Social enterprise start-ups blossom

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An “explosion” of social enterprise start-ups is being driven by a new generation of public-spirited entrepreneurs, according to research that will boost the government’s Big Society aspirations.

Social Enterprise UK, the body set up to promote social ventures, says 62,000 new businesses are operating in Britain, many in the most deprived communities.

A snapshot of the state of social enterprises has found that there are three times as many social-purpose businesses operating in the country’s poorest areas as mainstream companies. Social enterprises also have a higher start-up rate, as more than 14 per cent of such ventures are less than two years old compared with 4 per cent of conventional small businesses.

The findings, in a report released on Thursday by Social Enterprise UK, suggest social ventures are more than twice as likely to have recorded growth last year.

Peter Holbrook, Social Enterprise UK chief executive, said: “We’re seeing a new generation of social enterprises being created during these incredibly difficult economic times and in the communities where they’re desperately needed.”

The findings come as the government is working to increase the number of social enterprises as part of its Big Society agenda, vigorously promoted by Cabinet Office minister Francis Maude, to devolve power to communities.

However, research from Southampton university suggests deprived areas still have some way to go before they are well served by Big Society-style organisations. Its report found there were notably fewer third sector bodies – charities, voluntary groups and social enterprises – per head in more deprived areas.

Professor John Mohan, at the University of Southampton, said: “There’s a broad contrast between rich and poor areas in the distribution of third sector organisations. Richer communities might do well out of some of the Big Society ideas, and poorer communities might not.”

While most social enterprises trade directly with the public, ministers are keen to encourage more enterprises serving the public sector as part of government reform plans.

That is happening most strongly in the healthcare sector, where the number of social enterprises has grown by more than 25 per cent in the past couple of years. “We are now seeing an exponential increase,” said Mr Holbrook.

As many as 6,000 social enterprises are now delivering health and social care services for the National Health Service in a sign that social entrepreneurs are spotting opportunities in public sector reform.

So far 61 groups of former NHS staff have either started mutual or social enterprises spun out of the health service or are in the process of doing so. Mr Holbrook says the number who have decided to leave is as high as 80.

However, a report from the King’s Fund health think-tank released on Thursday says many are struggling to get going. “The reality lags behind the rhetoric of creating the largest social enterprise sector in the world,” it says.

Andrew Laird, a former management consultant, believes the increase in social-purpose companies will be so strong that, along with two fellow consultants, he set up Mutual Ventures to advise fledgling social enterprises.

But he adds that many would-be social entrepreneurs need business advice. “They are often fantastic frontline professionals but very few of them have put together a proper business plan.”

Social Enterprise UK has warned that planned NHS reforms to allow GPs to take over commissioning could lead to services being chosen on price rather than quality, while some fear the trend could lead to the privatisation of public services by the back door if such ventures are not properly protected.

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