Is it possible for Social Enterprises to thrive post the UK elections?

With the dust of the UK national election beginning to settle, now is a good time to look ahead and explore the possible consequences of the new conservative government for the UK social enterprise sector.

With the dust of the UK national election beginning to settle, now is a good time to look ahead and explore the possible consequences of the new conservative government for the UK social enterprise sector. To appreciate these consequences, let us revisit 2010, when the rhetoric of 'The Big Society' played an important role in the electoral campaign of the Conservative Party. 'Big Society' was put forward largely as an alternative to government provided social services ('big government') and can be broken down into three courses of action: (1) an emphasis on volunteering, (2) the devolution of government power to local authorities and communities realized through the Localism Act (2012), and finally, (3) extensive support for voluntary organisations, charities and social enterprises. The third course of action led to the creation of the Big Society Bank (Big Society Capital) as well as the 'opening up' of public service delivery for social enterprises (via the Social Value Act (2012)[i]).

The second and the third course of action under The Big Society agenda were of particular interest for the social enterprise sector, but they proved difficult to realise simultaneously. The increased responsibilities for public service delivery devolved to local authorities coincided with significant spending cuts in autumn 2010 – aimed at reducing the public expenditure deficit by 2014. This meant cuts of government grants to local authorities by 23% to 46%[ii], leaving local authorities with increased responsibilities for public service delivery but fewer funds to live up to these responsibilities. The Localism Act was intended to encourage local authorities to be creative and innovative in delivering public services - with social enterprises in mind as potential commissioning partners1. However budget pressures meant that local authorities ended up commissioning to large private companies instead of 'experimenting' with alternative ways of service delivery. Any additional funds earmarked to support the social enterprise sector quickly fell victim to the spending cuts. As for Big Society Capital, a recent report[iii] suggests that despite its potential, it has not been functioning much differently than a regular bank, and that it still needs to prove its added value for the social enterprise sector.

The miraculous disappearance of social enterprise from the 'Big Society'? 

The Big Society occupied much less space in the 2015 conservative election campaign manifesto. Although the manifesto contained pledges to encourage volunteering, a continuing commitment to the implementation of Big Society Capital as well as to expanding the National Citizen Service – social enterprises were largely absent. The only mention of social enterprise was in relation to the Work Programme[iv], which it claimed had commissioned extensively to social enterprises and charities, increasing the profile of the sector. A closer look, however, reveals that the prime providers of the Work Programme have been large organisations, a significant share of which comes from the private sector and are owned by large international recruitment companies[v]. The current mode of public service delivery thus seems to be one of 'tried and trusted' partnerships with large corporations instead of experimentation and engagement with social enterprises. Further future spending cuts of £15bn to £20bn pledged by the new government[vi]are unlikely to encourage public service commissioners to diverge from this pathway.

With much of the Big Society rhetoric and additional support for the social enterprise sector gone from the political agenda, the overall outlook for the sector is rather bleak. 

Yet, there is potential for social enterprises to benefit from the commissioning of large government programmes if they are included in the supply chains of the prime providers –social enterprises can emphasize their competences in delivering social value. There are also opportunities for social enterprises to exploit their networks and bid for commissioning in consortia. In addition, local authorities can play an important role by commissioning smaller contracts to social enterprises, which typically operate in an embedded way in their local communities. However, with the projected spending cuts, local authorities are likely to need further incentives to include social enterprises in their procurement. An example is the Scottish Government's sustainable procurement duty implemented in its Procurement Act (2014). It obliges contracting authorities to consider how their procurement affects their local area economically, environmentally and socially. This duty explicitly promotes experimentation in public service delivery, includes third sector organizations and plays to the 'local strength' of social enterprises. A redesign of the Social Value act in line with the Scottish Procurement Act would arguably be an effective way of supporting social enterprises.

There are further reasons and ways of strengthening the social enterprise sector under the current government as part of the Big Society agenda – and importantly as part of regular enterprise, SME and innovation policy to spur economic growth.

This would allow the UK national economy to harness the strengths of the social enterprise sector - such as the high rates of radical innovation by social enterprises[vii] and the well-documented spillover effects of a thriving social enterprise sector on business start-ups[viii]. Last but not least, social enterprise has the potential to re-engage young people with economic issues. At Aston and internationally, we see rising student interest in social enterprise – often by students from majors and backgrounds who would typically outright dismiss entrepreneurship and business as career options for them. Our research finds that social enterprise is a way into business entrepreneurship especially for these groups.

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[i] The Public Services (Social Value) Act (2012) intended to stimulate the commissioning of public services to organisations that created social value –it did not define social value and was not compulsory.

