Crash helmets on: UK impact leaders hold COVID-19 talks – as Budget fails to recognise ‘untapped potential’ of social economy

UK impact investors were conference-calling today to explore how to ease pressure on social entrepreneurs and their communities as the COVID-19 situation unfolds.

Measures such as capital repayment holidays for social enterprise investees were being mooted, which would involve backing from the UK’s big wholesale funders, such as Big Society Capital, Access Foundation and the National Lottery Community Fund.

The move follows the UK Government’s Budget announcements this week, which one foundation described as “lots on surviving, little on thriving”.

In a blog on the Budget, Kevin Armstrong, policy lead at UnLtd, the Foundation for Social Entrepreneurs, said many would feel reassured by the UK Government’s “blank cheque” for the NHS – but “the announcements for present and prospective social entrepreneurs were less positive”.

Armstrong said social ventures “were likely to be amongst the first to feel the effects of Coronavirus – most have fewer than 10 employees, and most trade with the general public – yet the total number of mentions of social enterprise in the Treasury’s 121-page Budget was zero”.

Social ventures are likely to be amongst the first to feel the effects of Coronavirus – yet the total number of mentions of social enterprise in the Treasury’s 121-page Budget was zero.

He added: “There was also no hint of policy reform that could benefit social entrepreneurs. For instance, no update was given on social value procurement at national level, and no improvement on pre-election plans for social care spending was offered.

"Despite all the spending announcements, the 2020 Budget fails to fully unleash the potential that social entrepreneurs can bring. Quite simply, this Government must utilise the UK’s present and prospective social entrepreneurs if it is to honour its promise to ‘level up’ Britain. Post-Coronavirus, we’ll hope to see the Government untap the solutions that people have to the social and environmental challenges that will otherwise persist."

Measures for tough times ahead

Measures that could help social entrepreneurs steer their ventures through the tough times ahead included:

• A ‘Coronavirus Business Interruption Loan Scheme’ will support businesses to access bank lending and overdrafts of up to £1.2m in value.
• A dedicated COVID-19 HMRC helpline will guide businesses and self-employed individuals in financial distress and with outstanding tax liabilities to receive support with their tax affairs.
• Statutory Sick Pay (SSP) will be extended to those advised to self-isolate, those caring for others who self-isolate, and to those who cannot claim SSP who are in the welfare system.
• Businesses on Small Business Rate Relief (SBRR) or Rural Rate Relief will be able to seek £3,000 in small business grant funding from their Local Authority.
• Business rate relief for the retail, leisure and hospitality sectors will temporarily increase to 100% in 2020-21.

Elsewhere in the Budget, the Chancellor also announced a £650m fund to help end homelessness.

Ben Rick, Managing Director of Social and Sustainable Capital (SASC), described housing as “one of the defining issues of our times” and said the £650m was a positive step. SASC’s Social and Sustainable Housing fund, launched last year, aims to create a new raft of charity landlords who can prevent homelessness.

Ed Siegel, Chief Executive of Charity Bank, also said the fund was “a step in the right direction” but added that it “must be invested wisely to address the manifold causes of homelessness”, which affects more than 300,000 people in the UK.

“Fixing the UK’s homelessness problem isn’t just about getting people off the streets,” he said. “While £650m isn’t a sum we should turn our noses up at, and the mantra that ‘everything helps’ rings true, in order for such investment to have a lasting effect, we need to work together to build more homes, increase employment opportunities, invest in mental health services, strengthen our social ‘safety nets’ and create communities where people can thrive.”

Siegel said the bank was also hoping to see increased funding for local authorities in the Budget, to support the work carried out by many of the bank's social enterprise and charity customers. It was also important to know what would replace the loss of European funding to support the social economy in disadvantaged areas.

Base rate blow

Alongside the Budget itself, Charity Bank was also delivered a sucker punch by the Bank of England, which dropped its base rate this week from 0.75% to 0.25%. Siegel described the move as “not the most pleasant surprise for us as a bank”, given that it is looking after tens of millions of pounds in deposits from savers, to whom it would be hard for the bank to pass on the full drop in income.

Charity Bank made “a sizeable net profit” in 2019 – having made a loss of £0.6m the previous year. But the rate decrease this week may also impact on the bank’s ability to leverage depositors’ savings as lending to charities and social enterprises. Over the past five years, Charity Bank has been able to more than triple its drawn loans from £54m at the start of 2015 to £179m at the end of 2019.

Siegel told Pioneers Post he was due to join the call today with other UK social investors.  “As a lender to the sector we are getting together with a number of other social investment intermediaries to talk about how we might form a collective view on how we should support those who might be affected by the virus,” he said. He added that the bank has started to look at whether specific sectors in its portfolio of borrowers that were particularly affected – for example, enterprises where there was a great deal of footfall, such as the retail sector, or organisations such as care homes where infections could affect both residents and staff numbers.

We’ve reached the limits of what we can achieve with the old ways of doing business, we need to look to the future.

Peter Holbrook, CEO of Social Enterprise UK, described the Budget as “underwhelming”. He said the short-term support offered to businesses to cope with a downturn in trade due to Coronavirus was welcome – but it was "important that government promotes these to social enterprises" as well as the rest of the private sector.

More broadly, Holbrook agreed with the Chancelloron the need to unleash the potential of business. "But the Chancellor must see that the most untapped potential is in social enterprises and responsible business, rather than continuing to reward business as usual,” he said.   

“We’ve been here before,” Holbrook added. “Every new government over the past few decades, has sought quick fixes through spending splurges or deregulation hoping to open the flood gates of investment and spread growth across the country. But even by their own figures, growth in the UK is predicted to be anaemic over the coming five years.

“We’ve reached the limits of what we can achieve with the old ways of doing business, we need to look to the future. The pressing climate emergency makes this even more vital and I hope that once the short-term challenge of the Coronavirus has passed, this Government will work with social enterprises to build a new economy that works for people and planet.”

Pictured above: Adrenaline Alley Skate Park, in Corby, Northamptonshire, was just one of 38 Follow the Money visits by Charity Bank last year to see how Charity Bank savers' money is used for good. Adrenaline Alley was set up to provide kids with a safe place to skate and is now Europe’s largest urban sports centre attracting enthusiasts and professionals from across the world.  In 2015 the social enterprise received a loan from Charity Bank to enable them to buy their 5.9-acre site. Photo courtesy of Charity Bank.