Having discussed the varying definitions, origins and forms of social enterprise, the discussion now turns to the current state of the UK social enterprise sector, i.e. the number of social enterprises thought to be active across the country. Given the lack of agreement over what a social enterprise is, it is, perhaps, to be expected that there is also disagreement over how many there are.
The most commonly cited figures for the number of UK social enterprises range from 55,000 to 70,000 (e.g. Addicott, 2011; Buckingham et al., 2010; Lyon et al., 2010; Sepulveda, 2015; Somers, 2013; Teasdale et al., 2013). These figures come from national business surveys commissioned by government. The most recent estimate provided by government claims there are 70,000 social enterprises in the UK (Cabinet Office, 2013). This is based on the findings of the 2012 Small Business Survey (Department for Business, Innovation & Skills [BIS], 2013b), which is a large-scale telephone survey of business owners and managers, commissioned by the BIS, with a sample size of 5,723. By grossing up the proportions classified as social enterprises to the ‘business population estimates’ (BIS, 2012), it was estimated that the total number of small and medium-sized9 (SME) social enterprise employers10 in the UK is 70,000, which amounts to 5.7% of all SME employers (Cabinet Office, 2013).
The definition used was almost identical11 to the one used in the Annual Small Business Surveys 2005 and 2007, which reported 55,000 and 62,000 social enterprises respectively (Buckingham et al., 2010):
1. The enterprise must consider itself to be a social enterprise
9 As defined in EU law, a small enterprise is defined as an enterprise that employs fewer than 50 people with an annual turnover and/or annual balance sheet that does not exceed EUR 10 million. A medium-sized enterprise is defined as an enterprise that employs between 51 and 250 people with an annual turnover that does not exceed EUR 50 million and a balance sheet that does not exceed EUR 43 million (European Commission, 2003a).
10 The total number of social enterprises (including organisations with no employees) is estimated to be 283,500.
11 Previous surveys stipulated that organisations should earn no more than 25% of income from grants and donations (Cabinet Office, 2013).
2. It should not pay more than 50% of profit or surplus to owners or shareholders 3. It should not generate more than 75% of income from grants and donations 4. Therefore, it should not generate less than 25% of income from trading
5. It should think itself ‘a very good’ fit with the following statement: ‘a business with primarily social/environmental objectives, whose surpluses are principally reinvested for that purpose in the business or community rather than mainly being paid to shareholders and owners’(Cabinet Office, 2013)
Thus, to be classified as a social enterprise, organisations had to, first of all, self-define as one, comply with criteria related to the distribution of profits and sources of income, and consider themselves a ‘very good’ fit with the much-cited, and arguably controversial, DTI definition of social enterprise.
Despite being described as the “best government data” (SEUK, 2011, para. 12) on the website of the umbrella body for UK social enterprise, the methods used to compile it, particularly regarding the interpretation of the DTI definition, have been criticised (Floyd, 2013; Lyon et al., 2010; Teasdale et al., 2013). This stems, in part, from the fact that as recently as 2003, official government-commissioned estimates suggested there were around 5,000 social enterprises in the UK (ECOTEC, 2003). This number grew to 15,000 in 2005 following a report published by IFF Research (2005), again on behalf of government, most likely due to the fact it included organisations with at least 25% of income earned through trading, unlike the ECOTEC (2003) survey that required more than 50% (Teasdale et al., 2013). This number is, however, still significantly smaller than the more recent estimates. The reason for these apparently high growth rates (Chell et al., 2010) is, according to Teasdale et al. (2013) and Floyd (2013), due to the varying methods used in collecting and reporting the data. Although all of these surveys used the DTI definition, the ECOTEC (2003) and IFF Research (2005) surveys only included CLG and IPS organisations, whereas the significantly larger estimates were based on organisations with any legal form (Buckingham et al., 2010). Teasdale et al. (2013) argue this was a deliberate attempt by UK governments (both New Labour and the subsequent coalition government) to artificially ‘inflate’ the amount of the social enterprises in the UK for political purposes.
