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Social enterprises in a European perspective at Kettering 12 March 2013

Posted by cooperatoby in cooperative, EU, social economy, Social enterprise.
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Kettering Conference Centre across its frosty lake

Kettering Conference Centre across its frosty lake

The Growing Successful Social Enterprise conference organised by E3M in the charming lakeside Kettering Conference Centre last week turned out very well. It was much more European in feel than I was expecting, and was graced by no fewer than seven representatives of the European Commission (though the French minister Benoît Hamon was detained on horsemeat business). It’s good to see some parts of the sector in Britain taking an interest in the rest of Europe, as in so many ways it behaves as if it is a special case.

Money, models and markets. What did I learn?

1. Mutualisation: First, it seems that employee takeovers of health service units can work to everyone’s advantage. I start off from a dubious position on this, having seen how the worker-owned privatisation of the country’s non-metropolitan bus system in the 1980s degenerated.
Andrew Burnell of the 1,400-strong City Healthcare Partnership in Hull did an impressive job in convincing me that co-operative ownership of former NHS services can work very well. One index of that is an SROI of 28. He is an immensely engaging man and I’m sure an awful lot is down to his personal qualities – simple things like saying ‘thank you’ to staff and having a weekly ‘Phone Andrew’ slot. So what happens if and when budgets are cut and the co-op’s contract is threatened? I asked him what factors prompted their bid, and he replied “self-determination”. Fair enough – it’s exactly what has motivated me in my own working life. I hope and trust that the workforce is inventive enough to stay ahead of the competition.
2. Finance: Secondly, the same issue keeps coming up and it remains unresolved – as it is surely destined to keep doing. We are bombarded with examples of social finance of various sorts, as national and European funds of various types are set up. It was Stephen Lloyd of lawyers Bates, Wells and Braithwaite who, having ably chaired a plenary round table discussion, pointed out that the big issue was still open – how social enterprises can attract funding without giving up control. Britain has seen several cases of so-called ‘mutualisation’ of public services which have been nothing of the sort, where a venture capital firm has bought a majority stake. Echoes of bus privatisation again. The safest way to avoid such a concentration of power is to crowdsource your funds, which is why community shares and peer funding sites are so important. The Phone Co-op does it this way.
The latest Co-operative UK members’ briefing says: “The market for Community Shares showed strong and buoyant growth in 2012 according to the Community Shares Unit. The amount of equity raised through share offers has trebled over the year with around £9 million raised, compared to nearer £3 million in 2011. The number of members purchasing shares in 2012 is thought to be almost 9,000, up from the 4,000 members recorded for 2011.” So it’s still relatively small. How can we make it larger?
3. Biodiversity: Given the new-found popularity of the idea of an ‘ecosystem’ to support social enterprises, another good point Stephen Lloyd made was about biodiversity in the business world. In the 19th century, he said, there were more industrial and provident societies than companies. The predominance of capitalist ownership, far from being the natural state of affairs, is quite recent! This pleasantly surprised me as the registered numbers of IPSs have only got up to 30,000 whereas companies are up to 8.1 million (mind you a lot more of them will be dormant or dissolved). Maybe the pendulum is swinging back – in eight years nearly 8,000 CICs have registered. I was very impressed by Sarah Burgess, the CIC Regulator, for her commitment and simplicity. As she puts it, the ‘CIC bubble’ has expanded beyond all expectations. Just like a bubble, the phenomenon is transparent. With 3,000 annual reports now coming in, her job is starting to become more heavy-duty. She has wound up one CIC under the Companies Act and there are issues of dissolution, but by and large she has kept her power in reserve. There are 17 complaints open at the moment. There is also a looming issue of ‘blended return’: currently, CIC shares are par value, so shareholders do not make a speculative return, but the CIC Association are challenging this and soon she will mount a consultation.
4. Business networking: A subtle undertone was that this was a conference about how to help existing social enterprises to grow, not about start-ups, which is where most of the effort and publicity is put. Hence the importance of B2B networking and clubs like E3M. In our workshop, about the European Structural Funds, a call came from June O’Sullivan of the London Early Years Foundation (which runs 24 nurseries) for some European-level business networking. So why not start with the childcare sector?
5. European funding: this was my main excuse for attending, and the workshop on the topic is worth recording in a little detail.

ESF support needs to be more systematic

B2B networking is something social enterprises can do for themselves. In contrast most ESF support goes to start-ups. In the ESF workshop, Gerhard Bräunling and Evita Agalianou drew on recent experience in Greece to outline four key objectives for ESF support to social enterprises: as well as supporting start-ups, the ESF should help develop new models, create an ecosystem and provide finance. In practice, on the ground it can provide five types of support: pre-start support, business development services, loans and equity for consolidation, improved access to markets (e.g. training public procurement officials) and learning networks and fora.
To put this systematic support in place, there are governance issues that Managing Authorities need to address too:
1. clear objectives within national strategies
2. partnership with stakeholders to develop actions
3. simple administration
4. synergy between different departments and levels
5. monitoring, impact measurement and evaluation
For the next 7-year programming period (2014-20) the European Commission has made country-specific recommendations at two levels: it recommends a specific investment priority for social enterprise in Greece, Spain, Hungary, Italy and Poland, and it recommends a thematic objective for social enterprises in Austria, Germany, Lithuania, Italy, Poland and Slovakia. These are still in the course of negotiation. (These can be found in Staff Working Document ‘Social Investment through the European Social Fund’, SWD(2013) 44 of 20 Feb 13 — or in more detail in the full country-specific recommendations.)

Integrated support in Poland

Krzysztof Cibor of FISE in Warsaw described how the Polish government has used the Structural Funds to set up a comprehensive national and regional social economy support system. A key element of its success has been the way it has been implemented in partnership with social economy organisations and NGOs, so that the sector’s capacity to self-organise has been built. Across the country, the programme has supported 33,000 people and 6,800 enterprises, and created 7,000 jobs and 300 new businesses. In the next period it will take a more planned approach, so that the support organisations it aids will be more sustainable. SEN reviewed the Working Group on Systemic Solutions in the Social Economy at its peer review in Trento in September 2013.

An Impact Fund for the UK

From the UK point of view, the main issue is that the government proposes to route the Structural Funds though the 39 Local Enterprise Partnerships (LEPs). This is controversial because LEPs are business-led and have no democratic legitimacy. Chris Dadson, seconded from the Social Investment Business to the Office for Civil Society, explained the cunning plan he has developed to increases the amount of support that reaches the sector (at the moment it is running at about 4.8%, according to an NCVO survey).
He proposes a rather complicated construction involving establishing a £100m national Impact Fund which would fund Local Impact Funds, working on the principles of mixed money (loan, grant, equity), leverage and an outcomes focus. These would be complemented by Investment Readiness facilities to build capacity.
The need for some ingenious thinking to improve on the current system of large ‘prime contractors’ was backed up by Sandra Turner, who has been seconded from NCVO to BIS, which is leading on the partnership agreement and has set up a working party. She sees it as crucial to bridge the gap in understanding and involve the voluntary and community sector more closely in managing the Structural Funds.

Coda

And the final lesson: never be the last speaker! At the end of our workshop, I got all of 2 minutes to present the BFSE network and its successor SEN. Worth it though, as despite the rush two participants asked afterwards how they could join.

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