Social investors cobble together COVID-19 plans as pressure mounts to rip up the rulebook
The UK’s social investors are uniting as they cobble together COVID-19 plans to support social enterprises – but can they provide the cash that’s most needed?
Social businesses in the UK have been quick to share messages of support and to adapt to a new working environment as the effects of the COVID-19 outbreak deepen.
But, as for most businesses, their future looks hugely uncertain. Cash flow for those relying on footfall – such as leisure, catering or retail businesses – is particularly vulnerable, given the restrictions of movement now in place.
“It feels like in a few days or weeks, many of our social enterprises will be closed, or struggling, or won’t know where to go,” said Dan Gregory, an independent advisor on social enterprise who formerly led government policy on access to finance.
Social investors, meanwhile, are rushing to cobble together support. On Monday a joint statement from 18 funders promised to be “as flexible as possible” with investees. Coordinated by the Social Investment Business, Big Issue Invest, Access and Big Society Capital, it said the priority was to “work collectively and with urgency to help where we can”. Specifically this will involve:
- Working together on how to adapt existing schemes and funds
- Working with government and other funders to establish new programmes that may provide additional help
- Recognising that grants and business support will be at least as important as social investment
In parallel, wholesale bank Big Society Capital also set out its three responses to the crisis:
- Sharing information internally and externally
- Adjusting existing funding, with “urgent discussions” with managers and investors across its portfolios under way
- Exploring new funding, including lobbying government to ensure commitments made in the Budget to support business are matched for the charity and social enterprise sector
Separately, dozens of UK-based grantmakers also made a commitment last Friday, pledging flexibility on the timing of their activities and reporting deadlines, and allowing organisations to use previously allocated grant money for other urgent needs such as buying equipment or covering staff sickness.
Social enterprises: vital in a crisis
But Niamh Goggin, director of Small Change and a trustee at NatWest Social & Community Capital, said the situation required more radical action from social investors.
Rather than offering fixes such as repayment holidays, she said they should be asking investees how much money they need and when, and “then do everything they can to get it to them”.
“It’s not just about saving these organisations because they’re good people,” Goggin added, “it’s because we really need them in a crisis.”
Asked what Social & Community Capital was doing, she said as a first step the board had just agreed to allow a recent batch of project-specific grants to be used for other purposes if needed. The funder will be looking at further measures.
'If in a year's time many of our social enterprises are decimated and Big Society Capital is still sat on its £600m, that would be unforgivable'
On Tuesday the UK government announced new measures to cushion the blow faced by businesses, including a 12-month business rates holiday for all retail, hospitality and leisure businesses in England, and grants of between £10,000 and £25,000 for small businesses.
However, the bulk of the £350bn offered is in the form of state-backed loans, which would not be appropriate for many social enterprises.
Goggin told Pioneers Post the social investment sector now needed “to demand a different approach from government… the people who have resources and influence with government need to make a stand.”
As the wholesale bank with a mandate to support the growth of social enterprise, many are looking to Big Society Capital. However, its flexibility (for example to start providing grants as well as loans) is restricted by legislation and other factors, which currently leaves “very little wiggle room”, said Gregory. But, he argued, Big Society Capital – as well as others with large government endowments such as Nesta, UnLtd and Power to Change – needed to find ways to meet the needs of its borrowers.
“If, in a year’s time the economy looks very different, with many of our social enterprises decimated and Big Society Capital is still sat on its £600m, that would be unforgivable, really. They have to find a way to be more flexible.”
'We understand grants will be a significant part of the response here'
Head of engagement, James Westhead, said Big Society Capital was “in active discussions with partners, managers and our stakeholders on what is needed in this developing situation. We understand grants will be a significant part of the response here and are actively working with grant makers and government on how we can work with their support.” He added: “We are conscious that the scale of capital needed is many multiples of what we can provide.”
For now, Big Society Capital is looking only at its own portfolio and pipeline, to work out what is needed from the 1,200 organisations that receive its existing funding.
But Westhead said it would then “actively explore” what broader role it can play.
“We believe the social investment infrastructure has an important role to play here in getting investment support to those organisations in need. We are talking to government and also to the intermediaries and fund managers to explore how we could coordinate the best possible offer to the sector.”
The wholesaler is also working closely with Access - the Foundation for Social Investment and the Growth Fund, expected to play a key role in helping smaller social enterprises.
Separately, Social Enterprise UK representatives met the Minister for Civil Society last Friday, and are also working with officials to set up new support measures. The membership body is calling for input from social enterprises to inform its conversations with government.
On Wednesday, the Mayor of London pledged £1m to a new emergency fund for community and voluntary organisations in the capital. NCVO, the national body representing charities, has called for an emergency grant fund for the sector, estimating the total funding need at £410m.
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Header photo by Gerd Altmann from Pixabay.