2010/11 Sector Survey. 2010/11 Sector Survey. The state of Social Enterprise in Yorkshire and the Humber

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1 2010/11 Sector Survey The state of Social Enterprise in Yorkshire and the Humber

2 1 Introduction I am very pleased that Social Enterprise Yorkshire and the Humber is able to produce the results of the latest robust and detailed survey of social enterprises in Yorkshire and the Humber. To those interested in the sector and keen to find out more the report gives some detail on what is an under-researched and reported part of the business environment. For social enterprises the survey will reinforce our belief in ourselves as an important, growing and profitable sector giving valuable support to communities. National research shows social enterprises bucking the trend in the current economic climate and this research shows that social enterprises in Yorkshire and the Humber are just as resilient as social enterprises elsewhere in the UK, outperforming privately owned businesses based on surveys of private business performance. We hope that we will be able to undertake the survey on an annual basis and it will act as a useful barometer for the sector. I would like to thank Leeds Community Foundation, Yorkshire Forward and European Regional Development Fund for making the production of this report possible, Viewpoint Research CIC for collecting the survey data and compiling this report as well as all the social enterprises who responded to the survey. Alex Sobel General Manager Social Enterprise Yorkshire and the Humber Contents 1. Introduction 2 2. Executive summary 3 3. Methodology 4 4. Results

3 2 Executive Summary Executive Summary This report presents the findings of the 2010/11 Sector Survey the State of Social Enterprise in Yorkshire and Humber. The results are taken from 121 completed questionnaires from the member organisations of Social Enterprise Yorkshire and the Humber (SEYH). Responses generally refer to the financial year and provide a picture of the size and financial activity of the sector. The findings of this research show that social enterprise currently successfully delivers economic and social outcomes throughout the region and has the potential to play an ever increasing role as a more socially responsible way of doing business. Key findings Social enterprises in Yorkshire and the Humber vary greatly by size in terms of turnover. The majority are small businesses but 65% turn over in excess of 100, % of social enterprises made a profit or at least broke even in , during the height of the economic downturn. Profit generated by social enterprise is largely reinvested within individual businesses to further develop services and social outcomes. The social enterprise sector is a major employer. 54% of respondent organisations employ more than 5 people. Social entrepreneurs and senior managers in the sector are largely motivated by social reasons, the most popular being to improve opportunities for the local community. The majority of social enterprises aim to create benefit for people, be that as part of the local community, employees or a particular community of interest. Social enterprises are not restricted to certain areas of the economy. They perform a variety of activities in a range of industry sectors. A wide variety of legal structures are used by social enterprises, including shareholding structures, but the majority of social enterprises are Companies Limited by Guarantee. Social enterprises are more likely to start-up and operate in the region s urban areas in response to social need. Raising finance, such as grants or loans, is used by social enterprises to maximise their activities and social impact. 3

4 3 Methodology The methodology of this research was designed to collect information which was representative of the social enterprise sector in the Yorkshire and Humber region. Design The survey questions were designed by SEYH, based on questions which appeared in the Social Enterprise Coalition s (now Social Enterprise UK) 2009 State of Social Enterprise Survey. The questions were chosen specifically to get a picture of the size and financial success of the sector. SEYH were keen to develop a short questionnaire which captured key information but which could be easily completed by senior managers within each organisation. Report Viewpoint Research CIC provided data analysis and compiled this report. The timing of this report enables figures to be compared with Social Enterprise UK s 2011 State of Social Enterprise survey, a national survey of social enterprise which was released on 4th August 2011 and had comparable data collection dates. Data Collection Data collection was carried out by Viewpoint Research CIC. A mixed approach to data collection was agreed, incorporating paper, online and telephone versions of the questionnaire to ensure the widest reach possible. Paper surveys were handed out at SEYH networking events and distributed in their newsletter, while an online survey was built using specialist survey software and a link placed on SEYH s website and e-newsletter. Telephone surveys were then used to top up the numbers collected from the online and paper surveys. The sampling frame used was SEYH s 2010 membership database of 190 social enterprises. From this 121 questionnaires were completed: 17 on paper, 45 online and 59 by telephone. After the various collection stages, duplicates were filtered out to ensure each organisation had only submitted one response. The 2011 Yorkshire & Humber Business survey estimated that 16.3% of businesses in the Leeds City Region are social enterprises, a total of 23,132, based on self classification. SEYH s membership reflects the diversity and variety in the sector with organisations of contrasting size, legal forms and objectives. Data was collected online and by paper between 1 st June 2010 and 26 th August 2010, with telephone surveys conducted between 18 th January 2011 and 4 th February 2011 so as to ensure that all responses relate to the same financial year. 4

