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The next wave of enterprise

Peter Holbrook, chief executive of Social Enterprise UK, talks to PSE about the rise of social enterprises and the need for localism to support this.

Austerity has led to the creation of new markets in the public sector, and a flurry of start-up social enterprises to deliver services in a new way. PSE spoke to Social Enterprise UK chief executive Peter Holbrook about its new report, ‘The People’s Business’, highlighting the potential to bring sustainable value to the sector.

New markets 

He explained: “We have seen new markets arrive in certain areas of public service: that has both created new organisations, particularly those who have spun out of the state to become social enterprises themselves, and secondly social enterprises which are diversifying their range of services. 

“We now have at least 70 new social enterprises that used to be part of the state, delivering in a market environment. That is also helping to fuel the growth.” 

It’s the larger social enterprises that are “growing reasonably sustainably”, while smaller businesses and SMEs are faring less well with their trade with the public sector.

Holbrook said that there was “significant diversification” in markets as businesses recognise the turbulence within the public sector, harrowed by cuts from central government. Moving into business to business and business to consumer markets offers “the greatest level of stability”, he said. 

As to whether this will be enough for social enterprises to weather the storm, Holbrook said it would depend on the business; some will have left it too late, and some may never find the new markets necessary to mitigate risks within the public sector. 

Bold moves 

The introduction of the Social Value Act has made a significant difference to social enterprises, with “bold moves” from cities like Liverpool and Bristol, who are taking the social value a social enterprise creates more fully into consideration. 

Creating jobs for disadvantaged local people – those who have been homeless or in jail or long-term unemployed – can have huge impacts on communities.

However, “it’s still early days” for evaluation of the impact of the Act. 

“We are seeing some really healthy and positive signs emerge and some very brave strategies being deployed by local authorities around the country.

“I think the Act is the first step in a journey towards better commissioning, the nature of whole-value economics. 

“The signs are very encouraging,” he said. 

Continued sharing of different approaches to social value will help other organisations to adopt models that have been deployed elsewhere. Increasing awareness around this is key to increasing innovation and creativity about a new definition of value for money. 

Local by default 

Considering how public procurement could be further bolstered, Holbrook said: “I’m very in favour of a greater degree of localism. We’ve taken a step forward with the Localism Act, but I would like to see a commissioning climate where we always commission at the most local level possible. 

“It’s only when there are overarching agreements for not doing that that we commission more centrally.” 

Talk about localism can also be undermined by an economic environment where public sector bodies are commissioning from larger providers “as they desperately attempt to create ever-greater economies of scale”. 

Holbrook urged a “very different approach” to understanding efficiency, rather than a one size fits all, lowest-cost definition. 

He said: “The size and scale of contracts continues to increase, meaning the opportunities to deliver services is an opportunity for only a very few multi-billion pound national providers. 

“Smaller providers, locally based, can never get a look in.” 

Finance barriers

Furthering the localism agenda would help create a more SME-friendly and social enterprise-friendly procurement environment and help increase access to finance – a major barrier for many small businesses.

Holbrook welcomed some “really positive steps” to open up markets for more to compete in, but warned against public sector bodies shrinking their commissioning teams in response to austerity. Commissioning for value will require more resource, not less, to consider a wider variety and range of suppliers.