Is social enterprise

hiring or firing?

Results from the 2011 survey

Report by Sarah Ashley

August 2011

1

Contents

2

3.Executive summary4.How much do you feel that the recent changes to government policy have affected your organisation?5.Has your organisation had to make any redundancies in the last year?6.How many staff do you employ? How many staff do you expect to employ next year?7.Are your staff experiencing difficulties in adjusting to the recent changes?8.Does your organisation view the government's Big Society agenda as an opportunity or a threat, or neither?9.Has the economic climate positively or negatively affected your organisation's financial health?10.Have you lost any funding?11.Do you feel that acquiring funding has become more difficult?12.Have public sector cuts negatively or positively affected your organisation’s financial health? 13.Were you delivering any publicly funded services 12 months ago? Do you currently deliver any publicly funded services? Do you intend to bid to deliver public services in the next 12 months?14.Additional comments

Executive summary

Social Enterprise London (SEL) wanted to hear directly from its members about how the current economic climate and recent policy changes have affected and are affecting their businesses. We conducted an online survey ‘Is social enterprise hiring or firing?’ in August 2011 and 74 member organisations responded.

Nearly all respondents (94.6%) have been affected by the recent changes to government policy with two thirds (64.3%) either noticeably or dramatically impacted. The findings highlight a particular public sector commissioning focus as nearly two thirds of respondents (61.1%) currently deliver public services, compared with 57.1% last year, with an increasing number (76.8%) looking to deliver public services next year. Nearly all respondents (92.5%) agreed that acquiring funding is now more difficult and 62.9% had experienced a recent loss in funding.

A quarter of respondents have made redundancies and the majority (66.7%) of member organisations reported that the economic climate has negatively affected their financial health; the impact of job losses and financial instability appear to be far-reaching with nearly half (45.1%) of all respondents reporting that staff are experiencing difficulties in adjusting to recent changes.

Despite the apparent difficulties and challenges faced by the social enterprises that responded to the survey, over half (50.9%) viewed the Big Society agenda as an opportunity. However, an increase in competition to win contracts coupled with a reduction in resources has seen smaller social enterprises in particular calling for a change in commissioning approaches to enable them to realise that opportunity. 3

Additional comments:

“Being a charity donations from individuals and organisations have dropped as a result in loss of incomes from donors.”

“Council has increased charges by between 60 percent and 100 percent to offset Government cuts.”

“Difficulties in getting grant and business loan”

Only 5.4% of the social enterprises we surveyed had not been affected at all by recent policy changes.

94.6% had been affected, with half being noticeably affected and 14.3% dramatically affected.

How much do you feel that the recent changes to government policy have affected your organisation?

4

“It is quite possible that we could be making redundancies soon but we are going to do our best to avoid it.”

“We are affected by loss of funding from Local Authorities.”

A quarter of businesses had to make redundancies over the last year and others feared that they would need to in the future.75% made no redundancies.

Has your organisation had to make any redundancies in the last year?

5

How many staff do you employ? How many staff do you expect to employ next year?

Companies around the 25-49 employees bracket seem most affected with a decline of 3.5%, most likely reflected by the increase in the 10-24 bracket .

Overall no dramatic change in numbers but the psychological impacts may be more wide reaching.

6

Additional responses:

“Reduction in hours hence reduction in salaries have caused some difficulties.”

“We are having to change a number of terms and conditions to meet financial cutbacks.”

“Redundancy is always unsettling.”

“The salary for the last financial year is yet to be paid.”

“Financial”

“Domestic issues with social service cuts, especially child care.”

“All the staff have lost their motivation to work hard and they all stress out about uncertain future and becoming unemployed.”

45% of respondents said that staff were experiencing difficulties in adjusting to the recent changes. Complaints included the unsettling nature of looming redundancy, reduction in hours, salary cuts and motivation.

Are your staff experiencing difficulties in adjusting to the recent changes?

7

 Does your organisation view the government's Big Society agenda as an opportunity or a threat, or neither?

Despite the threat of lost funding and difficulties in staff adjustment half of the organisations surveyed considered the government’s Big Society agenda as an opportunity, whilst a further 22% considered it neither a threat or an opportunity.

The fact that 10.9% didn’t know what it was suggests that the government’s agenda isn’t clear to all whom it may affect.

14.5% viewed the agenda as threatening whilst 1.8% didn’t care about it

8

“We are not grant funded but the reorganization of business support has affected us as social enterprises are unable to pay for services especially start ups.”

