Make or break Brexit: the future of social enterprise

Social enterprises are both a way to use profits for good and a ballast against cuts. Will they flounder or grow post-Brexit?

Necessity is the mother of invention. The best ideas are creative responses to need, responses that big business and government aren’t always nimble enough to make. Just look at The Big Issue.

The rise and rise of social enterprise is a welcome success story in Britain. There are 100,000 across the country, contributing £60bn to the economy each year. In the age of austerity, small local businesses have plugged gaps that councils and government can’t, or won’t, meet. Our event in Northampton last year, bringing together grassroots groups who are doing incredible things, was a microcosm of how this is spreading.

So, will social enterprises be able to grow and continue vital work post-Brexit? Or will they be proven even more useful than before?

Around one in 12 of them is reliant on grants or investment from the EU. Those European funding schemes tend to be targeted at deprived areas, says Thomas Montgomery, a postdoctoral researcher at Glasgow Caledonian University’s Yunus Centre for Social Business and Health. In fact, nearly a fifth of community-based social enterprises in the most challenging places are dependent on income from the EU. 

“There is a lot of uncertainty around how those programmes will continue post-Brexit,” Montgomery says. “Funding has been consistently decreasing for vital services. And the needs of the vulnerable groups, who these social enterprises work with, increase.” It’s a cycle those in the sector are expecting to see turbocharged if the UK leaves the EU without a deal.

“It’s not unreasonable to say social enterprises can fill those particular gaps,” Montgomery adds, “but if the situation worsens for vulnerable people then the pressure on those organisations to deliver more with less increases. You have to look at a no-deal Brexit scenario and ask: with what resources?” 

His colleague, research fellow Micaela Mazzei, points out that some of their work has helped create relationships between social enterprises and local governments, or worked on strategies to help the businesses flourish. The loss of those programmes could bring the mutually beneficial relationship between the sector and higher education crashing down. “It’s looking quite bleak,” she says.

Yet when Social Enterprise UK asked, nearly half of British social entrepreneurs said they didn’t think leaving the EU without a deal would have any impact on their operation. Some decided social enterprises were rendered Brexit-proof by their very nature – most are born out of a response to a system that’s already broken, after all. “Brexit is just another barrier that they have to face in an already challenging environment,” Peter Holbrook, the trade body’s chief executive told the Thomson Reuters Foundation. 

But he added: “We also lack a clear sense from the government about what no deal would mean in practice. This may be lulling businesses into a false sense of security.”

DID YOU KNOW…

The Big Issue magazine is a social enterprise, a business that reinvests its profits in helping others who are homeless, at risk of homelessness, or whose lives are blighted by poverty.

Period poverty-busting social enterprise Hey Girls has tried to prepare for Brexit. They import from China for their buy-one-give-one business model, getting sanitary products into the hands of those who can’t afford them.

“The main consideration for us is where we can import stock from Europe,” says Steve Hodson, director of finance and logistics. “It’s hard to know how we’ll adapt until we get more information.”

But there are some positives – maybe. “The government has said it will delay VAT payment on imports,” Hodson adds. (Current advice is that if the UK leaves the EU without a deal, businesses can pay VAT when they submit their VAT return instead of upfront when goods arrive at the UK border). “Sanitary pads worth £40,000 rack up quite a lot of VAT. So that would make things easier for us to manage, cashflow wise.”

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Big Issue Changemaker Sophie Unwin founded the sustainability-focused Remade Network, reuse and repair centres that fix items and teach locals to do it themselves. She said the end of freedom of movement threatens the social enterprise workforce. “In Edinburgh I hired several EU nationals who helped grow the business and create jobs for Scottish people. My work now is about setting up projects here as a model for other countries. Brexit makes it more difficult for me to travel and collaborate with EU partners, and removes us from EU legislation on environmental standards like the right to repair.”

Whatever happens, social entrepreneurs agree that Brexit must stop dominating the agenda. Last year 130 social enterprise leaders wrote to then-Chancellor Philip Hammond demanding he stop using Brexit as an excuse to avoid his responsibilities to the country. Suggesting tax cuts to reward companies that make a positive impact, they described social businesses as “fighting with one arm behind their back” due to the tax duties that larger companies can often get out of paying. Post-Brexit, while the dust is settling, maybe that would be a good place to start.

This article originally appeared in The Big Issue magazine issue 1379. Pick up a copy from your local vendor or from the Big Issue Shop