However, there is no single legal or regulatory form for social enterprise (Price, 2009) and the CLG and IPS forms clearly “do not account for all forms of social enterprises” in the UK (Doherty et al., 2009, p. 41). Thus, distinguishing between social enterprises and non- social enterprises on the basis of legal form is problematic, particularly because some organisational forms, such as social firms and fair trade organisations, which are commonly
considered to be social enterprises, would be excluded (Lyon & Sepulveda, 2009). Despite this, the fact that the criteria regarding proportion of income from trading has been relaxed in more recent surveys does provide support for the argument put forward by Teasdale et al. (2013). Also, analysis of the 62,000 figure suggests that the vast majority (almost 90%) are organisational forms that have no restrictions on the distribution of profits, e.g. CLS (Floyd, 2013; Lyon et al., 2010). Of course, this does not necessarily mean that these organisations will distribute profits to shareholders but it does leave it entirely to their discretion.
The criteria used by these surveys can also be considered problematic because it requires a lot of interpretation on the part of the enterprise itself regarding: (i) distribution of profits, (ii) sources of income and (iii) whether it is a ‘very good’ fit with the DTI definition (Lyon & Sepulveda, 2009). However, using arbitrary ‘cut offs’ such as 25% or 50% of income through trading can exclude emerging or transitioning social enterprises that have aspirations to reach those figures but are currently unable to (Doherty et al., 2009). Although, as Teasdale et al. (2013) point out, not including cut offs allows organisations that do not have intentions of increasing their income through trading, but self-define as social enterprises for other reasons, e.g. due the ‘social desirability’ of being a social enterprise, to be included.
Another survey that estimated the scale of UK social enterprise, commissioned by the OTS and carried out by Ipsos MORI (2009), reported just over 8,000 active social enterprises across the country. Although the DTI definition was used, criteria included over 50% of income from trading (rather than the 25% required by other recent surveys) and the sample was restricted to charities, CLGs, IPSs and CICs, i.e. organisations legally obliged to have primarily social aims and restrictions on profit distribution (Teasdale et al., 2013). Although the rationale for this is clear, Lyon et al. (2010) point out that the sample frame excluded many CLGs and some CICs by filtering based on Standard Industrial Classification codes, which resulted in organisations providing environment, recycling and transport services being excluded – no explanation for this was given. This likely could have excluded genuine social enterprises, given that many have explicit environmental aims (Doherty et al., 2009).
Within Greater Manchester (GM), comparatively few surveys have been conducted. This may be due to the fact that the difficulties associated with national mapping exercises also apply to those conducted at regional level (Buckingham et al., 2010). Nevertheless, an early attempt was made by the North West Regional Development Agency in 2003 and was followed-up, three years later, by the Centre for Local Economic Strategies [CLES] (2006). CLES identified 141 social enterprises coming in a variety of organisational and legal
forms12. While these data provide valuable insight into the GM social enterprise sector, whether they still provide an accurate picture of it is questionable given they were collected 10 years ago and are, therefore, likely to be ount of date given the significant changes the UK economy has seen during that period (e.g. the economic recession of 2007-2008).
Evidently, there is, as Lyon & Sepulveda (2009) point out, considerable confusion and a lack of clarity regarding the process of mapping social enterprise. Thus, the true scale of social enterprise in the UK is a matter of debate. It is apparent that more recent surveys (except Ipsos Mori, 2009) have less stringent criteria and do not insist on particular legal forms – possibly for reasons of political expediency. This could allow organisations that, despite not meeting these criteria, self-define as social enterprises. While this might be considered problematic, it is clear that social enterprise ‘status’ cannot be reduced to legal structure and the use of arbitrary cut offs could plausibly exclude many genuine social enterprises. As such, notwithstanding its limitations, the 70,000 estimate is, perhaps, the best available as it does not exclude organisations on the basis of legal status, and uses the DTI definition that comprises the two core characteristics of social enterprise (social aims through trade) identified by Peattie & Morley (2008). However, while its less stringent criteria have advantages, they do, arguably, leave room for ‘co-option’ of the social enterprise label by private enterprises (Roy & Hackett, 2016; Teasdale et al., 2013). Therefore, it is far from perfect.