‘Clear signs of strain’ as UK social enterprises cushion economic blow 

Almost one third of UK social enterprises have increased staff pay in response to the cost of living crisis, according to new data from Social Enterprise UK (SEUK), while one in six has taken other measures to support staff. 

Nearly one third are making no changes in response to the crisis.

The figures are published today in the Social Enterprise Barometer, a regular survey that aims to give a snapshot of the sector’s financial health and growth. The latest draws on responses from 173 organisations, gathered during July 2022. 

Among the non-pay measures cited in the survey are a one-off bonus, allowing staff to take more food home and rejigging shifts to enable lift-sharing to work. 

 

How is your social enterprise responding to the cost of living crisis?

 

We’ve increased staff pay

31%

We’ve taken other measures to support staff

17%

We’ve increased our prices

27%

We’ve paused plans to expand or seek investment

9%

We’ve changed our operating model in other ways 

13%

Other responses 

11%

No change 

32%

Don’t know/prefer not to say

3%

 

Social enterprises are also much more likely than small businesses generally to be retaining and growing staff teams currently: staff numbers are back up to November 2021 levels, after a big drop in March 2022.

Whereas other businesses might increase prices or cut staff, for many social enterprises this would risk fundamentals of their business operations

SEUK suggests that protecting staff comes with the territory, with many social enterprises unwilling to make vulnerable staff redundant – just as they are unwilling to make products and services unaffordable. Just over a quarter of those polled had increased prices so far, despite 66% reporting an increase in operating costs. 

“Whereas other businesses might increase prices or cut staff to offset rising input prices, for many social enterprises this would risk fundamentals of their business operations,” the report says. “We are seeing, as we did during Covid, that social enterprises are picking up the slack.” 

 

Shrinking margins

The Barometer suggests cause for optimism, with social enterprises appearing “significantly more resilient” in terms of turnover and expectations for the future compared with the wider business sector (based on data from the Federation of Small Businesses). 

However, SEUK director of research Emily Darko warned that “clear signs of strain” were emerging among social enterprises, “financially, but also in terms of leadership and staff capacity and wellbeing”. 

The sector urgently needed government support that recognised social enterprises’ contribution to society and to the economy, Darko said.

The survey revealed a continuing downward trend in the proportion of social enterprises with three months’ or more worth of funds, and an ongoing increase in those with less than one month’s cashflow.

We have lost customers but have more demand for people to be supported, most of whom do not come with payments

One social enterprise leader told SEUK that significant increases in costs – in some cases by up to 25% – had led to margins shrinking “to a point where they are almost unsustainable”.

Predictions of closure are at their highest level – 2% of those polled currently predict this outcome – since SEUK began asking this question in August 2021, while 7% expect to contract.

One third of those surveyed have seen increased demand for products or services, while more than a fifth report reduced demand, as customers cannot afford products or services.

One respondent said: “We have had increased demand for our services, but not increased demand for our products. We have lost customers but have more demand for people to be supported, most of whom do not come with payments.”

  • Impact investors, social sector representatives and foundations welcomed last month’s extension of the Recovery Loan Scheme – originally launched in April 2021 to offer state-backed loans to small businesses – but called for a commitment beyond the current two-year continuation. They also asked for a rethink of the rules for charities earning less than 50% of their income from trading, which will not be able to access Recovery Loans from 2023.

 

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