by Will Walker, Climate Action Manager and Chloe Nelson, Head of Impact and Learning at Power to Change.
The cost of living and energy crises is worsening with inflation at close to a 40-year high and sub-zero temperatures gripping the country. Power to Change is deeply concerned about the impact on community businesses and the vital services they provide to their communities.
In responding, we are focused on three fundamentals. Firstly, it is the same root cause driving our current economic challenges and the climate crisis – unsustainable, expensive fossil fuels from volatile parts of the world. Secondly, those least able to cope are hardest hit with low income and marginalised communities disproportionately impacted. Thirdly, that solutions to these crises can and must address these issues together. Only by doing so can we help to build resilient communities and harness the huge opportunities for community businesses in a fair transition to a green economy.
Community businesses are not only facing the same operational challenges as the private sector, but are also seeing growing demand for support. Our 2022 Community Business Market Report found that 77% of community businesses reported an increased demand for support related to the costs of food, and 79% for support related to increase in the costs of energy. There was a strong correlation between these two data points. Some are more at risk than others; community businesses serving economically or educationally disadvantaged people were a third more likely than others to experience greater demand for support with increases in food and energy costs. Those offering public-facing support were nearly twice as likely to report increasing demand for support with the cost of living.
In September 2022, the UK government announced an emergency package to discount wholesale energy prices for companies, voluntary sector organisations, including charities, and public sector organisations. The support came into effect from 1 October and many community businesses will benefit from this. However, the support is only guaranteed until 1 April 2023, and even with the cap energy prices are still significantly higher than they were last winter. So there remains a need to act quickly to support community businesses with these immediate economic pressures and improve their energy resilience for their long-term sustainability.
Many community businesses running large, energy intensive and/or inefficient buildings are likely to experience higher costs both after 1 April 2023 and for many years into the future. Many are unlikely to be able to absorb these costs. Whilst our research shows that community businesses have shown resilience to external shocks such as the pandemic by adapting their business models to respond to emerging threats, they are still at risk. Our statistical modelling suggests the average community business has 3 months of working capital, and 35% of the sector is in deficit. Qualitative research indicates that many are also worried about having to make staff redundant or reduce their hours. The worst hit sectors will include community hubs and village halls, community-owned food businesses, sports and leisure facilities and community-owned health and social care businesses (such as residential care homes). Together these four sub-sectors account for a third of the market, equivalent to 3,900 community businesses.
Most community businesses operate in areas experiencing multiple deprivations and with low levels of disposable income (our recent research found that 48% operate in IMD 1-3). This makes passing on increased costs to consumers and service users difficult. Yet with social purpose at the heart of their operating model, community businesses are ideally placed to address global challenges at a local level. A significant majority feel that the way they trade or operate contributes to improving the environment or tackling climate change (72%), and 74% said that they had a positive impact on tackling injustice and inequality. It is community businesses unique position to work at the intersectionality of these issues from the ground up that makes them so valuable.
Just as we saw during the pandemic, community businesses find themselves at the forefront of responding to growing needs within their communities in responding to the cost of living and energy crises. Whether through so called “warm banks”, free or subsidised food services, fuel poverty support and advice, or free activities for children during holidays, demand for these and other vital services cannot be met without additional support.
We’ve been busy working to support community businesses most exposed to these crises through our new Resilient Communities Fund. We have provided accelerated grant funding to over 100 community businesses ahead of the winter break to help them cope. Early in the new year, we will be providing further support to help community businesses navigate the cost of living and energy crises, build their resilience and strengthen local communities in the shift to a fairer, greener future. Sign up to our newsletter for further information.