5 4.1 Turnover What was your turnover in your last financial year? Turnover is a key measure for identifying the size of different businesses and their economic contribution to the region. The results show that the range of turnovers is broad but the vast majority of social enterprises in the region are small businesses (The 2006 Companies Act defines a small company as one that has a turnover of not more than 6.5million). However within this scale, almost two-thirds of respondents indicated a turnover of over 100,000, with 40% generating income of over 250,000 - suggesting that many social enterprises in the region are well established with a strong customer base. This survey shows a lower proportion of social enterprises with a turnover of over 1million compared to the national study (11% compared to 20%) but a higher proportion of businesses in the 100,000 to 1million range, particularly 250,000 to 1million (29% compared to 19% nationally). Similar proportions of social enterprises in Yorkshire and Humber and nationally earn under 50,000, suggesting that the region is producing comparable numbers of start up organisations and/or organisations which may choose not, or be unable, to grow beyond this level. Don't know 2.5% 0-10, % 10,001-50, % 50, , % 100, , % Over 1million 10.8% 250,001-1million 29.2% East Street Arts in Leeds is a contemporary arts organisation that develops the talent of artists through their events programme, membership activities, professional development and studio/ facility provision. Their approximate turnover of 315,000 was achieved by a mix of contracted projects, grant funding and license fees from their growing provision of premises which provides artists with space to work. They work with artists in all fields - painting, sculpture, dance, acting, film making and photography and have begun to expand into other regions by buying or leasing art space. They have provided space for art in Bradford, Halifax, Middlesbrough and Birmingham and with this approach hope to double their turnover in the next three years. 5

6 4.2 Profitability How was your financial performance in your last financial year? Profitability is a key measure of success for social enterprise, given the importance of demonstrating a sustainable business model as well as achieving a social mission. The survey asked about financial performance during when the UK was largely in recession, so figures showing that over two-thirds of respondent organisations (71%) made a profit or broke even should be placed in this context. There is an apparent link between profitability and scale with not one of the 12 organisations with a turnover of over 1million having recorded a deficit. But the group below them - turning over between 100,000 and 1million - proved just as likely to make a loss as businesses earning between 10,000 and 50,000. Indeed other than those with the highest turnover, the most profitable businesses are in the 50,000 to 100,000 turnover range, with only 12% recording a loss. The overall profitability figures Break even 24.8% Loss 29.2% compare negatively with the national statistics where 53% of social enterprises showed a profit, 7% more than in this region. This may be explained by there being a larger proportion of social enterprises nationally earning over 1million, which are shown to be the most profitable in this survey and the national study. Profit 46.0% Trustsport in Barnsley supply all types of sportswear equipment and offer a bespoke design, print and embroidery service for logos and badges. All their profit is put back into the community to encourage youth into sport by supplying local youth teams with kit and equipment. Trustsport generated a profit in 2009/10 through their regular customer base of local sports associations, schools and businesses. This has enabled them to acquire new equipment and their own storage facility meaning they can now embroider the badges and logos themselves. This will lead to a further increase in profits as they no longer need to outsource this work, resulting in increased job security for all staff and an increased ability to support more community youth projects. 6

7 4.3 Use of Profit How does your organisation use its profit or surplus? An obvious area of difference between social enterprise and the private sector is how profit is used. The results from this question showed that most of the profit generated by social enterprise is retained in the individual businesses to further develop their services and social outcomes. 73% of respondent social enterprises reinvested their profits for development activities with reinvestment for other purposes such as training, and building up reserves the second most popular response. Reinvestment in the business in this way is, of course, not unique to social enterprise as smaller scale businesses in all sectors can be expected to reinvest some profit in development activity and reserves. However it is striking that just 5% of social enterprises made dividend payments to individuals. Re-invested (training, capital) 38.1% Dividend payment 5.1% Re-invested for development 72.9% Reserves 38.1% Cross-subsidy of services 33.9% Provision of another service 22.9% Passed to external charitable venture 16.1% Have not made a profit 15.3% Respondents able to select more than one answer Kirklees Active Leisure (KAL) manages 11 major sports centres and swimming pools on behalf of Kirklees Council. KAL s vision is to get more people, more active, more often. KAL re-invested the surplus generated in 2009/10 in many of their fitness suites to improve the standards for customers and to offer more opportunities to them to be active. They have invested in energy saving schemes which will provide further returns through reduced consumption and also purchased more swimming pool inflatables and loose equipment to help make the pools more fun and enjoyable. Other responses to this question highlight innovative uses of profit that support the social aims which social enterprises provide. 34% of respondents cross-subsidised services, 23% of businesses used their surpluses to provide another service and 16% passed their profit to an external charitable venture, indicating the number of charitable trading arms in the sector. Data for this question was collected for the last two financial years. Only 18 respondents recorded that they had not made a profit in this time. 7

