Community enterprises are working hard to improve outcomes for health and wellbeing in local areas around the UK. But how are they achieving financial security?
Throughout the country, local people are working together, tackling challenges and seizing opportunities to improve their own communities. Projects undertaken by locally-rooted, grassroots groups have residents’ interests at their core and can be crucial to prosperity and wellbeing. Hyperlocal neighbourhood teams, places of worship, voluntary groups and charities all play their part in connecting people and places. However, non-profit organisations are not alone in their mission of championing local areas. Increasingly, community businesses are being recognised for their sustainable characteristics, enabling them to get things done through commercial action.
These locally-rooted, community-controlled bodies trade like regular businesses but operate entirely for the benefit of the communities they serve. Their objectives are manifold, responding to distinct local needs, such as the provision of skills-training, reviving local assets, protecting cherished services or tacking rural isolation and urban deprivation.
Research undertaken in 2019 by the Centre for Local Economic Strategies (CLES), highlights the importance of community businesses, particularly within deprived communities, noting how they ‘actively develop social capital, thrive where others cannot and strengthen community resilience’. The study points to the creation of improved areas, with a true sense of positivity and pride wherever community businesses flourish.
Examples of community businesses include libraries, shops, farms, pubs and community centres, where childcare, health and educational services are offered. Local residents are formally involved in their day-to-day operations and are often afforded legal ownership. In all cases, profits generated through these entities go towards delivering positive and measurable local enhancements.
Operationally, community businesses function in a similar way to social enterprises. Both structures undertake social activities and, unlike commercial businesses, reinvest their income in the business, with no requirement to generate profits for shareholders. The element which sets community businesses apart from social enterprises is their accountability and emphasis on a particular setting. Area-focused enterprises stimulate the labour market and trading environment. At the same time, they demonstrate an inclination towards local employees and suppliers, thereby significantly enhancing the surrounding economy.
‘Community hubs’, like village halls and drop-in centres, are the most dominant form of community business in the UK. They facilitate service delivery across a range of areas, enabling stakeholders in neighbourhoods to join forces, addressing the issues that matter most to them. New community hubs are set up in partnership with local authorities and are usually built on donated land. In some areas, community businesses nominate disused buildings to be included in their local authority's Assets of Community Value (ACV) register, enabling them to be purchased at a fraction of commercial market rates.
Community business experience a diverse range of barriers and there are many factors influencing their success. In December 2019, Power to Change – an independent charitable trust working to support and grow community businesses – produced a report on the state of the community business market. Focusing on the results of an annual survey undertaken by CFE Research, the latest report estimates there are around 9,000 community businesses operating in England alone – 46% of which are community hubs or village halls.
Innovation among community businesses is a key area of interest, with 56% planning to develop new products and/or services in the coming year. The top five ‘most important’ types of business support for the sustainability of community business have been identified as:
Those who anticipate a positive outlook to their operations in 2020 cite access to funding as one of the main reasons for their confidence, with many having already secured grants to cover the year ahead. Others believe they will remain partially self-sustaining, through continued use of their services. This can be apportioned to feedback received from service users about the value they ascribe to the provision of services and the ethos of reinvesting profits to improve their ongoing delivery.
Those feeling less confident about their financial outlook are concerned about grant opportunities reducing in or closing altogether, coupled with uncertainty around the availability of alternative funding sources. Many community businesses are seeking finances to maintain their existing activities or to expand by taking on more paid employees, reaching more customers or acquiring new assets.
Most community businesses provide a range of services, dictated by the needs of their communities. Because of their commercial nature, some generate the majority of their own income through trade; selling produce, generating energy or renting out space in their premises. Those less adept at trading – by virtue of their early stage of development – rely on a blend of income sources and will inevitably turn to volunteers, sponsorships and donations in order to function. Others may be commissioned by local government to provide services on their behalf – a model that involves a direct funding flow from the authority to the community business, by way of a tender or contract arrangement.
More than four in five community businesses surveyed for Power to Change have accessed grant funding in the last year, with around a third of their total income coming from grants; the remainder through trading or other sources of finance. However, there has been a reduction in the proportion of community enterprises deriving the majority of their income from grants – 33% in 2019 compared to 39% in 2018. More than a quarter have obtained less than anticipated from grants and more than expected from trading and contracting.
Whilst challenges associated with obtaining grants remain a concern, many community businesses anticipate an uptick in achieving grant income over the coming year, with 54% expecting to secure more non-repayable funds in 2020.
Having a legal status similar to charities and community interest companies means that community businesses can access more finance options than many other types of business. However, the short-term nature of most grant programmes clearly remains a concern for the sector. With that in mind, community businesses would be wise to revisit and evolve their strategies for sustainability, encompassing a varied mix of income sources. This may include offering new products and chargeable services, expanding into new sectors, moving online or diversifying their current portfolio of activities.
GRANTfinder features over 2,000 funding programmes for which community businesses may qualify, with some schemes entirely dedicated to the sector, including: