Government identifies 450,000 social enterprises and other value-led businesses in new UK analysis

Latest study identifies ‘hidden force for good’ that is often overlooked, as debate over definition of social enterprise rages on.

There are 131,000 small businesses along with 325,000 self-employed people in the UK which meet the UK government’s definition of social enterprise, according to the latest research. Together they employ 1.9m people.

Social Enterprise: Market Trends 2019 was published on 31 August 2022. It was written by the Centre for Enterprise and Economic Development Research (CEEDR) at Middlesex University Business School and commissioned by the civil society and youth directorate of the Department for Digital, Culture, Media and Sport (DCMS) which coordinates UK government social enterprise policy.

The research aims to identify the number of social enterprises among the UK’s small businesses, using the DCMS definition which includes enterprises and sole traders that have an explicit social or environmental mission and reinvest at least 50% of their surplus into this mission. It encompasses social enterprises within the voluntary and community sector as well as mission-led or purposeful businesses with private sector legal forms. 

The majority of the 131,000 enterprises identified in this report are a hidden force for good that is often ignored, despite their role as a basis of an alternative economy that puts people and planet ahead of profit

Professor Fergus Lyon, the director of CEEDR, wrote in an article to accompany the publication of the research: “The majority of the 131,000 enterprises identified in this report are a hidden force for good that is often ignored, despite their role as a basis of an alternative economy that puts people and planet ahead of profit. And the 325,000 self-employed people who also put social and environmental goals ahead of profit can be hidden even further.

“All these businesses are the bedrock of many communities, offering health care services, arts and wellbeing.”

Definition dilemmas

The last time this government research was carried out was in 2017, when the figure was put at 471,000 social enterprises and sole traders, employing just under 1.5m people. 

The most recent research from Social Enterprise UK, the representative body for social enterprises, has calculated 100,000 social enterprises across the country, using a different definition.

Professor Lyon pointed out that different organisations take varying approaches to calculating the size of the social enterprise sector in the UK. 

“The DCMS research is taking a very broad definition of social enterprise,” he said. “It should be noted that the social enterprise support community often takes a narrower definition of social enterprise than that used by the government, with a focus on organisations that restrict the distribution of profit and assets because of their legal form or changes to their articles of association.”

Social Enterprise: Market Trends 2019 defines social enterprises as “a diverse range of organisations that have an explicit social mission, receive at least 50% of their annual income from trading, and reinvest at least 50% of their annual surplus into their social mission”. Although this definition includes enterprises that have legal forms – such as companies limited by guarantee and community interest companies – that restrict the distribution of profits and assets, it isn’t limited to these. It also doesn’t include businesses with more than 250 employees.

Within the 131,000 social enterprises with employees meeting the DCMS definition, 35,000 have legal forms that restrict the distribution of profits and assets 

Other research carried out by Middlesex University published in 2019, Social Enterprises and their Ecosystems in Europe, identifies 30,800 enterprises in the UK that meet the EU definition of a social enterprise.

The research draws its data from the Longitudinal Small Business Survey carried out by the Department for Business, Energy and Industrial Strategy. 

The researchers emphasise that the figures were collated before the Covid-19 pandemic which may have had an effect on the number of social enterprises in the country. What’s more, it doesn’t include the most up to date figures on community interest companies.

Social enterprise in the UK: the latest facts and figures

  • There are 131,000 social enterprises with employees
  • 35,000 of the 131,000 social enterprises with employees have legal forms that restrict the distribution of profits and assets 
  • There are 325,000 social enterprises that are sole proprietorships
  • Nearly 1 in 10 (9.5%) of UK small and medium sized enterprises that employ people is a social enterprise
  • Social enterprises employ 1.9m people: 1.3m of these are employees and the others are working owners and partners
  • Social enterprises are significantly more likely to report facing barriers to obtaining grants and loans than other small and medium sized enterprises
  • Social enterprises are significantly more likely to apply for government and local authority grants and finance than other small and medium sized enterprises
  • Social enterprises are significantly less likely to apply for bank overdrafts than other small and medium sized enterprises
  • Social enterprises are significantly more likely to be involved in health, education, arts, entertainment and personal services and less likely to deliver business services than other small and medium sized enterprises
  • Social enterprises are less likely to be entirely male-led than other small and medium sized enterprises
  • More social enterprises have minority ethnic group leaders than other small and medium sized enterprises
  • Most social enterprise employers are micro businesses (with between one and nine employees)
  • Nearly half of social enterprises that employed people had existed for more than 20 years and just over 70% were ten years old or more
  • A quarter of social enterprise employers undertook public sector contract work

Source: Social Enterprise: Market Trends 2019

 

One in ten UK small businesses is a social enterprise

The researchers' estimates mean that almost one in ten of the UK’s small and medium sized enterprises (businesses with up to 250 employees) would meet the DCMS definition of social enterprise.

The researchers also found 325,000 sole traders that meet the definition of social enterprise.

“Given current concerns around health and socio-economic factors relating to the Covid-19 pandemic and Brexit, this report is an important policy tool,” write the researchers in the report’s introduction. 

“Social enterprises of different kinds have key roles to play in helping local economies ‘build back better’ (and fairer), in line with the government’s Industrial Strategy, and by delivering services that are crucial to the wellbeing of individuals and communities across the UK.”

 

Header photo: the team at social enterprise NEMI Teas which has four employees. Read more about how this London-based business which supports refugees is growing in our Social Business Profile.

Editor's note: this article has been updated from an earlier version published last week to clarify the differing definitions of social enterprise.