8 4.4 Staffing How many staff does your organisation currently employ? The results show that the social enterprise sector is a major employer to levels comparable with other economic sectors. There are a handful of social enterprises in the region which employ over 50 staff and so might be termed medium sized businesses. This confirms the scales determined by the turnover results in Section 4.1. It also means the social enterprise sector reflects the wider business sector, as 99% of all businesses employ less than 50 people (Dept of Business Innovation and Skills, SME Statistics for the UK and Regions 2009). Unsurprisingly there is a clear correlation between turnover and number of staff. All five of the businesses who employed over 50 staff turned over more than 1million. Compared with the national figures for social enterprise, this survey reveals fewer enterprises employing 0 to 5 staff (46% compared to 60%) but also less at the high end with 4% employing more than 50 staff compared to 12% nationally. The survey asked for numbers of full-time equivalent staff but many social enterprises offer part-time work, volunteer or trainee placements so do provide opportunities for a greater number of individuals than the figures suggest. Creating employment opportunities can be a key social aim of social enterprise. The increasing or decreasing number of staff is also a good indicator of scale. 26 to 49 staff 10.1% 11 to 25 staff 17.6% 50+ staff 4.2% 6 to 10 staff 21.8% 0 to 5 staff 46.2% The Rock Foundation provides constructive activities, vocational training and work experience for adults and young people with learning disabilities or other disadvantages in the Grimsby and Cleethorpes District and surrounding area. The activities provided include: Joinery, DIY, gardening, craftwork, life skills, laundry, catering and IT. Rock has 13 staff and 25 regular volunteers which it needs to be able to support its trainees and learners in such a wide range of activities. They also take people on 8-week work placements from the job centre. Rock is always looking for more volunteers, particularly people who may be retired but have skills they can pass on. As well as bringing a wide range of skills to the business, Rock also aims to create a family atmosphere within its team where staff support and help each other. 8

9 4.5 Motivation What motivated you to set-up/work in a social enterprise? The reasons for setting up/working in social enterprise are varied but it is clear that senior people within social enterprises are largely motivated by social reasons. It shows that social purpose is the driving force behind social enterprise to a level far beyond being merely socially responsible. 74% of respondents chose to work in the social enterprise sector because they wanted to put something back into the community and 67% wanted to make a lasting difference. What might be considered a more mainstream reason for choice of workplace, such as working in that particular industry is less of a motivation at 39%. There is also a strong proactive element to the answers with respondents recognising the freedom that working in social enterprise can provide. Over half of all respondents wanted to work in social enterprise to improve on what was available or to try out new ideas, which in turn suggests that social enterprise offers these opportunities. The other responses given included two people who saw social enterprise as the best model to suit their disability, and two who were motivated by the positive differences between social enterprise and the private sector. The remaining responses identified more specific social reasons. Work in this particular sector 38.8% Don't know 1.7% Other 10.7% Putting something back in to the community 74.4% Feeling good about my work 52.1% Offered the job 22.3% Always worked in social enterprise 11.6% Making a lasting difference 66.9% Better way to achieve social or environmental goals 59.5% To improve on what was available 55.4% The freedom to try new ideas 53.7% Positive impact on the environment 30.6% Economic/funding/legal/bureaucratic reasons 29.8% Respondents able to select more than one answer Get Cycling CIC, based in York, were set up to promote cycling in the community through bike try-outs and bike loan schemes. It is run by a team of enthusiastic, creative professionals with previous business experience. Their motivation in setting up Get Cycling was purely to realise their social mission to benefit the health and happiness of the community by getting the maximum number of people introduced to cycling. Being a social enterprise has given them great flexibility. In 2011 their funding from the public sector was reduced, but Get Cycling was able to diversify by moving into retail. They set up a community bike shop with a specialism in disability cycles and this ensured the business could continue with no redundancies. 9

