Social Enterprise in Glasgow · Social Enterprise in Glasgow 2017 6 2. Scale The social enterprise sector in Glasgow is a diverse one. This section examines the size of the sector,

Social Enterprise in Glasgow

Social Enterprise in Glasgow The Headlines

Comparison with 2015 Social Enterprise Census:

Increase since 2015 No change since 2015 Decrease since 2015 No comparison possible

£1.1bn The total annual income of social

enterprises in the city

£1.6bn The net worth of Glasgow’s social

enterprises

£91m The combined

operating surplus of Glasgow’s social

enterprises

£777m Income from

trading

68% Of social enterprises

sell direct to the general public

59% Of social enterprises generating at least half of their income

from trading


involved in international activity

48% Negatively affected

by the economic climate over the last

12 months

61% Of Glasgow’s social enterprises led by

women

84% Of social enterprises in Glasgow pays at least the Scottish

Living Wage

1:2.7 The average

differential between the highest and

lowest paid worker

61% Have a social objective of

improving Health and Wellbeing

732 Social enterprises

currently operating in Glasgow

44% Of social enterprises are based in the 20% most deprived areas

of Glasgow


in Glasgow are incorporated

18 yrs The average age of

a social enterprise in Glasgow

Social Enterprise in Glasgow 2017 3

ContentsSocial Enterprise in Glasgow: The Headlines 1

1. Introduction 4Context 4Focus of the Study 4Methodology 5

2. Scale 6Size of the Sector 6Economic Sector 7Age Profile 8Income 8Legal Form 9Social Objectives 10Registered Charities 10Sector Identity 11

3. Geographic Coverage 12City Spread 12Presence in Deprived Communities 13

4. Markets 14Financial Contribution 14Goods and Services 15Customers 15Market Alternatives 16International Activity 17

5. Business Practices 18Good Governance 18Diverse Leadership 19Pay Equity 20A Living Wage 20Secure Work 21Targeted Employment 21Access to Opportunity 22

6. Financial Performance 24Income 24Trading 25Expenditure 28Profitability 29Financial Health 30Financial Strength 31Sustainability 31

7. Prospects and Needs 33The Economic Climate 33Business Confidence 34Changes Forecast 35Key Challenges 36Access to Finance 37Support Needs 38Measuring Social Impact 39


1. Introduction This report presents the findings of the Social Enterprise Census 2017 for Glasgow, describing the scale, characteristics, prospects and needs of social enterprises in the city.

Context

Glasgow Social Enterprise Network (GSEN) commissioned Social Value Lab (www.socialvaluelab.org.uk) in 2013 to undertake a ground-breaking analysis of social enterprise activity in Glasgow, the first ever comprehensive, evidence based, census of social enterprise in Scotland.

In 2015, GSEN again worked with Social Value Lab to undertake further analysis on the first ever Social Enterprise Census in Scotland and extract the data for Glasgow.

The partnership continued in 2017, based on the recent 2017 Social Enterprise Census in Scotland. This report paints a comprehensive picture of the social enterprise sector in Glasgow.

The Scottish Government has a long-standing commitment to realising the potential of social enterprise; a way of doing business that is great for the economy and great for the people of Scotland. This commitment is set out in Scotland’s Social Enterprise Strategy1 – an ambitious and long-term programme that describes a clear path to stimulating social enterprise activity, developing stronger organisations, and realising market opportunity over a ten-year timeframe.

Focus of the Study

The study provides a detailed profile of social enterprise activity in Glasgow of organisations that are operating consistently with the Voluntary Code of Practice for Social Enterprise in Scotland2. This offers a broad and widely accepted set of criteria by which social enterprises can be identified and recognise each other.

1 Scottish Government, Scotland’s Social Enterprise Strategy 2016-2026, December 2016 http://www.gov.scot/Publications/2016/12/4404/02 http://www.se-code.net/


3 At the time of publication of this report the Technical Note has not yet been published, expected before the end of 2017.

Social Enterprise Definitional Criteria

There are five essential elements of a social enterprise:

1. They trade, with the primary objective of social or environmental benefit but also to enhance their financial independence.

2. Any profits are reinvested into the business or used for the benefit of the people it exists to serve, rather than distributed to owners, shareholders, or investors.

3. On dissolution, any assets are reinvested in another organisation with similar aims and objectives.

4. They are constituted and managed in an accountable and transparent way – particularly with regard to the community they serve.

5. They are distinct from the public sector and cannot be the subsidiary of a public body.

Source: Adapted from the Voluntary Code of Practice for Social Enterprise in Scotland

A detailed briefing on the interpretation of the Voluntary Code and the methodology used has been prepared in the Technical Note to the 2017 Social Enterprise Census3.

Methodology

The research for the study was carried out between March and August 2017. It included four main and interrelated elements:

1. Identification of the population of social enterprises currently active in Glasgow.

2. A full and objective financial assessment of the population of social enterprises was carried out, using publicly available financial accounts. Financial data was extracted from various sources and compiled for 635 of the 732 confirmed social enterprises (87% of all), although full data was not available for each.

3. A large-scale Census survey of potential social enterprises was conducted, with 215 responses form Glasgow based social enterprises.

4. An extensive financial and economic analysis of the available data was conducted. Data from the various sources were combined and cleaned for further analysis. Financial data, where available, were aggregated, analysed and benchmarked using various financial ratios relating to financial performance, strength and sustainability.


2. ScaleThe social enterprise sector in Glasgow is a diverse one. This section examines the size of the sector, its economic activity, some of its characteristics and the identities it adopts.

Size of the Sector

The social enterprise sector in Glasgow continues to grow. Currently there are an estimated 732 social enterprises active in the city, a growth of 4% compared to 20154. Almost one in eight social enterprises (13.1%) in Scotland is located in Glasgow.

