Community shares are crucial to a future economy that works for all

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Across the country, communities are using community share offers to save important spaces and run them in a way that works for them. How can we make this model work for everyone?
20 Jun, 2024
Matt Fazal

Matt Fazal

Portfolio Manager

In the face of the many challenges facing our country, many people feel powerless. In many parts of the country, shops on the high streets are boarded up, community services are struggling, and that feeling of ‘community’ feels harder and harder to tangibly grasp. For many people, the question is often, ‘well, what can I do about it?’. 

Although community shares are not the only answer, they certainly are one of the solutions. Quietly growing in the margins of the financial landscape, community shares are a means for communities to come together and save the buildings or spaces they care about. It gives power not just to those running these assets, but those who use them too. The model is simple. With one member, one vote, each shareholder has an equal say regardless of how much money they put in. 

I have talked before about how community shares is a way of raising flexible and patient capital. But how can we help more people tap into this way of raising money for their own community? 

The challenge with accessible finance  

Our recent paper, ‘Financing the Future Economy’ highlights the state of the current financial landscape. It highlights the pressing need for change to create a fairer and more sustainable economy.  

As the paper demonstrates, there are a myriad of financial products available, all with their own strengths and weaknesses. But accessing this finance, and understanding the patchwork of products, can be a real challenge for community businesses.  

For the community shares market, a few key changes to the policy environment, further institutional investment and more support for the Community Shares Unit could help open the market to a much larger number of communities across England.  

What needs to change? 

It’s a pivotal moment for community shares. As the Community Shares Unit (CSU)’s 2023 report highlighted, £210 million has been raised in community shares since 2012. Last year was the busiest year to date in terms of applications to the CSU-managed Community Shares Booster Fund. A significant number of the government-backed Community Ownership Fund grantees used community shares to raise their required match funding.  

In 2023 the CORE partnership also facilitated the UK’s biggest-ever transfer of renewable energy assets into community hands. Communities raised over £1.8m in community shares to help make this happen. Platforms such as Ethex and Crowdfunder (the former hosted the CORE share offers) have played a big role in growing the community shares market. The partnerships promote and amplify opportunities to invest with their large networks of investors. 

But more can be done to make community shares accessible to all communities. The next government, investors, funders, and sector partners can all work to grow community shares market, for the benefit of all. 

Policies to boost community shares 

With an election on everyone’s minds, many parties are pledging ways to grow local economies. Labour has committed to doubling the size of the co-operative and mutuals sector in their manifesto. But any party must centre community shares in their local growth strategies if they want them to succeed.  

Growing the community shares sector will have the knock-on effect of strengthening local economies, because it gives more local people a say in how their community is run. To make community shares work for communities, the next government should: 

  1. Introduce a successor to Social Investment Tax Relief (SITR). SITR never fully lived up to its potential due to its confusing process and restrictive criteria. Relaunching SITR, responding to these concerns, can capitalise on the huge interest from social investors and thus attract greater investment into the community shares sector.  
  2. British ISA. The next government can bring in investors by including Cooperatives and Community Benefit Societies (CBS) in the proposed new British ISA. 
  3. Continue the Community Ownership Fund (COF). The COF has played a big role in supporting communities to save valued assets in the past couple of years, and many have used community shares to raise their required match investment. Continuing the fund, increasing the pot and adding more capability support will help more communities save and run assets they care about. 

Investment from trusts and foundations  

Institutional investment has a big role to play in future share offer raises, particularly in deprived areas where it can be more challenging to raise significant investment from your local community. Institutional investors should: 

  • Provide more capability building support for community businesses to access community shares. The Booster Fund’s pre-grant support has helped to create a more diverse community shares market, through supporting communities at the earliest stages of their community shares journey to understand what is required, and whether it is right for them. The pre-grant support programme is currently oversubscribed and more investment is needed to reach even more underrepresented communities.    
  • Provide more direct investment into community share offers. The community shares market is a huge opportunity for trusts and foundations to empower communities, while also making their money go further. In 2023, for every £1 invested through the Booster Fund as matched equity, an incredible £9.30 was raised by the community.  

Developing stronger market infrastructure 

The Community Shares Unit has played a significant role in spreading good practice in the market, and codifying knowledge of the model. The cross-sector partner organisations within the CSU have really helped to grow and develop the sector. But to go further, two things are now needed: 

  1. A review of the governance and structure of community shares. A cross-sector review of what can and can’t be done under current legislation. Currently, only co-operative and community benefit societies can run a share offer. Changes to legislation and reforms to legal structures making community shares simpler to access could help share offers serve more community businesses,  
  2. More resource for the Community Shares Unit. Power to Change has supported the CSU since 2017. However, for it to continue supporting the growing market, it needs more resource to capitalise on opportunities and grow the community shares market.  

Interested? Work with us 

At Power to Change, we’re excited to see what comes next for the community shares market. We remain committed to supporting this innovative approach to asset ownership for communities across England. If you’d be interested in hearing more about our work in the community shares space, or partnering with us, then please do reach out.