A socially enterprising nation

March 2016

The UK is a world leader in social enterprise. It is well-placed to meet growing international demand for expertise in this area. Doing so can support international development. It can also generate economic opportunities and the good will of governments and future leaders in other countries, benefiting the UK’s long-term prosperity and influence.

A route beyond aid

Trade, investment, and business, if harnessed in pursuit of a social mission, can provide a route beyond aid and become powerful enablers of social change

As the Overseas Development Institute has pointed out, “developing and emerging economies have been driving global growth over the past decade and it is this, not overseas development aid, that has been the main driver of poverty reduction at global level.” Trade, investment, and business, if harnessed in pursuit of a social mission, can provide a route beyond aid and become powerful enablers of social change. This is all the more important in an era of austerity in many countries, when the limitations of philanthropy are magnified. 

Social enterprises are businesses which trade for a social purpose, re-invest surpluses into their social objective, and make themselves accountable for their actions, rather than simply maximising profits for owners and shareholders. They deliver social as well as economic value. As such they can promote sustainable development and reduce inequality. They can also contribute to stable societies: encouraging social entrepreneurship among young people can give them a sense of engagement and provide sustainable employment, the lack of which has been associated with increased risks of radicalisation. In Pakistan, for example, young social entrepreneurs are addressing basic social needs, improving quality of life and creating jobs by, for instance, providing affordable housing, solar energy and clean drinking water . And as a global leader in social enterprise, sharing the UK’s strengths with others can help build long-term economic connections and international influence.

A world leader

The UK is a world leader in the sector. It is home to the world’s fastest growing social investment market. According to the Cabinet Office, 20% of all UK businesses report having a social mission at their core, generating a turnover of £120 billion and employing 2.3 million people. Of these businesses, 70,000 are defined as social enterprises, contributing £24 billion annually to the economy. 75% of British social enterprises earn more than 75% of their income from trade, with the general public being the most common customer (2015 State of Social Enterprise Survey). 

Social enterprises are now active in every sphere of the UK economy and offer a dizzying range of goods and services. They sell everything from fashion to coffee to telecoms plans. They provide personal loans, career counselling, and child support services. They manage housing stock, renewable energy schemes, and transportation services. 

Furthermore, according to Social Enterprise UK’s recent Leading the World in Social Enterprise report, in the UK: “social enterprise is outperforming its mainstream SME counterparts in almost every key business metric: including turnover growth, start-up rates, diversity of leadership, workforce growth, and business ownership” (Leading the World in Social Enterprise: State of Social Enterprise Survey 2015. Social Enterprise UK. 2015. P. 60. The sector also out-performs the private sector on innovation, with the number of social enterprises introducing a new product or service in the last year standing at 59%, compared to just 38% amongst regular businesses (2015 State of Social Enterprise Survey). 

The UK is rated first in the world for social investment professional services, first for supportive infrastructure and first for the policy and legal environment. The UK education sector has also taken a lead in the sector: 70 of the UK’s Higher Education institutions have a significant amount of social enterprise activity and are supported by HEFCE/UnLtd

The sector enjoys the strong backing of government, which has introduced policies to bolster their growth. The Community Interest Company legal structure for social enterprise, the Social Value Act (to promote procurement from social enterprises), social investment tax relief (to promote social investment), new funding mechanisms such as social impact bonds, and a uniquely vibrant intermediary sector, all support social enterprise. These are innovations that other countries are keen to study and in many cases replicate. 

Government policy also encourages UK social enterprises to export. Interest and demand overseas for the products and expertise of the UK social enterprise sector is high and conditions are favourable to building on the UK’s comparative advantage. 

A growing demand

Social enterprise is expanding around the world. A recent snapshot of investment funds and products listed on ImpactBase showed that, from 2014-2015, there was an increase from 310 to 355 listed funds and products, which increased from $16.7 billion to $30 billion in assets under management (ImpactBase Snapshot 2015). A recent global survey of investors found that respondents had committed $10.6 billion to social investment in 2014 and intended to invest 16% more - $12.2 billion – in 2015 (J. P. Morgan and GIIN, Eyes on the Horizon, 2015). 

More and more young people want jobs with social impact

There is growing demand for knowledge on social enterprise. The ethos is starting to influence mainstream business as sustainability and social value become important measures of success. More and more young people want jobs with social impact. There is a growing investor appetite for social as well as financial returns. Consumers are becoming aware that they can use their spending power to ‘buy social’ and influence producers to embed positive social impact. Meanwhile, some governments, including the UK, are opening their vast procurement contracts to social enterprises. 

The UK is by no means unique in its focus on social enterprise. India, for example, has a centuries-long tradition of involving social goals in business settings. In these contexts, the role for the UK is more complex than straightforward export of British models. Yet the UK is keen to share its own expertise. It has developed a number of global initiatives to promote social enterprise investment. These include the launch of the Social Enterprise World Forum and the creation of the Social Impact Investment Taskforce. 

In order to build on these initiatives, the British Council has developed an active global social enterprise programme. In March 2015 the UK Government launched the Social Investment is GREAT campaign, described as a campaign to ‘promote the UK as the global hub of social investment where businesses and individuals can invest in enterprises that have a positive social impact and make a difference in communities (Minister: ‘Social economy is a great UK success story’. British Council. 5 March 2015. It is hoped that this will bring further benefits to the UK. Social enterprise offers a strong model for achieving social goals and capitalising on an area of significant UK strength. 

Dr Mairi Mackay, Global Head of Social Enterprise; and Adam Pillsbury, Social Enterprise Global Stakeholder Manager, British Council