Exclusive: Fears for social entrepreneurs in Britain as Brexit looms large
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A Union flag flies next to the flag of the European Union in Westminster, London, Britain June 24, 2016. REUTERS/Toby Melville/File Photo
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By Astrid Zweynert
LONDON (Thomson Reuters Foundation) - Britain's role as a pioneering country for social entrepreneurs could suffer as it prepares to leave the European Union after decades of the government actively promoting business leaders seeking to do good, experts said.
A Thomson Reuters Foundation poll of experts in the world's 45 biggest economies ranked Britain third after the United States and Canada as having the best environment for entrepreneurs using businesses to help tackle social problems.
From The Big Issue newspaper sold by homeless people and ecotourism attraction the Eden Project to Divine Chocolate, a company co-owned by cocoa farmers in Ghana, Britain's social enterprise sector has grown rapidly in 20 years.
Britain launched a social enterprise strategy in 2002, the first social impact bond in 2010, introduced social investment tax relief and brought in a law in 2013 calling for all public sector commissioning to factor in social value.
But economic uncertainty after Britain's decision to leave the EU poses significant financial and operating challenges for the sector, said Peter Holbrook, chief executive of Social Enterprise UK, a membership organization for social enterprises.
"While there is no blueprint to know what will happen after Brexit we can expect there will be less government support, financially and in terms of policy, because there will be some economic contraction," Holbrook said.
The Thomson Reuters Foundation poll, carried out in partnership with Deutsche Bank, the Global Social Entrepreneurship Network (GSEN) and UnLtd, foundations for social entrepreneurs, found Britain came seventh when experts were asked if government policy supports social entrepreneurs.
South Korea, Singapore topped the list with France tied with Chile in third place followed by Canada and the United States.
In Britain government records identify about 70,000 social enterprises - loosely defined as ventures combining business with social purpose - employing nearly one million people.
But leaving the EU could bring new challenges such as delays on public sector contracts - a source of income for larger social enterprises - and social businesses may find it harder to borrow money amid financial uncertainty, Holbrook said.
In Britain, as elsewhere in the world, public funds have come under increasing pressure from shrinking economic growth, making governments more aware of the potential of social enterprises to promote a more equitable and sustainable society.
Nigel Kershaw, executive chairman of the Big Issue Group, said the sector had grown since the 1990s out of co-operatives and community enterprises wanting to use business to create social change.
Growing demand from the government to buy services from charities has also boosted the sector, Kershaw said, a factor he said he expects to continue despite Britain's EU exit.
The poll found that selling to government was one of the main challenges faced by the growing sector.
The Big Issue, one of Britain's best-known social enterprises, was formed in 1991 as a business solution to a social crisis and inspired street papers in more than 120 countries.
"It's about finding sustainable business solutions that are making a difference to people's lives throughout the U.K. in a time when we need a more innovative way of doing business," Kershaw said.
But despite Britain's leadership on social entrepreneurship, experts in the Thomson Reuters Foundation poll ranked Britain only 27th when asked if social entrepreneurship was gaining momentum, while Canada and the United States ranked top.
Experts said the sector could be impacted if the new government of Theresa May does not provide the same level of support enjoyed by social entrepreneurs in the past two decades.
A decision to move responsibility for the sector from the Cabinet Office - a department at the heart of government - to the Department of Culture, Media and Sport set alarms bells off.
"There is a danger that the needs of social enterprises, social investors and mutuals will be sidelined," Holbrook said.
Britain's model of government support for social enterprise has caught the attention of other governments, aware of the power of using business to help social problems, experts said.
In Malaysia - which came 9th in the overall ranking and 10th when it came to government support - Prime Minister Najib Razak last year allocated 20 million ringgit ($5 million) to boost the number of social enterprises to 1,000 by 2018 from around 100.
As part of the plan it set up the Malaysian Global Innovation and Creativity Centre (MaGIC) which provides training in setting up a business, how to access funding and networking opportunities, along with competitions and outreach.
"It's been a tremendous help to get this type of government support," said Su Seau Yeen, founder of Simply Cookies, a social enterprise based in Kuala Lumpur that trains single mothers to bake in a kitchen where they can bring along their children.
By contrast Australia ranked 36th on government support with experts saying the sector needed coordinated government support.
"It's a hot-button issue right now and there is a strong sense that there's not a lot of government support," said Jo Barraket, a professor and director of the Centre for Social Impact at Swinburne University of Technology in Melbourne.
($1 = 0.7769 pounds);($1 = 4.0050 ringgit)
(For the full results of the 2016 poll on the best countries for social entrepreneurs go to poll2016.trust.org)
(Reporting by Astrid Zweynert; Additional reporting by Pauline Askin in Sydney; Editing by Belinda Goldsmith; Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, which covers humanitarian news, women's rights, trafficking, property rights and climate change. Visit news.trust.org to see more stories)
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