Which UK city could rival Bologna’s social economy?

Many cities have strong social economies, helping tackle poverty and build inclusivity. Why is the UK so far behind?

The social economy refers to the parts of the economy that are neither private profit-making businesses nor publicly owned. It is made up of a wide range of organisations, including social enterprises, cooperatives, community enterprises, voluntary organisations and informal self-help networks. What unites this group is their prioritisation of social mission over private profit.

The evidence suggests these diverse organisations can offer numerous economic benefits. Work integration social enterprises (WISE) offer work opportunities and skills development, often for excluded groups, and can be more effective than traditional government employment support. The social economy can also provide better quality work than the alternatives.

Cooperatives operating in traditional markets tend to treat their employees better and have higher wages than comparable businesses. And the social economy can even help to build a more resilient economy. Employee-owned businesses performed better during the recession than comparable businesses.

‘A UK city becoming the next Bologna, Barcelona or Montreal is possible.

A big shift in leadership and action will be needed.‘

Social economy seen as an ‘add-on’ in the UK
But the social economy is relatively less developed in the UK than elsewhere. The best estimates suggest one in twenty jobs in the UK are in the social economy, compared to around one in ten in countries such as Sweden, Belgium, Italy, France and the Netherlands. Frequently, organisations with a social mission are seen as an add-on to the national economy – as providing services and a safety net where private and public sector opportunities are missing. This is an important role, but it means that the social economy is less innovative and shapes the economy less than in some other countries.

Compelling examples from cities around the world show the potential of the social economy to reshape economies. The Mondragon cooperatives of the Basque Country and cooperatives in Bologna make up the majority of the non-public local economy, and are highly productive firms with relatively low pay differentials. In cities as distinct as Barcelona, Montreal, Gothenburg and Lille, partnerships between the social economy and local leaders are aiming to tackle poverty and transform their economies.

The question that lingers is what is holding back the social economy in UK cities? A JRF-funded programme of research involving case studies of UK and international cities and roundtables across the country tried to find out.

How to develop a social economy
The research suggests there isn’t a quick fix. This isn’t just about getting the right structure or financing instrument in place. International cities with developed social economies have varying structures and systems, but what is common to them all is a supportive ecosystem. In their various ways, all of the cities have provided leadership, networks, innovation, infrastructure, and procurement opportunities that collectively allow the social economy to develop.

We can draw some key lessons for UK cities wanting to develop the social economy as a route to inclusive growth. City governments need to champion and create long-term partnerships with the social economy, as has set the agenda in Barcelona, Montreal and others. This partnership working should allow local leaders to identify the most appropriate infrastructure – spaces, incubators and financing models – to allow the social economy to flourish.

Procurement offers city governments an underused policy lever to develop the social economy; social economy organisations feel that current processes all too often shut them out. Those in the social economy can also do more to build networks and represent themselves as an integrated ‘social economy’. The Liverpool city region social economy panel is an effective recent effort to do just this.

Our roundtables showed the appetite within the social economy to be part of a bigger movement, one that changes the economic model and reduces poverty. A UK city becoming the next Bologna, Barcelona or Montreal is possible. A big shift in leadership and action will be needed.

• Read ‘Cities, the Social Economy and Inclusive Growth’ here.