This growth is less than the national growth of 8%, but with one social enterprise operating for every 890 people5, Glasgow is still ahead of the national average of one social enterprise operating for every 1,000 people in the country.

4 This net gain of 28 social enterprises consists of 79 social enterprises that have dissolved or stopped or paused trading, while 107 new social enterprises have been formed or started trading.

5 Scotland’s Population 2016 - The Registrar General’s Annual Review of Demographic Trends, National Records of Scotland. Estimated Population Glasgow 30 Jun 2016: 650,017

732Social enterprises

+4%

NUMBER OF SOCIAL ENTERPRISES IN GLASGOW

704 social enterprises in 2015

732 social enterprises in 2017 (+4%)


Economic Sector

Social enterprises are active across all economic sectors. Arts & Creative Industries is the largest sector (22%), followed by Health & Social Care (13%) and Housing (9%).

Source: Analysis of data on all identified social enterprises, 2015 and 2017

Economic Sector 2015 2017 % of All

Arts & Creative Industries

142 163 22.3%

Community Centres & Halls

47 44 6.0%

Early Learning & Childcare

53 55 7.5%

Education, Training & Employment

39 52 7.0%

Environment & Recycling

20 20 2.7%

Financial Services

45 41 5.6%

Food, Catering & Hospitality

17 22 3.0%

Health & Social Care

83 92 12.6%

Economic Sector 2015 2017 % of All

Housing

74 64 8.7%

Information, Consultancy & Support

59 52 7.1%

Property, Energy, Utilities & Land

18 23 3.1%

Retailing

15 24 3.3%

Sport & Leisure

25 27 3.7%

Tourism, Heritage & Festivals

12 23 3.1%

Transport

4 5 0.7%

Other

51 26 3.6%

TOTAL 704 732 100%


Age Profile

Almost two-thirds of social enterprises in Glasgow (62%) are more than 10 years old, with the average age of social enterprises in Glasgow being 18 years, comparable to the national average (20 years).

AGE / TOTAL NUMBER OF SOCIAL ENTERPRISES

Number % of All

0 – 4 years 167 23%

5 – 10 years 110 15%

Over – 10 years 455 62%

TOTAL 732 100%

Source: Analysis of data on all identified social enterprises, 2017

Income

Social enterprises come in a variety of sizes, broadly evenly spread across income bands. The largest group has an income between £100 and £250k (20%).

Compared to the national Census data, social enterprises in Glasgow are financially larger. Nationally, 57% have an income of less than £100,000; in Glasgow the equivalent figure is 28%. More than a quarter of social enterprises in Glasgow (26%) have an income exceeding £1million, while nationally this is only 12%.

SOCIAL ENTERPRISES (SE) INCOME BY SIZE BAND

x

Source: Analysis of publicly available financial data where available for identified social enterprises, 2017.

78 SE

15%67 SE

13%109 SE

20%83 SE

16%58 SE

11%95 SE

18%45 SE

8%

£0 – £49,000 £50,000 – £99,000

£100,000 – £249,000

£250,000 – £499,000

£500,000 – £999,000

£1,000,000 – £4,999,000

£5,000,000+


Legal Form

Social enterprises come in different legal structures. More than half of them (52%) are constituted as a Company Limited by Guarantee, a structure shared with other third sector organisations and charities. The largest increase has been in relatively new legal structures constructed to suit the needs of social enterprises: Scottish Charitable Incorporated Organisation (SCIO, +100%) and Community Interest Company (CIC, +48%).

LEGAL STRUCTURES

Legal Form Number 2017 % of All Net Change

(2015-17)

Community Interest Company 123 17% +48%

Company Limited by Guarantee 384 52% -5%

Registered Society 101 14% -4%

Scottish Charitable Incorporated Organisation 58 8% +100%

Trust 7 1% +40%

Unincorporated 59 8% -24%

TOTAL 732 100% +8%


In Glasgow the number of unincorporated social enterprises is decreasing. Only 8% of social enterprises remain unincorporated, comparing favourably with the 29% unincorporated social enterprises nationally.

INCORPORATED AND UNINCORPORATED SOCIAL ENTERPRISES

92% incorporated

8% unincorporated



Social Objectives

Social enterprises are by their nature driven to deliver social and/or environmental objectives.

Social and/or environmental objectives% of All

2017

Improving health and wellbeing 61%

Providing volunteering opportunities 58%

Addressing social isolation/exclusion 55%

Enabling people to participate in local community 54%

Tackling poverty and financial exclusion 52%

Promoting learning or education 50%

Providing opportunities for young people 46%

Creating employment opportunities 45%

Promoting equality and human rights 42%

Providing training for employment 38%

Registered Charities

All social enterprises pursue objectives that benefit geographical communities or communities of interest. Almost two out of three social enterprises in the city (64%) are registered charities with the Scottish Charity Regulator (OSCR).


64% of social enterprises are registered charities


Sector Identity

The term social enterprise is not used by all organisations that align with the principles of the Voluntary Code of Practice for Social Enterprise in Scotland. Two-thirds of social enterprises in Glasgow (66%) use the term to describe their organisation, which is a significant increase compared to 2015 (53%). The Glasgow figure also compares favourably to the national number of social enterprises self-identifying as social enterprise (56%).

Source: Social Enterprise Census Survey, 2017

The use of the term ‘social enterprise’ varies across key sectors and the age of organisations. The term is not yet widely used in all parts of the social enterprise community. In particular, organisations in the housing sector and those older than 10 years are less likely to self-identify as social enterprises.

