Maximising the potential of the community businesses at the heart of our highstreets

By Ailbhe McNabola, Director of Policy and Communications, Power to Change

Published this week by Pro Bono Economics, the Law Family Commission on Civil Society report shines a light on the “vital importance and versatility” of charities and community organisations, always important but in a time of multiple crises and challenges, ever more so. Civil society plays a role in every community and every policy area and the report draws on a huge body of work to recommend ways to maximise the potential of civil society. I can’t summarise it all here, but I’d like to pick out a few interesting areas at the enterprise end of civil society – what we might call the social economy – and look at what the report has to say about its potential.

Although I slunk in late, so to speak, replacing Power to Change’s outgoing CEO Vidhya Alakeson on the Commission a year ago, it has been a fantastic project to be part of. The description of “an ambitious programme of ground-breaking research” is certainly accurate. Over the course of two years, the Commission looked into almost every aspect of civil society in the UK, asking how we might make more of this important part of our society. Vidhya and I represented the community sector in those discussions, feeding in evidence and insight from our work at Power to Change and from the work of our close partners, and reflecting what we have learned from the community businesses and community organisations we work with.

Of course, civil society is a broad term – indeed the report recognises in its introduction that there is a spectrum running from charity to social enterprise, with a lot of overlap and commonality along its length. At Power to Change, we support communities through community business: trading organisations offering products and services that meet local needs, run by local people for the benefit of their community. A growing part of the social sector in the UK, these businesses often own or manage a physical asset such as a building or green space, contributing to the physical improvement of places as well as offering services and important shared community spaces. Part of the social economy, these businesses are important sources of jobs for people in deprived places and for groups furthest from the labour market. They contributing to, and sometimes lead, high street regeneration – occupying buildings temporarily while the rest of the market recovers or bringing ‘landmark buildings’ back into use, like the Observer Building in Hastings or the Millennium in Plymouth. They bring new economic activities to expand and complement what high streets offer local people, supporting reintegration by widening the range of users attracted to the high street.

The Commission looked at how we might maximise the potential of these businesses as part of civil society, picking out areas where more or better tailored support would make a difference.

Firstly, community businesses and social enterprises, while trading, will be using grant funding to support their growth and development. The report highlights a need for unrestricted funding, for pre-development finance that supports planning or feasibility studies, and for ‘patient capital’ that supports the long-term ambitions of the organisations. This also means a greater diversity in income streams beyond grants is needed to build sustainable civil society organisations.

Over the past two decades, there has been a shift towards diversifying the sources of finance that are available to community businesses. In addition to grants and trading income, they may seek investment from their local community, social investors or even mainstream banks to help them grow. Stretford Public Hall in Greater Manchester is owned by members who have invested equity through a community share offer.

Community businesses do also take on social investment, but there needs to be adequate support, infrastructure and capacity within the sector to realise this. The report highlights the case of Liverpool City Region, where community businesses have worked with the Combined Authority and Power to Change to establish and fund Kindred – a social investment and support vehicle owned by the sector in that region which offers flexible and patient investment at 0% interest to social economy organisations, who can then repay a portion of their loan in social impact.

Alongside funding, business support is important for this part of civil society. Although community businesses and social enterprises can access initiatives aimed at small and medium sized enterprises, such as Growth Hubs, many social economy businesses do not find that interventions designed for the broad span of SMEs are suitable for them, nor are they often communicated effectively to this part of the business community. The report calls for more to be done to ensure that the needs of social economy SMEs are met by business growth support offerings.

While not denying the ongoing challenges, there is a wealth of innovation and energy in communities and in civil society. The Commission’s work has been to identify practical ways to support and grow this important part of our society and economy. The report makes wide-ranging and well-tested proposals for how we might do this over the next decade.

This piece was written in response to the publication of the report ‘Unleashing the power of civil society’