UK social enterprises’ resilience is being ‘chipped away’ by economic crisis, SEUK report reveals

A survey of nearly 2,000 UK social enterprises reveals a “worrying" picture, as profitability drops and concerns mount over finances and the wider economy.

The State of Social Enterprise 2025 study, published today by membership body Social Enterprise UK, shows a quarter of respondents report a fall in turnover in the past year, up from 17% in 2023.

Profitability also dropped, with 40% of social enterprises saying they made a profit in their last financial year – down from 48% in 2023, while the share of organisations breaking even was up by six percentage points to 28%. A quarter reported making a loss, in line with previous surveys.

For Emily Darko, director of research at Social Enterprise UK, the accumulation of indicators that are flatlining or edging down “indicates that things are getting a bit jittery, and if the sector is to have another two years of economic challenge, you’re probably going to see worse numbers again in a couple of years”.

Social enterprises always tend to be very resilient, and it just looks like that resilience has been chipped away at

While more than half of social enterprises expect a growth in turnover over the next year, this proportion remains below that of 2023, according to the report.

“The slightly negative aspect of a lot of these financial performance [figures] is a bit worrying,” said Darko. “Social enterprises always tend to be very resilient, and it just looks like that resilience has been chipped away at.”

Economic headwinds

The biennial study draws on a survey of nearly 2,000 social enterprises which completed a questionnaire between February and April 2025 about their experience over their last financial year.

The main challenge mentioned by respondents is financial barriers (cited by 74%, up from 62% in 2023), with a particular concern over availability of grant funding for two thirds of social enterprises – up 20 percentage points from 2023, and cashflow (mentioned by 54% of organisations, up from 44% in 2023).

The wider economic context remains a major cause of concern (cited by 64% of the sample). The closely related factors of inflation and economic instability come top, both a concern for around three quarters of organisations.

“Social enterprises, which are vital to the health and well-being of communities in the UK, have proved remarkably resilient in difficult trading conditions,” said Peter Holbrook, CEO of Social Enterprise UK. “However, they’re vulnerable to economic headwinds.”

The share of respondents reporting a growth in turnover dropped from 65% in 2023 to 41% this year. However, as turnover figures are not adjusted for inflation, that might in part be due to the fact that inflation was substantially higher over the 2022-23 period than over the 2024-25 period. 

More government support

The most common trading activities among the respondents were education and skills development (for 17% of respondents), business support/consultancy (11%) and the creative industries (10%). Nearly 61% of respondents say they generate income through government trading or grants. Of those 61%, three quarters receive funding from local government. 

More social enterprises are considering taking on investment to grow their business than they used to in 2023 – but most indicators of actions taken in the past year to grow have flatlined or edged down since 2023. Half of social enterprises surveyed said they developed products or services new to their organisation, down from 53% in 2023; 33% diversified or expanded into new markets (down from 42% in 2023); 15% invested in new capital assets (down from 18%); and just 15% invested in research and development.

Three-quarters of social enterprises’ income come from trading, in line with previous years, however, Darko pointed out that this needed to be seen in a broader context where grant funding is tight: 68% of social enterprises report difficulty in accessing grants as a barrier, up from 48% in 2023.

Realistically, the wider economic context is going to be what more fundamentally shapes things

The past two years have also seen a drop in younger social enterprises: 24% of respondents were three years old or less this year, down from 33% in 2023, indicating a slight slow down in startup growth. This could also be attributed to the lack of grant funding for startup support, Darko said.

The research is unlikely to show the impact of recent government policy developments – including commitments to increase procurement with social enterprises, a confirmed dormant asset allocation to social investment and the creation of an Office for the Impact Economy at the heart of government. 

However, some measures like the rise in employers’ national insurance contributions, announced more than a year ago and implemented since April, have already had an impact: tax is now a worry for 33% of social enterprises, up from just 12% two years ago.

• Read more: UK’s new Office for the Impact Economy will ‘unlock billions’, promises government

Holbrook asked for more government support. He said: “We’ve asked the government for a joined-up strategy for social enterprises across key departments such as those for business, and health and social care. The social value that social enterprises deliver is very clear – they’re the backbone of Britain. We'd like to see government policy that better supports their work.”

But Darko warns that while support from the government is important, the fate of the sector is inextricably linked to the state of the economy. “Realistically, the wider economic context is going to be what more fundamentally shapes things,” she said. 

“Because whereas some social enterprises will be direct net beneficiaries of some of the central government programmes or combined authority engagement on procurement, a lot of social enterprises are predominantly reliant on the trading context, on consumers – in the much more general sense – and on the availability of funding and finance.”

Top image: Freepik.