% SELF-IDENTIFYING AS ‘SOCIAL ENTERPRISES’

KEY SECTORS6 AGE

Arts & Creative Industries 72% 0-10 Years 85%

Health & Social Care 48% > 10 Years 35%

Housing 35%

Early Learning & Childcare 53%

Information, Consultancy & Support 82%


66% of social enterprises use the term ‘social enterprise’ to describe themselves

We’re a socialenterprise!

6 ‘Key Sectors’ referred to here and throughout this report are the five fields of activity which contain the most significant share of social enterprises or social enterprise trading activity


3. GEOGRAPHIC COVERAGESocial enterprises are located across the city. This section describes the spread across the city.

City Spread

Social enterprises are located throughout the city. However, almost a third of all social enterprises (29.5%) are located in the Anderston/City ward, followed by Govan (8.8%) and Calton (6.6%).

SOCIAL ENTERPRISE ACTIVITY BY WARD

1

2

3

4

5

6

7

8

9

10

1112

13

14

15

16

17

18

19

20

21

% of All

1. Linn 3.4%

2. Newlands/Auldburn 2.3%

3. Greater Pollok 2.5%

4. Craigton 2.1%

5. Govan 8.8%

6. Pollokshields 3.2%

7. Langside 2.7%

8. Southside Central 5.8%

9. Calton 6.6%

10. Anderston/City 29.5%

11. Hillhead 3.7%

% of All

12. Partick West 4.2%

13. Garscadden/Scotstounhill 2.3%

14. Drumchapel/Anniesland 3.5%

15. Maryhill/Kelvin 3.2%

16. Canal 4.0%

17. Springburn 2.5%

18. East Centre 2.3%

19. Shettleston 2.0%

20. Baillieston 2.1%

21. North East 3.2%

TOTAL 100%



7 The Scottish Index of Multiple Deprivation (SIMD) is the Scottish Government’s official tool to identify areas of multiple deprivation in Scotland. It is a relative measure of deprivation across 6,976 small areas with roughly equal population. Find out more at http://www.gov.scot/Topics/Statistics/SIMD.

Presence in Deprived Communities

Social enterprises work in deprived communities and in Glasgow they are more present in deprived communities than the national average. Almost a quarter of social enterprises in Glasgow (24%) are located in the 5% most deprived areas, nationally this is only 5%. Over two in five social enterprises in Glasgow (44%) is located in the 20% most deprived areas, against 17% nationally.

SHARE OF SOCIAL ENTERPRISES IN DEPRIVED AREAS

% of All National Census

5% Most Deprived Areas 24% 5%




Rest of Scotland 56% 83%

Source: Analysis of data on all identified social enterprises, 2017, classified by SIMD 20167


4. MARKETS Social enterprises are active in all parts of the city’s economy. This section examines the markets in which social enterprises are trading and the customers they serve.

Financial Contribution

Social enterprises have a stronger presence in some sectors than in others. In Glasgow, like the national picture emerging from the 2017 Census, social enterprises operating in the fields of Housing and Health & Social Care together account for the majority of income (79%, nationally 70%).

SHARE OF SOCIAL ENTERPRISE SECTOR INCOME BY ECONOMIC SECTOR

Economic Sector% of Total Social Enterprise

Sector Income

Arts & Creative Industries 7.2%

Community Centres & Halls 0.7%

Early Learning & Childcare 1.2%

Education, Training & Employment 2.7%

Environment & Recycling 0.4%

Financial Services 1.8%

Food, Catering & Hospitality 0.2%

Health & Social Care 21.6%

Housing 57.5%

Information, Consultancy & Support 2.5%

Property, Energy, Utilities & Land 1.2%

Retailing 0.5%

Sport & Leisure 0.6%

Tourism, Heritage & Festivals 0.7%

Transport 0.2%

Other 1.1%

TOTAL 100%



Goods and Services

The vast majority of social enterprises in Glasgow are delivering services (83%). Only 8% of social enterprises are offering mainly goods, while 10% do both.

MAIN SOCIAL ENTERPRISE OFFERING


Customers

A trading social enterprise has a customer, someone that pays them to deliver goods or services. The 2017 survey shows a relatively small reduction since 2015 in sales to the public, private and third sectors and an increase in sales to the general public.

Compared to the national figures, Glasgow’s social enterprises sell more to the public and third sector and less to the general public.

REPORTED CUSTOMER GROUPS

Customer % of All 2015 % of All 2017National

Census 2017

Public Sector 66% 58% 52%

Private Sector 40% 37% 36%

Third Sector 67% 59% 46%

General Public 57% 68% 79%

Source: Social Enterprise Census Survey 2017

Mainly Goods

7.7%Goods and Services Equally

9.7%

Mainly Services

82.6%


Selling to the public sector often involves bidding for public sector contracts. The 2017 Census reveals that social enterprises in Glasgow are more involved in public sector tendering processes and have won more public contracts than the national average.

BIDDING FOR PUBLIC CONTRACTS (LAST 12 MONTHS)


Of the social enterprises that won a contract almost one in six (17%) did so as part of a consortium.

Market Alternatives

Social enterprises typically respond to needs arising in communities and often address ‘market failures’, delivering goods and services that fall outwith the remit of the public sector and/or where the private sector does not fill the gaps.

When asked about who would provide those business activities to their customers if they did not, the 2017 survey findings show that most frequently (40%) respondents indicated that there is no likely alternative source of supply in their absence. In just over a third of the cases (34%) another third sector organisation is likely to fill the gap.

ASSESSMENT OF THE MARKET ALTERATIVES

Alternative Provider % of All

A Private Company 19%

A Public Body 7%

Another Third Sector Organisation 34%

No One 40%


Did Not Bid For Contracts

69%National Census 2017 - 80%

Unsucessful Bidding for Contracts


Won a Contract



International Activity

Social enterprises in Scotland are increasingly looking to international markets to sell their goods and services.

