SECTION 2 | A FAIRER ECONOMY

Community businesses contribute to fairer local economies through operating, trading, and partnering locally. Compared with the private sector, a higher proportion of what they spend stays in their local community,[1] and their trading income is invested in developing and delivering more services and facilities for local people.  

Often operating in areas of high disadvantage, social exclusion, and economic inactivity, they support financial inclusion and employability where it is most needed. 

They provide sustainable work for local people and build skills through volunteering opportunities, making a much-needed contribution to the prosperity and prospects of their local areas and the people living there. 

Community businesses typically operate with a hybrid business model, financing the development and delivery of facilities and services with a mix of grants (84%) and income from trading (83%).  

Base sizes = 1,015.

Grant funding can help maintain services while trading contributes to sustainable development and growth. Although the average annual community business income reported for the financial year preceding the survey is £264,000, larger high-turnover operations tend to skew the average upwards. A more meaningfully representative measure is the median income, which was £108,000 (a 17% decrease from £130,000 last year).  

Trading plays a key role in the community business model and 83% of those providing financial information in the survey earned income in this way. The average reported trading income for the financial year preceding the survey (2021/22) was £157,000. Again, larger organisations affect the average, and the median was £34,000. 

Base size = 1,015.

In last year’s survey (financial year 2020/21), the reported median was £50,000, and in 2019/20 it was £63,000. While median trading income has nearly halved since the pandemic, we are cautious about drawing direct conclusions given the significant change in the size of our survey sample over a similar period.

You cannot solely rely on grants for income. You cannot solely rely on grants for income. I’ve got three things generating [income], the garage generates money, the men’s shed and furniture project generates money, and the transport generates money. So, they’re my three things, that’s what we were told, get your grants in but you also need to start looking at what else is going to generate your income.  

Hour Community

Overall, 84% of survey respondents receive grants, with an average grant income of £99,000 and a median of £32,000. Grant income has fluctuated since 2020, and may have been playing a more important role in community business finance since the pandemic.

Base sizes vary between 312 and 1,015.

Community businesses are continually adapting their business models to respond to emerging challenges. In the research interviews, some mentioned increasing or diversifying trading activities to gain extra revenue to cover increased costs and build resilience. For example, one community farm offered corporate customers the opportunity for their employees to visit the farm as part of team–building and therapeutic exercises. Their intention is that this keeps them afloat while other customers struggle to meet costs, so they might be able to continue to offer their services to schools and other non-corporate customers.  

Schools’ budgets have been slashed as well so we’re seeing fewer schools booking [at the farm]… So, one of the things we are now looking to do is to offer a service for corporate clients based on therapeutic use of our facilities, basically, for their staff in exchange for sponsorship. [It’s income] from a different source. A more sustainable source.

Community farm

Community businesses provide meaningful employment and volunteering opportunities for local people, building skills and employability for those who need support to re-enter the job market, in areas typically facing inequity and disadvantage.  

Staff

This year, 88% of survey respondents said that they had a positive impact on employability. On average, surveyed community businesses said they employ nine paid staff, although there is huge variability across businesses: reported numbers of paid staff range from zero to 250. This reflects the diversity of the sector and its business models. The data on staffing (and volunteers) from the survey changes little year to year, despite the annual increases in survey respondents. 

Base sizes vary between 312 and 1,015.

Nearly half (45%) of surveyed community businesses employed someone who had not previously been employed in the last year. When taken together, they employed a total of 1,514 people without previous employment in 2022, and 3,458 people in similar circumstances since these community businesses began operating.

Assuming the survey sample is representative, the sector would have employed around 16,500 people who were previously unemployed in the last year. 

Base sizes vary between 420 and 459.

For the first time, we also collected information on where staff lived, and learned that on average 86% of paid staff lived locally.

Community businesses employ more people compared with traditional SMEs. 80% of respondents said that their community business has at least one paid employee, whereas 75% of SMEs in the UK have none.[2] 53% said they employ between one and nine people, compared with 29% of the UK’s SMEs. The predominance of smaller businesses in the sector explains why the median number of paid staff (4) is lower than the average.  

Volunteers

On average, surveyed community businesses said they engage 29 volunteers, which is three times higher than paid staff. Volunteers are central to the community business market model and the ratio of volunteers to paid staff has remained constant over the past few years. Larger community businesses tend to influence the average, as 10% of surveyed community businesses employ more than 60 volunteers. Most (92%) volunteers live in the local area. 

Average paid staff: 9  | 86% paid staff live in local area.
Average number of volunteers: 29  | 92% volunteers live in local area
Base size = 1,015.

