The number of 'social enterprises' just doesn't add up

The government has increased it's estimate of the number of social enterprises in the UK from 55,000 to 62,000. However, this is due neither to any actual growth in the number of social enterprises, nor any new research – rather it is 'down to a new and 'complicated' way of working out the estimate'!

The actual basis of the figure of 55,000-62,000 is rarely scrutinised. It in fact derives from the Small Business Service Annual Survey of Small Businesses: UK 2005 (www.berr.gov.uk), but this counted only social enterprises that confirmed ALL of the following criteria:

  • they think of themselves as a social enterprise (Q45b)
  • they never pay more than 50% of profits to owners/shareholders (Q45)
  • they generate more than 75% of income from traded goods/services (or receive less than 20% of income from grants and donations) (Q43)
  • they think they are a very good fit with the Government Definition of a Social Enterprise.

These criteria in my own view would exclude much – perhaps even most - social enterprise. Here are just some examples:

  • they would exclude many organisations which Social Firms UK would classify as Social Firms, since these need only earn 50% of turnover from traded goods/services
  • they would exclude many – perhaps most - Co-operatives – which are member-benefit organisations and often adhere strongly to the principle of distributing profits to members (who are indeed owners or shareholders)
  • they would certainly exclude most Development Trusts – which aspire to generate their income from trading but very few of which (I believe) have actually achieved over 75% trading income
  • they would exclude the often very substantial and successful trading divisions or subsidiaries of charities or other public or voluntary sector bodies (which typically do not generate 75% of the income of the whole charity – or if a subsidiary in fact gift most of their profits to their owners).

Regular readers of this Blog will know my own views on why counting 'social enterprises' will never work (because social enterprise is a verb not a noun – its something you do, not something you are).

Another recent news story - that the Social Enterprise Mark is 'falling flat' – is also interesting in this context. Apparently – after 2 year's work, £470,000 from the Lottery, plus additional funding from Co-operative Group and Triodos Bank - there are now 40 Social Enterprise Mark holders in the UK (and another 23 'in the pipeline'). So that's about half of one percent of the government's (low) estimate of social enterprises in the UK.

I really do not want to join the critics of the Social Enterprise Mark initiative because in fact their work on defining 'a social enterprise' is the best I have seen – a far deeper recognition of the complexity than the government's for example – but I do think it's wrong-headed - and I must admit I do wonder if they couldn't have actually set up 40 or so 'social enterprises' with that amount of money...

Bonjour

Petite info pour ceux qui ne l’auraient pas vu, je vous recommande le dernier hors-série du journal Le Monde. Chaque année il publie un atlas thématique, et celui de 2012 n’est pas sans lien avec notre Mouvement : L’atlas des utopies.

Doing the maths

Hi Geoff
I share your anxieties about the inadequate methodology used by BERR in estimating the number of social enterprises in the UK, the workforce and contribution to GDP. Any suggestions as to how the next BERR review can provide robust figures?

Verb or Noun

Hi Geof,

There is a terrific article by Fergus Lyon and one of his colleagues on the difficulties of defining social enterprise in the latest volume of the social enterprise journal (SEJ). Interestingly, he goes into the reasons why different studies produce different numbers. The issue, it seems to me, is two-fold: politics enters into the definition process (so different studies influenced by different political interests will produce different definitions and different results); the concept itself is still relatively young and still in the process of formation (pre-paradigmatic, as Kuhn would argue).

Even so, I only half agree with your assertion that social enterprise is a verb, not a noun. I would argue that it is both. It is verb when we describe social entrepreneurial practices that are recognised as part of a social enterprise project. At the same time, as soon as that project seeks to institutionalise its practices, it starts to recreate itself as a legal entity and becomes a noun. Social enterprise is both something that you do, and also something that you create - it is both a verb and a noun.

What is the proof of this? Try getting social enterprise support when you are not constituted in the way that a support agency demands that you constitute! At one speaking engagement, I discussed a case of person who established a CIC but was denied support by a social enterprise support agency because the directors were a husband and wife team. The support agency insisted on there being an external board (like a charity - which shows the level of understanding in some council departments!). I've also discussed cases where different agencies in different parts of the country offer support only if you are constitutionally a cooperative, or (alternatively) only if you are consitutionally *not* a cooperative. Lastly, I've discussed a case in Sheffield where a social enterprise support agency stopped support for a person ploughing all their earnings in a 'social enterprise' after they discovered the person was cross-subsidising their 'social enterprise' with income from commercial contracts. For most people, of course, this is precisely was social enterprises are designed to do. So, there are cases of people being denied social enterprise support both for how the enterprise is constituted / governed, and also on the basis of what they do. Each support agency judges cases of support against their own internalised model of social enterprise.

So long as there are people who have the power to decide whether or not to offer support, it will matter both what you are *and* what you do. Across Europe, there are now legal definitions of social enterprise (not yet in the UK, but we're getting closer all the time - we're running about 10 years behind some other countries). It is fraught with difficulty, as you rightly point out, but a generation from now I imagine that there will be as good an understanding of the legal differences between social and private enterprise as there is currently between the public and private sector. This does not mean it won't be contested, but popular norms and definitions will eventually be accepted by more and more people until it becomes a relatively stable concept for practical and legal purposes.

Having said all this, that's why the debate matters - whatever becomes accepted as a popular notion is likely to influence future legal definitions.

All the best
Rory