Almost one in ten social enterprises (9%) is active in international markets and 7% of social enterprises reported to have traded internationally in the last year.

The 2017 survey findings show that Glasgow based social enterprises operate slightly more internationally than the national average.

INTERNATIONAL SOCIAL ENTERPRISE ACTIVITY

Operate Internationally


Have exported/Licensed Overseas in

Last 12 Months




5. BUSINESS PRACTICES Social enterprise generally does business in an ethical, fair and inclusive way. This section examines the commitment of social enterprises to good governance, diverse leadership, fair pay and working practices.

Good Governance

Most social enterprises have a transparent governance structure that is accountable to their stakeholders.


Best practice, described in the Voluntary Code of Practice for Social Enterprise in Scotland, requires social enterprises to operate with at least three unrelated directors/trustees in their board. Almost all social enterprises (94%) comply with this requirement8.

7The average number of Trustees/Directors in overall management and control of social enterprises

94%Of social enterprises report a minimum of 3 unrelated Directors/Trustees in place

8 Social enterprises that operate as Community Interest Companies (CICs) can be something of an exception and tend to have a lower number of directors (trustees) in control. Legislation states that a CIC limited by guarantee should have at least two directors (trustees) although a CIC limited by shares can have just one director and shareholder.


Diverse Leadership

Social enterprises generally embrace diversity. The boardrooms of Glasgow’s social enterprises show a mixed picture with regards to diversity9. Women constitute the majority in the boardroom (56%) and the majority of social enterprises are led by a woman (61%).

DIVERSITY ON BOARDS

% of Directors/ Trustees from this

Group

% of Social Enterprises at least half of the Directors

from this Group

Women56% 57%

People from Black and Minority Ethnic Communities

6% 4%

Young People (Aged Under 25 Years)

2% 0%

People with a Disability or Long Term Health Condition

13% 6%


PROFILE OF SALARIED SOCIAL ENTERPRISE LEADERS/MANAGERS

61% 5% 2% 12%Female Black and

Minority Ethnic

Young person

(


Pay Equity

Social enterprises tend to have flat pay structures and avoid paying their senior management excessively. In Glasgow the ratio between the highest and lowest paid employee is 1:2.7; similar to the national average of 1:2.5.

1:2.7 The average differential

between the highest and lowest paid employee

88% Of social enterprises have a pay

differential not exceeding 1:5


The Voluntary Practice for Social Enterprise in Scotland suggests a maximum ratio of 1:5 between the lowest and highest paid as a useful benchmark which reflects the values of the sector. In Glasgow the vast majority of social enterprises (88%) keep within that benchmark.

A Living Wage

Social enterprises aim to provide a level of pay that supports a decent standard of living. The 2017 survey data show that most social enterprises in the city pay at least the Scottish Living Wage10, up on 2015 and comparing favourably to the national average of 72%.


10 http://scottishlivingwage.org/what_is_the_living_wage

Pay at Least the Living Wage in Scotland for All Employees

% of All 2015

74%% of All 2017



Secure Work

Providing secure employment is in many cases one of the aims of social enterprises. Therefore, social enterprises tend to avoid using zero hours working arrangements. Due to competition from private sector providers, in some sectors zero hours contracts appear to be unavoidable. In Glasgow the use of these contracts has increased from 10% to 12% since 2015, but still compares favourably with the national average of 15%.

Source: Social Enterprise Census Survey 2015 and 2017

Targeted Employment

Social enterprises are inclusive organisations that tend to employ women and local people more than other sectors. The survey reveals that in almost three-quarters of social enterprises (73%) women make up the majority of the workforce, comparable to the national average (76%). Not surprisingly for a large city, in just over half of Glasgow’s social enterprises (52%) local people are in the majority, compared to a national average of 79%11.

% of All National

Census 2017

More Than Half of Employees are Female 73% 76%

Employ More Than Half Their Workforce Locally 52% 79%


11 ‘Local’ is self-defined by respondents. People in large cities generally view their direct neighbourhood as ‘local’ while people in a more rural environment consider their whole town/village plus surroundings as local.

% of All 2015

74%% of All 2017


Make Use of Zero Hours Contracts


Access to Opportunity

Social enterprises generally aim to make employment opportunities available for everyone in the community. The 2017 Census survey data show that social enterprises in Glasgow score well in that aspect, also in comparison with national averages.

22% 60%Have a MAIN aim to create employment,

training, work experience and volunteering opportunities WITHIN the organisation

Employ Previously Unemployed Young People (Aged Under 25)

National Census 2017: 18% National Census 2017: 49%

46% 71%Employ People Formerly Disadvantaged in

the Labour MarketProvide training or support intended to

improve employability

National Census 2017: 41% National Census 2017: 63%


The survey results show the extent to which social enterprises actively work with and seek to extend employment opportunities to disadvantaged groups with additional barriers to the labour market.

TARGETING OF OPPORTUNITY TOWARDS DISADVANTAGED GROUPS

Disadvantaged Groups Work With Seek to Employ

Young people leaving care 73% 27%

People with mental illness or mental health problems 90% 10%

Homeless / coming out of homelessness 83% 17%

Alcohol or drug addiction / dependency 93% 7%

Long-term unemployed 73% 27%

Individuals with a physical disability 82% 18%

Individuals with a learning disability 89% 11%

Young parents 81% 19%

Older people losing independence 93% 7%

People with convictions 84% 16%

Refugees and asylum seekers 81% 19%

Veterans / ex-military 78% 22%



Social E

nterpris

e in Gla

sgow 2

017


6. FINANCIAL PERFORMANCEThere is a great variety of social enterprise active in the city, from very large to very small. This section examines the financial strength, performance and sustainability of the Glasgow social enterprise sector.

