Number of Scottish social enterprises stays flat as sector ‘squeezed’ by economic challenges – new research

The number of social enterprises headquartered in Scotland remained broadly flat at just over 6,000 between 2021 and 2024, according to the latest research published today by network body Social Enterprise Scotland. 

The Social Enterprise in Scotland Census 2024 shows the figure grew by just 56, from 6,047 in 2021 to 6,103 in 2024. 

This continues a trend of only marginal growth in the number of social enterprises in the country since the 2019 census, which the 2024 report suggests likely reflects ongoing economic turbulence including the lasting impacts of the Covid pandemic and the pressures of the cost of living crisis.

The research estimates the sector’s total annual income at £5.2bn, up from £4.8bn in 2021, which is a drop of about 13% in real terms (figures in the survey are not adjusted for inflation – which reached just under 20% over the same period in the UK). 

Meanwhile, survey respondents reported a 14% increase in expenditure since 2021. Surplus generated across the sector dropped from £524m in 2021 to £346m in 2024.

Chris Martin (pictured), CEO of Social Enterprise Scotland, said the report was a “reality check. Surplus is down, margins are tighter. [The report] tells us the model is popular, but it's also under pressure”.

The study finds that Scottish social enterprises contributed £2.89bn to the country’s economy in 2024, up from £2.63bn in 2021 – but a £0.5bn drop when adjusted for inflation, meaning the yearly economic output of the Scottish social enterprise sector dropped in real terms by around 17% between 2021 and 2024. 

Martin added: “Without inflation adjustment, the growth figures risk looking rosier than they feel on the ground. Social enterprises are more productive, but their margins are being eaten away.”

The 2024 census is the fifth edition of the report since the first was published in 2015. Its production was co-ordinated by market research agency Diffley Partnership with support from a project steering group and funding from the Scottish Government.

The model is popular, but it's also under pressure

Presenting the census at the Scottish Social Enterprise Summit, held today in Stirling, Scott Edgar, senior research manager at Diffley Partnership, said the overall picture showed Scottish social enterprises were feeling “squeezed” as Covid-era grant funding was drying out and costs had gone up.

Despite those challenges, 61% of Scottish social enterprises surveyed reported an increase in the number of people they support, leading Martin to add that the report “shows a sector that’s steady in size but still growing in impact”.

A drop in optimism across the sector

Nearly two thirds of respondents to the census expressed concern about their financial future and 23% of respondents reported that they only have enough funds to operate for up to three months.

The ongoing pressures of inflation, rising wages and supply chain challenges were reflected by 87% of social enterprises reporting increased operating costs, while 76% of respondents anticipated increased operating costs over the next year. 

The percentage of respondents feeling “much more confident” dropped sharply from 13% in 2021 to just 4% in 2024, while 28% reporting feeling “slightly less confident” (up from 20%) and 10% feeling “much less confident” (up from 8%).

Martin said: “No one really sees a way out in terms of the cost of living crisis. Profits are up, but costs are up, and the worry is less about the model, but more about whether they’ve got the resources to keep going.”

We don't just want to stimulate growth, we want to help [Scottish social enterprises] become resilient

The census report notes sector pessimism “reinforces the need for targeted policy and funding interventions to rebuild confidence and support organisational resilience over the longer term”.

Social Enterprise Scotland hosted discussions on focus areas of its upcoming draft Social Enterprise Strategy 2026-2034 at the Scottish Social Enterprise Summit. Martin said a key focus of the new strategy, which could significantly boost sector confidence, will be working with government and other stakeholders to improve local support for social enterprises. 

“We really have to have an honest conversation about that localised support and why it’s patchy,” he said. “We’re going to champion that in the next eight years.”

He added: “For us as an organisation, our big challenge is, 'how do we keep these enterprises?' We don't just want to stimulate growth, we want to help them become resilient, serving Scotland's communities.”

A maturing sector 

Evidence of resilience of the sector, Martin suggested, was that nearly three-quarters (72%) of social enterprises in the country are over 10 years old. The mean age of social enterprises in Scotland currently stands at 23 years while the median age stands at 20 years.

However, the report notes there is evidence of considerable “churn”, with 590 new social enterprises launched while 534 others have closed, merged, or changed status since the previous census. 

Martin suggested that in addition to challenging economic circumstances, this “churn” was explained by a large number of community interest companies (a specific form of limited company in the UK that operates for the benefit of the community rather than for private profit) being launched during the pandemic by people who were furloughed from their main jobs. Since their founders had returned to work, many of these community interest companies subsequently closed, Martin said.

The number of social enterprises financially independent through earned income increased from 67% in 2021 to 73% in 2024. 

The proportion of social enterprises offering both goods and services has also seen a significant increase, from 13% in 2021 to 22% in 2024. The report argues this demonstrates a maturing sector diversifying income streams to increase resilience.

In a statement, deputy first minister and cabinet secretary for economy and Gaelic Kate Forbes (pictured) said: “These figures demonstrate the positive, growing impact that social enterprises have on Scotland’s communities and economy. 

“To support the continued growth of social enterprises, we are progressing our Community Wealth Building Bill. This will encourage public bodies including the NHS and local councils to buy more products from their local businesses and promote social enterprises.” 

Community wealth building is an economic model which seeks to redirect wealth back into local economies where it is generated, and places the control and benefits of that wealth into the hands of local people. In March 2025 the Scottish government introduced the Community Wealth Building (Scotland) Bill, which, if passed, will establish strategy and actions to implement the economic model across the country. 

• Read more: Scottish government backs social enterprise to ‘influence and inspire’ new community wealth building push

The 2024 census found that most organisations are able to meet their short-term financial commitments, although only 27% of social enterprises reported having enough funds to operate for more than 12 months.

The growth and increasing maturity of the sector is reflected in a 5 percentage point increase in organisations self-identifying as social enterprises, from 56% in 2021 to 61% in 2024. As in previous years, organisations launched in the last decade are more likely to adopt the term, which Martin said showed social enterprise had become more mainstream and credible. 

The report notes, however, that while some organisations saw social enterprise as “fundamental to their identity”, others felt a lack of a clear, universally understood definition made it harder to see themselves as fitting within the sector or for people to understand what they are and what they do. 

The census was made up of findings from an online survey with 702 valid responses, interviews with 20 social enterprise leaders, analysis of financial data available for organisations identified to be social enterprises and an economic analysis of that financial data.

Because the census focuses on organisations headquartered in Scotland and doesn’t include social enterprises registered elsewhere but operating within Scotland, the report notes it may be a partial underrepresentation of overall activity of the sector.

Top image: Include Me 2 Club SCIO, finalists of the Social Enterprise Awards Scotland 2025, which will take place on 6 November. Courtesy of Social Enterprise Scotland.