, been through a divorce and lost his house and his wife in a short period of time,’ he says. ‘Without the funding, and, more importantly, without someone to believe in him, he wouldn’t have done it. He was in tears when we gave him the money.’

A SELF-HELP PHILOSOPHY

Mr Barry-Walsh’s personal experience of the difficulties involved in finding money to set up his own business was the trigger for the launch of Fredericks.

‘I had a privileged upbringing: I was middle class, had been to university and had social connections. I thought “if I’ve found it hard to raise money how much harder is it for someone who’s been out of work for a while and whose confidence is low?”’

Having started his own IT outsourcing company Netstore at the age of 30 and sold a second business Safetynet for £170m in 2000, he was looking for a new venture that would allow him to help those less fortunate than him.

He named Fredericks Foundation after his Irish grandfather who he says ‘never turned a beggar from his door’, but his own approach is to help people to help themselves.

‘The most satisfying thing is helping people to make themselves self-sufficient,’ he says.

Mr Barry-Walsh wants to revive the sense of responsibility of Victorian times, a responsibility that he says has slowly been abdicated as individualism has risen and the government has increased its reach.

‘The dead hand of the state has infiltrated into everything and I think that’s been very divisive. People say why should I look after my parents when the state can? I think we’ll have to reassess that and take greater responsibility for our families and friends.

‘The Western model is constantly evolving. The state has given a safety net to everyone but it’s been very expensive and it has eroded one of the fabrics of society.’

He found a sharp contrast to the UK when he visited a microfinance organisation in Malawi. Villages there self-insure themselves so that if one person gets sick or dies the rest of the village covers that person’s loan.

‘I couldn’t do that in Britain,’ he says. ‘If I said we’re going to share the liability for a loan with the rest of the village I’d be told to take a running jump.’

At Fredericks he has established a 1% club, which asks businesses to pledge to donate 1% of their profits to charity. The idea has gained the ear of civil society minister Nick Hurd, and is helping boost corporate donations to Fredericks, which now has a policy of only accepting a maximum of 50% from government, after a series of bad experiences with government funding programmes including the Phoenix Fund. It now receives only 17% of its money from the state.

Since Fredericks launch, the already underfunded provision for self-employment has contracted further. Of those organisations like Fredericks providing loans to disadvantaged people to move into self-employment Mr Barry-Walsh estimates that less than 50 remain.

Demand is strong however, and is likely to get stronger as the retraction of the public sector hits jobs, and self-employment becomes the only viable career route for many.

During the recession when mainstream banks stopped lending, Fredericks moved away from its core function to bail out bigger companies like green roofing company Sky Gardens which needed £20,000 funding to stop itself going under.

In recent months Fredericks has been expanding through its ‘hub’ model that allows it to move into new areas with little upfront cost (New Start, June 2010). A ‘hands-off’ franchise model, the hubs revolve around an advisory board, client manager and volunteers, with main admin functions centralised at its main office in Surrey.

So far hubs have been set up predominantly in southwest England but a tie-in with the Community Foundation Network will allow the further expansion of the organisation, with a hub expected to open in London in the new year.

But Mr Barry-Walsh is keen for the charity not to expand too far. He has had personal contact with most of the charity’s clients so far and wants to keep it that way.

He rails against the move towards ‘big’ – whether it be business, charity or government.

‘Big is not beautiful. I want to encourage small business – that’s where the dynamism is. It’s greener, people are happier and companies under 200 create 13 times more patents than larger companies.’

His vision for the future of the UK is a revival of our sense of community and for local areas to teem with small businesses and small local charities working, as he says Beveridge intended, alongside government on the pressing social issues of the day.

In 2009 Paul Barry-Walsh won the Queen’s Award for Enterprise Promotion. Last year also saw him pip Virgin boss Richard Branson to the post to be awarded the CNBC philanthropist of the year. But it’s not a term he feels comfortable with.

‘I’m trying to get away from the idea of philanthropy. We should all be philanthropists. The poor give much more of their income in percentage terms than rich. Just because the numbers are big the rich are labelled philanthropists but why is one a philanthropist and one not?’

* For more information about Fredericks Foundation contact tel: 01276 472722 email: mail@fredericksfoundation.net or go to www.fredericksfoundation.org