10 4.6 Beneficiaries What or who are your organisation s main beneficiaries or users? This question sought to establish who benefits from the social outcomes generated by social enterprises in the region. The results show that social enterprises are primarily interested in people, be that as part of the local community, employees or a particular community of interest. Social enterprises focusing on people far outnumber those with environmental goals. Social enterprises are outward looking in defining their benefit. 45% of respondents aim to benefit the local community. Other 5.1% Employees 6.8% Other organisations 11.0% Community of interest 29.7% This result also suggests that social enterprises in the region have a very localised view by working in defined geographical communities. Whilst this creates a large impact in these areas, it can also hinder their potential for growth. These figures are supported by the national survey results which show that 82% of social enterprises reinvest their profits to further local social goals. Environment 2.5% Local community 44.9% 7% of respondents said that their employees were their main beneficiaries. These respondents may be Social Firms, which are social enterprises set up specifically to create jobs for people disadvantaged in the labour market. In the national survey results 24% of social enterprises named creating employment opportunities as one of their social objectives. Two of the other responses received said their area of benefit was the whole sector as they were concerned with the promotion of social enterprise. Community Health Works deliver a range of community health activities across the Sheffield City Region (South Yorkshire and North Derbyshire). They help local people improve their health and wellbeing, reduce health inequalities and get involved with community development and volunteering. The beneficiaries of Community Health Works are wide ranging including the long term unemployed and people with health issues such as depression, weight problems, alcohol and drug history. They are currently developing two new projects providing heath and wellbeing services on a youth project and also to people who are homeless. 10

11 4.7 Activities What is your organisation s main area of income generating activity? This question aimed to broadly define the different activities through which social enterprises in the region generate their income. The results show that social enterprises are not restricted to certain sectors of the economy. They perform a variety of activities in a range of industry sectors. The other services category actually has the second greatest number of responses which shows the variety on offer. Responses within this category included a number of specific services such as facilities management, IT, catering and media services. Generally, the most common type of service provided by social enterprises is with developing the skills of people through training, support, and education. This supports the findings from section 4.6 which identified people (as members of the local community or within a particular community of interest) as the main beneficiaries of social enterprise. Turnover levels are very well spread across the different industry sectors but some patterns are of particular note. 31% of organisations with a turnover of over 1million work in the financial sector while 23% with a turnover of over 1million defined their main income generating activity as regeneration. At the lower end of the scale, 27% of businesses who earned between 10,000 and 50,000 defined their income source as training/support. Housing 1.7% Transport 0.8% Regeneration 12.6% Retail/wholesale 11.8% Education 5.0% Financial 5.0% Environment 2.5% Arts/culture/sport 7.6% Young People 6.7% Training/support 20.2% Other services 17.6% Health/social care 8.4% Wildscapes CIC was established in 2007 with the primary purpose of generating commercial profits to be reinvested into the charitable work of their parent organisation, Sheffield Wildlife Trust. Wildscapes are one of a few social enterprises in the study who identified environment as their main area of income generation and indeed they provide a range of services to public and private sector businesses related to nature and ecology. These include species and habitat surveys, landscape design and construction as well as land management and maintenance. The Centenery Riverside Project in the Templeborough area of Rotherham (pictured) was designed and created by the Wildscapes team. Their clients include Sheffield Parks & Countryside, Sheffield Forgemasters, the Peak District National Park and various community groups. 11

12 4.8 Legal Structure What is your organisation s legal structure? A wide range of recognised legal forms are available to social enterprises, each with their relative merits. The results show that social enterprises in the region operate under a variety of legal structures, including shareholding structures, but almost twothirds of respondent organisations are Companies Limited by Guarantee over half of which have charitable status. Use of these traditionally voluntary/community sector legal structures perhaps partly explains the close overlap and routes to social IPS Other 6.8% 5.1% enterprise. Co-op/Mutual 2.6% Company Ltd by shares 3.4% Unincorporated 3.4% Just 13% of respondent organisations are Community Interest Companies. This is similar to the national picture where only 10% of social enterprises are CICs, despite this legal form being created specifically to suit social enterprises, with its emphasis on business activity for community benefit. CICs were only introduced in 2005, which may explain the relatively low numbers. Shareholding structures are represented in the sector through CICs (7 of the 15 CICs in this survey are limited by shares), companies limited by shares and Industrial & Provident societies. Companies Ltd by Shares are represented either by wholly-owned CLG 29.9% subsidaries of charities or by NewCos, which are multi-stakeholder enterprises. CLG with charitable status 35.9% CIC 12.8% Analysis by area of income generation shows that some social enterprise trading areas are more likely to choose a particular legal structure. For example 60% of health/social care social enterprises have charitable status and 50% of financial organisations are Industrial and Provident Societies. 87% of organisations concerned with Regeneration are Companies Limited by Guarantee. Footprint is a worker cooperative based in Leeds which provides printing services to the highest possible ethical and environmental standards. Footprint s founders chose a cooperative structure as they wanted to work and make decisions as a team without one single person in charge. Company membership is made up of five part-time staff. All the members are directors of the company and everyone gets the same rate of pay. The organisation operates a Social Fund as a method of investing profit in local community projects or campaign groups. 50p is allocated to the fund for every hour an individual works. Members can choose how to distribute their own portion of the fund with a formal collective decision required for large amounts. 12