Income

The social enterprise sector in Glasgow generates a substantial income of just under £1.1 billion in the latest year for which figures are available. Registered Social Landlords account for more than half (56%) of the overall income.

TOTAL INCOME TO THE SOCIAL ENTERPRISE SECTOR

Type Total Income 2017 % of Income

Registered Social Landlords £610m 56%

Credit Unions £20m 2%

Other Social Enterprises £454m 42%

TOTAL £1,084M 100%

Source: Analysis of publicly available financial data, 2017

Almost two-thirds of social enterprise income in Glasgow comes from trading (65%), and just over a fifth from grants (22%).

SHARE OF SECTOR INCOME BY SOURCE

Trading Activity Grant Funding Other Source

65% 22% 13%Source: Analysis of publicly available financial data, 2017

Average figures do not tell the whole story. There is a great variety in the level of income between organisations. More than a quarter of social enterprises in Glasgow (27%) have an income of less than £100,000.

For a slim majority of social enterprises in the city (57%) income has increased since 2015, while for two in five (43%) income has decreased.


TWO-YEAR CHANGE IN INCOME AT ORGANISATION LEVEL

Change (2015-17) % of Social Enterprises Experiencing Change

Income Has Increased 57%

Income Has Decreased 43%

Source: Analysis of publicly available financial data, where available for individual social enterprises in both financial years

Trading

Trading is a key characteristic that sets social enterprises apart from the rest of the third sector. Therefore, trading income12 is a key indicator of success for the sector.

The total trading income generated by the sector is an estimated £777 million from trading in the latest financial year, equating to an 11% increase on 2015.

TOTAL TRADING INCOME

Value of Social Enterprise Activity 2015

Value of Social Enterprise Activity 2017

Net Change (2015-17)

£701m £777m +11%Source: Analysis of publicly available financial data, 2015 and 2017

Housing associations account for the majority of the trading income of the sector (59%).

SHARE OF SECTOR TRADING INCOME BY SOCIAL ENTERPRISE TYPE

Registered Social Landlords

Credit Unions Other Social Enterprises

59% 2% 39%Source: Analysis of publicly available financial data, 2017

12 ‘Trading income’ refers to income generated through providing goods or services in return for payment, often under contract (or ‘Service Level Agreement’).


The social enterprises in Glasgow are at different stages of development and show different levels of trading. The financial data show that the social enterprise sector in Glasgow is getting a higher proportion of its income from trading than two years earlier. The mature social enterprises with more than half of their income from trading count for 59% of the total. This group also generates the vast majority of income (89%).

BREAKDOWN OF CHANGING TRADING IN THE SECTOR

Trading Level% of All

2015% of All

2017Net Change in

Group (2015-17)% of all Sector

Trading Income

Mature Group(50%+ Income From Trading)

55% 59% +4% 89%

Aspiring Group(25-49% Income From Trading)

18% 20% +2% 9%

Emerging Group(


TRADING LEVEL AND CONTRIBUTION BY SECTOR

SectorAverage %

Income from Trading

Share of All Sector Trading

Income

Arts & Creative Industries 53% 3.4%

Community Centres & Halls 43% 0.4%

Early Learning & Childcare 82% 1.3%

Education, Training & Employment 57% 2.4%

Environment & Recycling 62% 0.3%

Financial Services 91% 2.4%

Food, Catering & Hospitality 62% 0.1%

Health & Social Care 68% 25.0%

Housing 79% 60.2%

Information, Consultancy & Support 54% 1.8%

Property, Energy, Utilities & Land 77% 1.0%

Retailing 52% 0.3%

Sport & Leisure 59% 0.3%

Tourism, Heritage & Festivals 51% 0.4%

Transport 59% 0.1%

Other 70% 1.0%

TOTAL 100%



Expenditure

Collectively, the social enterprise sector spent £993m in the latest financial year, an increase of 18% compared to the £838m two years ago.

TOTAL EXPENDITURE OF THE SOCIAL ENTERPRISE SECTOR

Type Total Expenditure 2017 % of Expenditure




TOTAL £993M 100%

Source: Analysis of publicly available financial data 2017

For almost two-thirds of social enterprises in Glasgow (62%) costs have increased.

TWO-YEAR CHANGE IN COSTS AT ORGANISATION LEVEL

Change (2015-17) % of Social Enterprises Experiencing Change

Costs Have Increased 62%

Costs Have Decreased 38%

Source: Analysis of publicly available financial data, 2015 and 2017

Staffing is the single largest cost for social enterprises in Glasgow, accounting for more than half (59%) of their total expenditure, but decreasing significantly since 2015.

STAFF COST RATIO13 OF SOCIAL ENTERPRISES

Staff Cost Ratio 2015 Staff Cost Ratio 2017 Net Change (2015-17)

65% 59% -6%Source: Analysis of publicly available financial data, 2015 and 2017 / Note: Excludes Registered Social Landlords and Credit Unions

13 The Staff Cost Ratio is the percentage of actual expenditure among social enterprises which is allocated to staffing costs. The formula is Staffing Costs/Total Expenditure x 100.


Profitability

Earning more income than the total cost of operating is crucial for social enterprises to sustain themselves in the future. The social enterprise sector in Glasgow has generated an estimated surplus of £91m in the latest financial year, a significant increase from the £48m two years ago. Almost three quarters of the total profit (74%) is generated by housing associations.

