One-fifth furloughing – first findings on impact of Covid-19 on Scotland’s social enterprises

About a fifth of Scotland’s social enterprises are so far using the UK’s furlough scheme to put staff on temporary leave due to Covid-19, according to initial research.

The analysis, conducted by Social Enterprise Scotland and shared with Pioneers Post, finds some geographical variation – with 15% of organisations in Glasgow and west Scotland furloughing staff at the lower end, up to 29% in the north east.

The government’s Coronavirus Job Retention scheme allows organisations to claim government money to cover 80% of wages for staff members put on temporary leave due to Covid-19. It is currently available for wages from March to June.

Social enterprises with a higher turnover appear to be quicker to furlough staff, SES has found, possibly because smaller organisations hope to survive with emergency grants – and may also need to hold onto an entire, smaller staff team to continue delivery or manage interim arrangements. Across Scotland, just 12% of the smallest organisations – those with a turnover of under £100,000 – reported that they were using the furlough scheme, compared to 40% of those in the £100,000-£500,000 band, and 25% with turnover of £500,000- £1m.

Just 12% of the smallest organisations are using the furlough scheme

The findings, based on data from over 1,000 organisations plus reports from other intermediaries, also suggest that social enterprises in rural settings are able to pivot activity more quickly. The report's authors suggest this is because in such areas just a handful of organisations cover a number of different types of service, and because there are fewer specialist organisations to turn to, such as food banks.



The situation is likely to evolve in the coming weeks. More organisations may consider furloughing if their emergency grant applications are not successful. 

While some social enterprises have seen a rise in income – such as Social Bite, awarded £500,000 from the Scottish government as part of an £8m boost to a number of key support services – organisations with higher levels of trading are in general most acutely affected by a sudden loss of income, SES says. Those more dependent on grant funding are less affected as many funders have tried to be flexible by lifting restrictions or allowing timetable changes.

Chris Martin, Social Enterprise Scotland CEO, said it was “an extremely concerning time” for the social economy, with the sector “certainly struggling” while trying to both make use of available support while also continuing to meet social objectives.

But he praised social entrepreneurs’ resilience and adaptability, adding: “I believe social enterprises will play a key role to support the recovery period with social innovation and a passion to support the most vulnerable in our communities and I can see a glimmer of hope on the horizon.”


Fragile finances

The SES report also highlights concerns about the “overall financial fragility” of the sector. Sixty-three percent of the social enterprises who applied for emergency grants through Scotland’s £20m Third Sector Resilience Fund, announced a month ago, have £50,000 or less in cash reserves according to data provided by Firstport, Scotland's agency for start-up social entrepreneurs, which is managing the grant process. Over a quarter (27%) of those who shared information about reserves have none at all. 

While the fund was only open to organisations currently at risk due to the pandemic, the figures present a stark contrast with those from the 2019 Scottish Social Enterprise Census, which found that organisations on average had sufficient reserves to survive for 33 weeks. 

Firstport received more than 1,800 grant applications in the first month of the Third Sector Resilience Fund, one third of them in the health and social care sector. Around 130 organisations had been awarded funding as of 15 April, according to data shared on Firstport’s website.

Header image: A Social Bite cafe in Glasgow, pictured in 2017. ©David Smith, licensed for reuse under this Creative Commons Licence.

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