13 4.9 Location Holderness Area Rural Transport (H.A.R.T.) aims to combat rural isolation by operating a door to door dial-a-ride community transport service for the Holderness area of East Yorkshire. The transport service is aimed at all that need it - from the elderly and disabled who cannot use other forms of transport, to people living in isolated villages who do not have a bus service available. H.A.R.T. faces the challenge of having to travel long distances between pick ups, often on single track roads in difficult weather conditions. These factors, and the small vehicles used, means each seat has a high cost attached. To combat this they use a lot of volunteers and also apply for funding where available. They have recently received a grant to create a post to assist with the recruiting of volunteers across the whole of the East Riding. Do you operate in a rural area? This question aimed to explore the geographical scope of social enterprise in the region and see if there were any patterns relating to rural and urban operations. 35% of respondents indicated that they operate in a rural area. Previous research demonstrates that social enterprises arise from social need so naturally predominate in urban areas where complex social needs are more prevalent. Yes 35.0% Market failure has become an increasing feature of rural areas where there is low demand and social enterprises have been formed to address this market failure and provide essential services. There are challenges associated with operating in, and trading with, the rural community. But there are a number of social enterprises in the region who have set up specifically to tackle rural isolation, one of which is highlighted on this page s case study. No 65.0% Interestingly the smaller businesses (between 10,000 and 100,000 turnover) were more likely to trade in a rural area 41% compared to 31% of businesses sized between 100,000 and 250,

14 4.10 Finance If you raised finance in the last year, where did you get it from? Access to finance, for example through grants or loans, is traditionally seen as vital to the success of a social enterprise. The results of this question to some extent bear this out, with 94 of 121 (78%) of respondent social enterprises revealing that they raised finance in the past 12 months. This does indeed suggest that this finance is crucial to helping social enterprises maximise their activities and social impact. But the figures do not prove that social enterprises are reliant on funding to survive, it may just be that they would be smaller and achieve less without it. It is also possible that some social enterprises take advantage of being able to attract grant funding relatively easily it makes economic sense for them to do so and means they can achieve more social outcomes. Grants are, understandably, by far the most popular source of funding, as they are the most financially attractive. It is clear that there are still opportunities for social enterprises to attract grant funding and, in general, raising finance is clearly very possible. It is worth noting that size is not a key factor in determining who raises finance and of what type as the respondents included organisations of all turnover categories. It is also clear that relationships between social enterprise and the public sector are well established with 57% of respondents receiving funding from this source. Bank overdraft 9.6% Other source 7.4% Personal loan 6.4% Share issue 4.3% Public sector funding 57.4% Bank loan 14.9% Loan from a CDFI 11.7% Donations 30.9% Grant 68.1% Respondents able to select more than one answer Humber Learning Consortium receives public funding from the Skills Funding Agency and the European Social Fund to deliver learning contracts. HLC are a managing agent for these funds and sub contract to a range of partners from the voluntary/ community, public and private sectors to deliver learning in deprived communities and to disadvantaged groups. Their awards have helped develop the capacity of organisations to deliver more learning and to deliver in the mainstream. HLC are currently delivering the Community Grants contract which is worth 2.4million of grants to the voluntary sector across the whole of Yorkshire and the Humber. 14

15 SEYH Social Enterprise Yorkshire and the Humber (SEYH) represents, promotes and connects social enterprise in the region. SEYH Ltd is a not-for-private-profit company limited by guarantee. Our members are social enterprises within the region. The Board of Directors is elected by the members at each AGM. SEYH exists to: Develop a Regional Network of social enterprises Provide a single information portal for social enterprise Represent the sector Lobby on behalf of the sector Undertake research on the needs and nature of the sector Help create new markets for social enterprise Raise public and institutional understanding of social enterprise Mainstream social enterprise within society 15