Devolution could boost social investment market

Devolution could boost social investment market

Andrew Mitchell, chairman of the North East Social Investment Company, explains how social enterprises can ease pressures that have been growing on key public services.

The devolution agenda and pressure on public sector budgets could offer real opportunities for social enterprises in the North East - businesses that in fact could provide an engine for growth in the region.

How? The social investment market is growing across the UK. It has increased by 25% over 12 months. Social enterprises can provide innovative ways of delivering crucial services to society. They generate economic benefits, create jobs and make profits while also delivering social impact and outcomes. It’s this marriage of economic and social benefits that’s now being hailed as an exciting solution to some of the challenges faced through the contraction of funding for local authorities. North East Social Investment Company (NESIC) has been set up to help stimulate the market for social investment within our region, to create social change and help create a climate in which it can thrive.

NESIC has appointed Northstar Ventures to manage its first fund, the £9m North East Social Investment Fund, which has already supported two social investments in the region. The first was the Fair Chance Fund, focused on providing accommodation, training and counselling for vulnerable young people. It has so far helped 160 youngsters through the project operated by Home Group.

The second provides funding for the Sunderland based Substance Misuse Recovery Service, which has a project to prevent offenders relapsing into drug and alcohol misuse. This is being run through the charity Achieve with North East Engagement into Recovery from Addiction.

The North East Social Investment Fund was established in partnership with Northern Rock Foundation, Big Society Capital and the Esmee Fairbairn Foundation. The financial input being made in social investments isn’t just about social enterprises scaling up; it’s also about how social investment can play a part in the delivery of central and local government services.

In the face of challenges to funding and the devolution agenda, we need to be innovative and intelligent in the delivery of services in fields such as health and social care. Social enterprises are well placed to do this; we want social enterprises to help transform the landscape.

There’s huge opportunity to shift how public services are delivered - through a different ownership model that the public will trust. We’re looking at businesses that are experts and specialise in particular services, but that are also entrepreneurial while maintaining their commitment to delivering social benefit.

Social enterprises owned by the public sector, in general, are subject to too much red tape, and they aren’t able to be enterprising enough. If they’re passed to the private sector the pressures on them to make a profit can at times mitigate against their social objectives.

Social investment models can offer the best of both worlds, with ownership structures which reflect the interests of all stakeholders and cannot be bought out by large multinationals.

Social enterprises are set up in a number of different ways, including co-operatives and mutuals. But the themes underpinning the businesses remain the same. They’re not private companies that can be bought or sold; they’re the property of the staff and the stakeholders. While delivering social impact, they’re also established on a sound entrepreneurial foundation. Staff are rewarded and profits generated to plough back into the business.

The North East Social Investment Company will be lobbying to raise awareness of the benefits of social investment. It will work to ensure organisations understand how they can benefit from funding through the North East Social Investment Fund, and will give information or mentoring about how to become social enterprises.

In many cases social enterprises could achieve greater social impact if they were able to expand existing goods and services, take up new opportunities and reach scale. To do this, they need access to the finance they require. Social investment – that’s what NESIF can provide, and that’s what we believe will help transform the delivery of services in the next 10 years.

Northstar Ventures is a North East venture capital company investing in successful high-growth SMEs and social sector organisations across the North East. It is authorised and regulated by the Financial Conduct Authority. The North East Social Investment Fund is one of the funds it manages. This fund invests in social enterprises with individual investments ranging from £100,000 to £1m.