SURPLUS GENERATED BY THE SOCIAL ENTERPRISE SECTOR

Type Total Surplus 2017 % of Surplus




TOTAL £91M 100%

Source: Analysis of publicly available financial data 2017

The social enterprise sector in Glasgow (excluding housing associations and credit unions) has become vastly more profitable compared to 2015. This means that on average a social enterprise generates surplus of 4.5p for every £1of income.

PROFITABILITY RATIO14 OF TYPICAL SOCIAL ENTERPRISES

Profitability Ratio 2015 Profitability Ratio 2017 Net Change (2015-17)

1.9% 4.5% +2.6%Source: Analysis of publicly available financial data, 2015 and 2017 / Note: Excludes Registered Social Landlords and Credit Unions

The Profitability Ratio does not tell the whole story. Most social enterprises in Glasgow (58%) are making a profit, but a significant group (40%) is making a loss.

14 The Profitability Ratio tells us the amount of surplus per £1 of income social enterprises have earned after taking account of all expenditure. The formula is Net Surplus (Deficit)/Total Income x 100.

SOCIAL ENTERPRISES MAKING A SURPLUS/DEFICIT

Last Financial Year End % of all

Making a Surplus 58%

Breaking Even 1%

Making a Deficit 40%



Financial Health

A main measure of the health of any business is its liquidity, the ability to pay short-term debts with cash and other liquid assets. Collectively, the sector in Glasgow has £576m debt payable within the next 12 months (current liabilities), but this is covered by £1,025m of cash and other assets that can be turned into cash quickly (current assets).

CURRENT ASSETS AND LIABILITIES OF THE SECTOR

Type Current Assets Current Liabilities

Registered Social Landlords £472m £181m

Credit Unions £363m £322m

Other Social Enterprises £190m £73m

TOTAL £1,025M £576M


The most common measure of liquidity is the current ratio, which has remained relatively stable for Glasgow’s social enterprise sector at 2.5, meaning that the sector has £2.5 current assets for each £1of short-term debt.

CURRENT RATIO15 OF TYPICAL SOCIAL ENTERPRISES

Current Ratio 2015 Current Ratio 2017 Net Change (2015-17)

2.8 2.5 -0.3Source: Analysis of publicly available financial data, 2015 and 2017 / Note: Excludes Registered Social Landlords and Credit Unions

Another important indicator for financial health is the Debt Turnover Ratio, which shows the average time it takes for debtors to pay their invoices, which has worsened in Glasgow since 2015.

DEBT TURNOVER RATIO16 OF TYPICAL SOCIAL ENTERPRISES

Debt Turnover Ratio 2015 Debt Turnover Ratio 2017 Net Change (2015-17)

42 days 56 days +14 daysSource: Analysis of publicly available financial data, 2015 and 2017 / Note: Excludes Registered Social Landlords and Credit Unions

15 The Current Ratio provides an indication of social enterprises ability to meet short term obligations (those obligations due within 1 year or less). The formula for the Current Ratio is Current Assets/Current Liabilities.

16 The Debt Turnover Ratio provides an indication of how long debtors take to pay their account. The formula is Debtors/Total Income x 365.


Financial Strength

The balance sheet of a business provides a statement of financial strength. It sets out what assets the company owns and what debts it owes to others. The difference is its net worth.

Overall the balance sheet for the social enterprise sector has increased over the past two years, with total assets of £4.9bn and total liabilities of £3.3bn, resulting in an increase in net worth from £1.1bn two years ago to £1.6bn in the latest year. Housing associations account for three-quarters of the net worth of the sector (75%).

AGGREGATED BALANCE SHEET FOR THE SECTOR

Type Total Assets17 Total Liabilities18 Net Assets19

Registered Social Landlords £3,999.9m £2,811.0m £1,188.9m

Credit Unions £382.4m £340.0m £42.4m

Other Social Enterprises £483.6m £124.8m £358.8m

TOTAL £4,865.9M £3,275.8M £1,590.1M


Sustainability

Social enterprises aim to increase their financial independence and resilience through trading. The Self Sufficient Ratio, depicting the extent to which social enterprises can pay their expenses through trading, has slightly increased over the last two years to 71%, which logically means a reduction of the same amount in the Grant Reliance Ratio.

SELF SUFFICIENCY RATIO20 OF SOCIAL ENTERPRISES

Self Sufficiency Ratio 2015

Self Sufficiency Ratio 2017


69% 71% +2%Source: Analysis of publicly available financial data, 2015 and 2017 / Note: Excludes Registered Social Landlords and Credit Unions

17 Assets are possessions held by social enterprises either to use in the course of their work, or to generate income. These include cash, unpaid invoices, property, equipment, stock and investments.

18 Liabilities include all that social enterprises owe to others, from unpaid bills to loans and long term pension liabilities.19 Net assets represent the net worth of the sector and equate to its total funds.20 The Self Sufficiency Ratio provides an indication of the extent to which social enterprises are able to cover their costs through trading. The

formula is Earned Income/Total Expenditure x 100.


GRANTS RATIO21 OF SOCIAL ENTERPRISES

Grants Reliance Ratio 2015

Grants Reliance Ratio 2017


31% 29% -2%Source: Analysis of publicly available financial data, 2015 and 2017 / Note: Excludes Registered Social Landlords and Credit Unions

The free financial reserves of Glasgow’s social enterprises, their unrestricted reserves, have increased from £211m two years ago to £238m in the latest year. This indicates social enterprises having used their unrestricted reserves, either to invest in new assets and activities or to offset operational losses.

TOTAL UNRESTRICTED RESERVES22 OF TYPICAL SOCIAL ENTERPRISES

Unrestricted Reserves 2015

Unrestricted Reserves 2017


£211m £238m +£27mSource: Analysis of publicly available financial data, 2015 and 2017 / Note: Excludes Registered Social Landlords and Credit Unions

The Survival Ratio indicates how long a business can operate without any income. Glasgow’s social enterprises could continue to run for almost 7 months without any income.