[ii] Institute for fiscal studies briefing note BN166,

[iii] The Report of the Alternative Commission on Social Investment:

[iv] The Work Programme is a UK-wide payment-for-results welfare-to-work programme launched in 2011.

[v] Work Programme: contract package area and prime providers

[vi] The Conservative Party manifesto 2015,

[vii] See e.g.,

[viii] Estrin, S., Mickiewicz, T., & Stephan, U. (2013). Entrepreneurship, Social Capital, and Institutions: Social and Commercial Entrepreneurship Across Nations. Entrepreneurship Theory and Practice, 37(3), 479–504

New research outlines the ingredients for a successful ‘Big Society’

Copenhagen, Denmark

Copenhagen, Denmark

Research disproves the theory that reducing government support will boost social enterprise. A recently published 'Institutions and Social Entrepreneurship' study by academics from Aston Business School, EDHEC Business School, and the University of Sheffield Management School identifies why some countries are better than others at fostering social enterprise.

The Global Entrepreneurship Monitor (GEM) ranks Denmark number one for social entrepreneurship activity[1]. The study sought to identify the secret of Denmark's success and what other countries, such as the UK, could learn from its example. The authors analysed 26 countries to identify the relative importance of a range of economic, institutional, cultural and social measures in encouraging greater levels of social entrepreneurship.

These included:

  • the level of active government support, i.e., the extent to which the government formally redistributes wealth through progressive tax structures and welfare spending[2]
  • the level of so-called 'post-materialist values' among individuals, i.e., the extent to which individuals feel willing and empowered to take action for the benefit of society[3]; and
  • socially supportive culture, i.e., the strength of informal networks in the wider community[4]

The results of the analysis demonstrate that it is a combination of these three factors, not any one factor alone, that best encourages social enterprise activity. However, active government support is crucial: Without this support it is unlikely that individuals and communities can mobilise to fill the gap.

Key findings:

Seven out of the top ten countries for social entrepreneurship also top the list for strong social entrepreneurship support, e.g., a local culture and government that endorse such activity, as illustrated by the table below.

Top 10 countries for social entrepreneurship activity (GEM)

  • 1. Denmark
  • 2. Argentina
  • 3. Finland
  • 4. UK
  • 5. Slovenia
  • 6. United States
  • 7. Israel
  • 8. France
  • 9. Greece
  • 10. China

Top 10 countries for social entrepreneurship support[5]

  1. Denmark
  2. Italy
  3. Netherlands
  4. Finland
  5. United States
  6. UK
  7. Switzerland
  8. France
  9. Slovenia
  10. Israel

Study highlights:

  • Denmark, France, Italy, the Netherlands and Israel rank highest for government support
  • Switzerland, Italy, the UK, US and Argentina rank highest for post-materialist values among individuals
  • Malaysia, Iran and Russia rank amongst the top five countries for having a socially supportive culture but have relatively low levels of government support. This can explain why these countries rank lower for social enterprise activity (25th, 19th, and 24th, respectively)

Compared to other nations, the UK relies more heavily on individuals to drive social entrepreneurship activity, based on a relatively high ranking for post-materialistic values amongst its citizens (3rd) and less favourable rankings for government support (10th), and socially supportive culture (17th).

Ute Stephan, Professor of Entrepreneurship at Aston Business School commented: “Broadly speaking there have been two schools of thought about the extent to which government encourages or stifles social entrepreneurship. Some feel that too much support removes the demand for social enterprise while others have taken the opposite view – that social entrepreneurship must have institutional support to survive.

“Things are never so black and white, but the importance of a supportive climate may explain some of the challenges facing the UK's Big Society initiative, despite the UK's strong post-materialist values. Cultivating such an eco-system is likely to be a longer term process. It is also a process that spending cuts and rising social inequalities in the UK likely undermine".

Lorraine Uhlaner, Professor of Entrepreneurship at EDHEC Business School concluded:“Our study highlights that the additional demand for social enterprise created when there are radical cuts in the state sector, such as those seen in many countries in response to the global economic crisis, do not translate into higher social entrepreneurship activity.

“Social entrepreneurs need to feel supported both by the government and the wider community to be able to realise their aims, which is why countries like Denmark perform so strongly. Private individuals and groups, if they collaborate and support each other, can make a difference but will only thrive with effective government support".

[1] Global Entrepreneurship Monitor (2009)

[2] Analysis of information on government activism (2008) based on a model developed and validated by Aidis et al.(2012)

[3] Based on World Values Survey (2010)

[4] Based on GLOBE cultural practices data (1995-1997)

[5] Includes all three measures plus GDP performance rankings