“We are a membership organisation and some members are finding it difficult to fund their membership.”

“Very little public sector commissioning.”

“Have lost income in some contracts but have gained new work.”

“Loss of some funding; public sector mutuals may have negative impact.”

“We have yet to see an impact on sales.”

“Cash flow problem as well as difficulty to get funding.”

Has the economic climate positively or negatively affected your organisation's financial health?

The economic climate has negatively affected a majority of organisations at 66.7%, but 7.4% have benefited whilst 26% were not affected revealing a mixed pattern of problems and effects of the economic downturn.

9

Have you lost any funding?“But picked up contracts to counter the problems.”

“None to lose”

“Mostly local authorities”

“Core funding as well as the funds for small projects”

“Most of our funding was contracts, now increased competition for each contract.”

“We have lost some but gained others.”

We received a variety of responses. Whilst many explained that they had no funding to lose, 18.5% of organisations lost a considerable amount of funding and 44.4% lost at least some funding. Other organisations have reported losing some funding but gaining more from other sources.

10

Do you feel that acquiring funding has become more difficult?

“Depends on what you mean by funding - the contracts are going and the local commissioners don't know what they are 'buying’.”

“There's more competition for available funding, making it more difficult to win funding.”

“But it is still there”

“More competitive field; Home Office priorities may assist us.”

“Most of funders rejected our funding application.”

92.5% of respondents agreed that acquiring funding has become more difficult. The responses suggest that acquiring funding has become more difficult due to increased competition but many acknowledged that there are resources still available. Only 7.5% of organisations responded that acquiring funding was not any more difficult whilst 66% said it was more difficult and over a quarter claimed that it was now very difficult. 11

Have public sector cuts negatively or positively affected your organisation’s financial health?

“They want business support but not prepared to pay.”

“In so far as the Council has increased charges to minimise cuts.”

“Putting a lot of pressure on our organisation to provide service they used to provide.”

A majority of respondents had been negatively affected by public sector cuts whilst a third were not affected and 5.5% reported being positively affected. Responses suggest that certain organisations have been affected far more dramatically than others.

12

Were you delivering any publicly funded services 12 months ago?

Do you currently deliver any publicly funded services?

Do you intend to bid to deliver public services in the next 12 months?

Social enterprises are hoping to deliver more public services over the next 12 months and increases in bids to do so are set to increase. More organisations are delivering publicly funded services now than 12 months ago but the change in numbers over the last year has not been especially dramatic.

13

“We're a new social enterprise trying to grow our business in a very difficult climate. Our income is diverse enough (I hope) to see us grow despite economic downturn. We're particularly keen to harness the enthusiasm under the Big Society to provide services to the public sector. However, in practice, as a new and small social enterprise we're finding it very difficult to compete for public sector contracts and this will have an impact on our growth.”

Additional comments

“The Big Society idea is nothing new. It's just a better term to cover the public sector buying from the SocEnt and voluntary sector. However, it also comes with massive cuts to the public sector which makes things incredibly difficult.”

“The coalition government talk about encouraging the SE sector but in reality the way they procure services favours the larger private sector organisations who can respond to large tenders. The government should consider breaking up big tenders into smaller elements to encourage a diverse range of providers to deliver aspects of services in collaboration. For new organisations like ourselves, having to provide three years of audited accounts excludes us from many opportunities where we believe we would provide high quality and value for money services.”

“The recession has been a good thing for my business as it has created a niche for holistic therapies due to stress in the workplace.”

14

“Less contracts, less commissioning as clients are less sure of their budgets, more competition for each contract, especially as organisations from different sectors move into our sector to compete as a means of off-setting cuts in their own sector.”

“It is a very difficult time at the moment but there are still significant opportunities if you are flexible, evidence based and efficient.”

“I see the Big Society as offering a platform for our non-profit organisation to thrive and grow. It will also weed out the wheat from the chaff and it will enable organisations who offer a high quality service to continue and those who do not to disappear. This is good for the community.”

“Overall the present economic climate has affected funding which has affected the delivery of services to the community.”

“My sense is that many people think that this is a blip in the economy and do not fully comprehend the changes in Britain's economic situation in recent years, i.e., peaking of North Sea oil, export of manufacturing jobs, impact of ageing population, etc.”

“I think 2012-13 will be harder as full impact of cuts in Local Authorities take effect. Possibly some opportunities around spot purchasing.”

15