SURVIVAL RATIO23 OF TYPICAL SOCIAL ENTERPRISES

Survival Ratio 2015 Survival Ratio 2017 Net Change (2015-17)

27 Weeks

29 Weeks

+2 Weeks

Source: Analysis of publicly available financial data, 2015 and 2017 / Note: Excludes Registered Social Landlords and Credit Unions

21 The Grants Ratio provides an indication of the extent to which social enterprises are making use of grant funding. The formula is Grants/Total Income x 100.

22 Unrestricted Reserves are unrestricted funds held in reserve by social enterprises, and exclude funds designated for a specific purpose.23 The Survival Ratio provides an indication of how long social enterprises could survive with no income. The formula is Total Unrestricted Reserves

/ Total Income.


7. PROSPECTS AND NEEDS Social enterprise activity in Glasgow continues to be strong, but the future is unclear. This section examines the confidence in and prospects for the future and explores associated challenges and needs.

The Economic Climate

Over the last two years the social enterprise sector in Glasgow had to cope with considerable change, ranging from a slowdown in GDP performance, fluctuating consumer and business sentiment and a weaker economic outlook as a result of the Brexit decision, to continuing pressure on public finances (which are of key importance to the social enterprise sector).

Social enterprises in Glasgow, consistent with the national trend, have become more cautious about the effect of the economic climate on their business. Almost half of all respondents (48%) reported a negative effect and only 8% a positive one. The difference with two years ago, however, is more defined with a large increase in organisations reporting a negative impact.

REPORTED EFFECT OF THE ECONOMIC CLIMATE OVER THE LAST 12 MONTHS ON THE PROSPECTS OF SOCIAL ENTERPRISES

Reported Effect 2015 2017National

Census 2017

Positively 13% 8% 7%

Neither Positively or Negatively 55% 43% 44%

Negatively 32% 48% 50%

Source: Social Enterprise Census Survey, 2015 and 2017

Main Factors Influencing Markets And Prospects

Social enterprise leaders have identified a number of main influencing factors for the more negative outlook:

• The continuing economic and political uncertainty.

• Continuing challenges and change within the public sector, including organisational restructuring, staff changes and shifting priorities.

• A challenging public funding environment with standstill or reducing public sector funding.

• Increased competition for both public sector grants and contracts.

• Financial pressures facing consumers, increasing demands on their services, while threatening income streams where consumers are also their customers.

• Rising costs across the board.


Business Confidence

The social enterprise sector in Glasgow is slightly less pessimistic about the future than the national average. However, just under one-third of social enterprises (30%) is slightly or much more confident about the economic prospects in the next 12 months.

REPORTED CONFIDENCE IN ECONOMIC PROSPECTS

Confidence Level % of Respondents National Census 2017

Much More Confident 7% 6%

Slightly More Confident 23% 17%

As Confident 32% 41%

Slightly Less Confident 27% 29%

Much Less Confident 10% 8%


The 2017 Social Enterprise Census introduced a Social Enterprise Confidence Index24. The first ever Social Enterprise Confidence Index for Scotland stands at -7.8. The Glasgow social enterprise sector is more optimistic with an index score of -5.9, albeit the social enterprises in the city are still cautious about the future.

24 This is based on the method employed by the ICAEW UK Business Confidence Monitor, one of the largest and most comprehensive quarterly reviews of UK business confidence and provides a regular snapshot of the economy. The scale runs from 100 to -100.


Changes Forecast

The research suggests that the social enterprise sector in Glasgow is levelling off and perhaps becoming a bit more realistic. In the 2015 survey, respondents showed a widespread optimism that has not been justified by the actual results. In the 2017 survey, respondents are much more cautious in their predictions.

For example, in the 2015 survey 51% of respondents expected contracts with the public sector to increase, which according to 2017 responses has only happened for 17% of respondents, which led to a perhaps more realistic expectation of 28% for the coming year.

REPORTED AND FORECASTED CHANGES IN GLASGOW

% Respondents Forecasting

Increase for 2016(Reported in 2015 Census)

% Respondents Reporting Actual Increase for 2016

(Reported in 2017 Census)

% Respondents Forecasting

Increase for 2018(Reported in 2017 Census)

Total income 75% 54% 57%

Proportion of income from trading 66% 35 % 46 %

Contracts with the public sector 51% 17% 28%

Geographic coverage 86% 34% 39%

Product/service range n/a 42% 52%

Demand for services 86% 77% 77%

Operating costs 68% 69% 75%

Joint working with others 76% 52% 66%

Reliance on grants 22% 19% 23%

Total employees 58% 43% 44%



Key Challenges

Social enterprises like all organisations experience barriers and obstacles that hinder their further development. The lack of time/capacity available to develop the trading potential of their organisation was the most frequently reported issue, as it was in the 2015 Census. Declining grant funding and increasing costs completed the top three challenges, like they did in 2015. The importance of increasing cost rose from 37% to 45%.

The picture for Glasgow is broadly comparable to the national average.