Community businesses play a vital role in community-led regeneration, helping recover local infrastructure and high streets. They are helping areas move away from outdated retail-led models towards local enterprises providing services, facilities and experiences developed and owned by the communities that depend on them.  

Assets and local regeneration

Community businesses are improving the physical fabric of places and the services available to the communities that live there through access to fixed assets like land and buildings. 56% of survey respondents owned or managed at least one fixed asset,[3] and 9% had taken a new asset into ownership (such as a building or capital services) in the past 12 months[4]. 

Base size = 987.

Our market analysis estimates the total value of fixed assets owned by the sector at £744 million. Within the survey, the value of average fixed assets is higher for those owned than managed. The average value of owned fixed assets amongst relevant survey respondents is £1,173,400[5] and managed fixed assets is £1,024,400[6]. However, the median for both is much lower – £375,000 for those owned and £470,000 for those managed – because the data is skewed by a low number of high value fixed assets. The highest value reported for fixed assets owned is £75,000,005 and for those managed is £12,800,000. 

Base size varies between 189 and 253.

Compared with other community businesses, survey data indicates that those owning or managing building assets typically employ more staff, engage more volunteers, and generate more income. Those owning or managing assets employed an average of 11.9 staff and generated an average income of £360,777, compared with 5.4 and £136,253 for those who do not. 

Base size varies between 344 and 544.

Most community businesses with fixed assets hold a long-term lease on their building, own their premises outright or hold it in a trust. The latter maintain the building in exchange for rent-free use. Some obtained premises from an asset transfer arrangement with the local authority, and others are owned by the community. In many cases, community businesses come to own fixed assets through harnessing the power of their community. 

It was funded by the community; it was a “buy a brick” kind of thing. They all contributed weekly to build the hall…

Grange Welfare Association

Most community businesses feel that owning or leasing fixed assets can offer long-term stability, and typically fund their ownership or long-term lease through methods such as grants or issuing community shares. However, owning assets brings greater benefits than leasing. For example, one community business said that if they owned their building they could then sell and move to a better location to expand their services. Another had made significant investments in renovating from which they felt they should benefit. 

We have a full repairing lease. So, the council get loads out of it because anything we do to the building, [the council] are getting the benefit. So, we have spent £200,000 over the last four or five years on renovating a new space, of which we are obviously getting the benefit but ultimately, their asset, in the community, is worth more.

Ware Arts Centre

High street location

Often the heart of the community, high streets offer a diverse range of services to compliment the traditional retail model. More than two in five community businesses are currently located on or near a high street (43%)[7].  

Respondents that felt positive about operating from high streets usually represented community businesses already based in such locations. Overall, 51% of community businesses agree a high street is, or would be, a suitable location for their business.[8] The proportion agreeing is larger for those currently located on around a high street (72%)[9] and smaller for those based elsewhere (31%)[10]. Community businesses operating from areas of high disadvantage (low IMD) are also more likely to agree that the high street is a suitable location for their business.[11]

Base sizes vary between 843 and 922.

A high street location may not be appropriate for all community businesses, such as those already based elsewhere. Respondents that own or manage fixed assets are less likely than others to agree the high street is a good location for them.[12] Some interviewees felt the relative scale of high street rents or the long-term leases they had already negotiated elsewhere were financial barriers, and as a result relocation offered little business benefit. These findings from the surveys and interviews suggest a broad range of factors influence preferred locations, like building costs, community needs, and access requirements.

Regardless of location or appropriateness to individual community businesses, 80% of those surveyed agree that the high street is important to their local community. Many interviewees had witnessed a steady decline in physical condition and appearance of these traditionally vibrant economic and social hubs in recent years: 

The high street has been decimated and it’s really sad to see that…

Cornerstone Place

The reality is, we have a lot of people come to Framingham on Sundays and bank holidays. But there’s very little to do because the majority of the shops are shut… it’s got to change with new people coming in with new ideas.

Hour Community

Visible and accessible services can attract people back into otherwise declining areas by increasing footfall and opportunity for others trading locally. Increasing community ownership of assets on the high street is one such way to facilitate community-led regeneration. Community businesses currently operating on or around a high street are more likely to agree their presence would lead to regeneration – 66% of high-street based community businesses agreed, compared with 30% located elsewhere.  

One interviewee, the Anstice Centre, explained how high street presence can help encourage other people, shops and businesses back into the local area: 

What was this fairly dead space… is now quite a lively, nice place to be... So, a lot of the feedback we’ve got is that it’s just brought life back to the middle and that’s because we’re there, because The Anstice is there and it’s open. It’s a very big, physical presence… I think if you’ve got something that’s a bit of a destination, something to pull people in, it will draw in people and other shops.

The Anstice Centre