Creating a more inclusive economy involves joining up economic and social policy

HOME 5 Blog 5 Creating a more inclusive economy involves joining up economic and social policy
Inspired by last week's event which launched the recent report published by Power to Change by the Heseltine Institute at the University of Liverpool, our CEO Vidhya Alakeson discusses the potential for a more inclusive economy through community business in the Liverpool City Region.
2 Apr, 2019

If more people are to participate in the benefits of economic growth, then economic policy also needs to serve a social function

– Vidhya Alakeson CEO Power to Change

Last week Power to Change published a report by the Heseltine Institute at the University of Liverpool on the scale of the community business sector in the city region. It revealed that the sector is a small but significant part of the social economy in the city region, with 84 businesses generating annual turnover of £22 million, employing 600 staff and owning 38 million worth of net assets. While small compared to the wider social enterprise sector – which includes 696 organisations in Liverpool itself – the report demonstrates that community businesses are a long standing and robust part of the social economy in the city region.

Does this community business presence support the city region in its ambition to create a more inclusive economy?

Central to the concept of a more inclusive economy is the idea that prosperity is more widely shared than it has been in recent decades. This is where community businesses can play a decisive role, not in a passive way that simply ensures that some of the wealth from high growth areas is transferred to areas of disadvantage but in a far more proactive way. Community businesses give local people more opportunities to actively participate in, and benefit from, economic activity, even in the poorest communities. One of the most encouraging findings from the Heseltine Institute report is that community businesses are more likely to exist in the poorest communities in Liverpool City Region compared to other social organisations.

Community businesses significantly lower barriers to economic participation. Granby Market in the Toxteth area of Liverpool is a prime example. The organisers of the market keep pitch fees low and provide those who cannot afford to bring their own equipment with what they need to set up a stall. This makes it more of a challenge to run the market profitably but it means that anyone can participate and test our their business idea. The market has kick started a number of food and drink businesses now flourishing across the city, such as Little Furnace pizza.

Other community businesses play their part by employing those further away from the labour market, as well as providing skills development through volunteering. Across England, community businesses engage 130,000 volunteers and research from Liverpool City Region shows that volunteer numbers among community businesses continue to grow, while numbers have declined over the last five years among other social organisations. Mark Basnett, Managing Director of the Local Enterprise Partnership highlighted the importance of drawing more people into the labour market at last week’s report launch. Productivity per head in Liverpool City Region is the lowest in the Northern Powerhouse because too many people are not part of the workforce.

Community businesses also ensure that more of the proceeds of economic activity benefit the immediate local area than businesses that are not locally rooted where revenue and profits leak out. In this way, they have much in common with small and family businesses that are not just based in a place but are of a place and have a long term connection with, and interest in, that place. Homebaked, the community bakery in Anfield, illustrates this well. Of their £300,000 turnover, £150,000 is spent with other local suppliers and much of the rest pays the wages of 18 local employees. Buying locally is not the cheapest way of doing business but Homebaked feels it pays dividends and reduces its environmental footprint. When the bakery was broken into, it was another local business, Wrights, that supplies its pie cases, that stepped in without hesitation to provide the equipment they needed to stay open.

The success of Homebaked and its award winning pies – they recently struck gold at the British Pie Awards – not only benefits those who use the bakery but also the wider community of Anfield. Surpluses from the bakery support the community land trust that is redeveloping the empty terrace at one end of which sits the bakery. Boarded up houses will become new homes, workspaces and commercial spaces, including a new production facility for the bakery and a microbrewery.

At its heart, creating a more inclusive economy involves joining up economic and social policy. Traditionally, these two functions have sat quite separately in government but if more people are to participate in the benefits of economic growth, then economic policy also needs to serve a social function. We need to worry not just about the size of the pie (excuse the pun) but about how it is distributed and about the human experience of growth. This is where community businesses come into their own and provide something different from other civil society organisations. As their name suggests they unite economic and social concerns in a place-based context. As well as making money stick locally, they provide a vehicle through which local people can connect to each other and feel better connected to decisions about their future. The organisers of Granby Market are clear that it is more than a market; it is a way to build community cohesion in a highly diverse part of the city.

Since 2015, Power to Change has invested close to £4m in Liverpool City Region to support community businesses. We will continue to do so, working closely with local strategic partners including the Local Economic Partnership and Combined Authority. In other parts of the country, leaders looking for ways to deliver more inclusive growth, would do well to consider the contribution that community businesses can make and invite them to the table in pursuing a different type of growth.