REPORTED CHALLENGES TO THE DEVELOPMENT OF ORGANISATIONS IN GLASGOW

Obstacle/barrier % of

Respondents 2015

% of Respondents

2017

National Census 2017

Lack of Time/Capacity to Develop Trading Potential

60% 51% 54%

Insecure or Declining Grant Funding 52% 48% 51%

Increasing Costs 37% 45% 51%

Difficult Market/Trading Conditions 32% 28% 27%

Competition Within the Market 25% 27% 20%

Cashflow Difficulties 22% 25% 22%

Difficulties Securing Public Contracts/Service Level Agreements

22% 24% 20%

Skills Gaps or Shortages 23% 21% 20%

Difficulty Accessing Finance n/a 20% 20%

Recruitment and Retention Difficulties n/a 18% 17%

Public Awareness or Preconceptions of Social Enterprise

21% 17% 21%

Difficulty Complying With Regulations or Legislation

n/a 12% 14%

Inadequate Business Support 15% 12% 13%



Access to Finance

The results of the 2017 survey indicate that the awareness and use of loan finance is slightly more prevalent in Glasgow compared to the national average.

REPORTED AWARENESS, ATTITUDES AND USE OF REPAYABLE FINANCE

Reported Position % of Respondents National Census 2017

Aware of the Options 60% 56%

Willing to Consider 32% 29%

Able to Access 41% 35%

Currently Making Use of 15% 14%


The survey findings suggest that three-quarters of social enterprises in Glasgow (75%) have accessed some form of finance in the last 12 months. Grant funding is still the most used form of finance (73%) but just over one in ten organisations (11%) have applied for repayable loan finance.

TYPES OF FINANCE APPLIED FOR IN LAST 12 MONTHS

Finance Type % Applying for Finance National Census 2017

A Loan 11% 9%

A Grant 73% 73%

An Overdraft 3% 4%

Equity Finance 0% 0%

Leasing/Hire Purchase 3% 3%

Community Share Capital 1% 1%

None of the Above 25% 24%



Support Needs

The Scottish Government has published its ten-year Social Enterprise Strategy25 setting out how social enterprises will be supported to reach their full potential.

The 2017 survey work has explored 22 areas of potential support for social enterprises. The areas of support most frequently requested included support with marketing strategy (45%), measuring social impact (39%), help with researching new opportunities (38%), collaborating with others (38%), and developing new products or services (38%).

FORMS OF SUPPORT THAT SOCIAL ENTERPRISES MIGHT USEFULLY BENEFIT FROM IN THE NEXT 12 MONTHS

Form of Support% Reporting they Might

Benefit from HelpNational

Census 2017

Developing Your Marketing Strategy 45% 39%

Measuring Social Impact 39% 44%

Researching New Opportunities 38% 40%

Collaborating With Others to Succeed 38% 39%

Developing New Products or Services 38% 35%

Developing Your Workforce 35% 39%

Developing Digital Capabilities 35% 33%

Preparing a Business Plan for Growth 33% 32%

Planning for Business Change and Succession 33% 30%

Tendering for Public Sector Contracts 33% 23%

Improving Your Business Practices 32% 33%

Developing Leadership Capabilities 32% 28%

Attracting New and Young Talent 30% 33%

Finding a Business Mentor 23% 19%

Learning New Business Skills 21% 22%

Finding Property Solutions 20% 19%

Managing Your Intellectual Property 17% 12%

Improving Environmental Sustainability 13% 14%

Starting up a New Business Venture 10% 10%

Recovering from Business Difficulties 10% 8%

Doing Business in International Markets 10% 6%

Attracting Repayable/Loan Finance 9% 8%


25 Scottish Government, Scotland’s Social Enterprise Strategy 2016-2026, December 2016 http://www.gov.scot/Publications/2016/12/4404/0


Measuring Social Impact

Evidencing social impact has become increasingly important for social enterprises over the last decade or so. The Scottish Government is committed to support social enterprises to produce social impact evidence26.

The survey results suggest that there is still some way to go to fully embed social impact measurement into business operations. However, Glasgow is slightly ahead of the national average.

REPORTED EXTENT TO WHICH ORGANISATIONS MEASURE THEIR SOCIAL IMPACT

Response % of Respondents National Census 2017

A Large Extent 24% 18%

Some Extent 46% 48%

Not Very Much 23% 23%

Not at All 6% 11%

Source: Social Enterprise Census Survey, 2017 Note: Excludes respondents stating ‘Don’t Know’

There is no consistent methodology to measure and report on social impact across the sector. Only a small minority of organisations use one of the two most established frameworks (SAA and SROI). Most organisations reported to use their own method, with an unknown level of sophistication.

METHODS USED TO MEASURE SOCIAL IMPACT

Method % of Respondents27 National Census 2017

Social Accounting and Audit (SAA) 5% 4%

Social Return on Investment (SROI) 8% 7%

Other Method 14% 18%

Own Method 82% 80%


26 Scottish Government, Building A Sustainable Social Enterprise Sector in Scotland: 2017-20, April 2017. http://www.gov.scot/Publications/2017/04/8804/0

27 Some respondents gave more than one answer, hence the total being more than 100%

For further information about this report contact:

Elizabeth McKenna / DirectorGlasgow Social Enterprise Network Mobile: 07584 422775 Email: [email protected] Twitter: @GlasgowSEN

Rick Rijsdijk / DirectorSocial Value LabStudio 222, South Block, 60 Osborne Street, Glasgow G1 [email protected]

(Footnotes)

1. ‘Key Sectors’ referred to here and throughout this report are the five fields of activity which contain the most significant share of social enterprises or social enterprise trading activity

2. Assets are possessions held by social enterprises either to use in the course of their work, or to generate income. These include cash, unpaid invoices, property, equipment, stock and investments.

3. Liabilities include all that social enterprises owe to others, from unpaid bills to loans and long term pension liabilities.4. Net assets represent the net worth of the sector and equate to its total funds.5. Some respondents gave more than one answer, hence the total being more than 100%.

Documents

Social Enterprise in Glasgow · Social Enterprise in Glasgow 2017 6 2. Scale The social enterprise sector in Glasgow is a diverse one. This section examines the size of the sector,