Finance · 24 May 2017

Social enterprise sector registers almost £1bn profit as startup presence grows

Social investment
Average turnover for social enterprises under three years-old was £634,000

Entrepreneurs in the UK’s social enterprise sector generated almost £1bn profit in 2016, according to the country’s largest study into community-minded businesses.

NatWest’s SE100 report, the widest survey of the UK’s social enterprise sector, used data from 2,120 ventures contributing total turnover of £8.5bn to the economy.

The findings revealed an industry in considerably good health, with growing businesses seeing significant success.

Figures showed average year-on-year growth for the 100 fastest growing enterprises at 932 per cent in 2016. Community-focused businesses were also 20 per cent more likely to register a profit than a loss.

Mark Parson’s, NatWest’s head of community finance and social enterprise said the index confirmed the sector was “growing in both strength and maturity.”

“As social enterprises continue to make a sustainable social impact to both disadvantaged and marginalised groups, [founders] should feel buoyed by the positive news that year-on-year growth in turnover for established enterprises was 61 per cent,” Parsons said in a statement.

Looking more closely into the make-up of the sector, some 84 per cent of all businesses were considered micro, small or medium enterprises.

However there was a significant startup presence. Over a third of the entire social enterprise sector were micro enterprises employing under ten employees.

For social enterprise startups under three years old, the average turnover was £634,000. Enterprises into the tenth year of business had average turnover of £8m.

“Whilst the average social enterprise is small, together they pack a significant punch,” Parsons added.

Job creation Britain’s job market has also begun to benefit from the growing sector. The average enterprise employed 21 staff members.

Commenting on the survey, Nick Hurd, government minister for civil society, said the figures showed “phenomenal growth which will boost confidence in the sector and open doors to private finance”.

Despite the strong economic output and job creation, unpredictable revenue was cited in the study as a considerable challenge for the sector.

Social enterprise startups receiving a large grant could see significant turnover in that year but then see a dive the next year, generating a volatile figure.

Ventures under three years-old registered turnover ranging from 12,000 per cent growth to a decline of 89 per cent.

Find out why social enterprises encounter barriers when accessing finance

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Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.