The prospects for community businesses in the North of England

As the latest Third Sector Trends survey is published, author Professor Tony Chapman, Director of Policy & Practice at St Chad’s College, Durham University reflects on the challenges and opportunities facing community businesses in the post Covid-19 economy.

When community business leaders completed their Third Sector Trends survey in 2019, there was a good deal of optimism in the air. That optimism must surely have been dented with the onset of the Covid-19 crisis and, undoubtedly, there will be casualties as the  economy falls into recession.

We don’t yet know how quickly the economy will recover or whether the economy will remain in the doldrums in the longer term. So it is not surprising that alarmist reports are circulating from third sector bodies and think tanks on the current calamitous situation.

But these reports are based on small unrepresentative samples which ask organisational leaders to predict what will happen next when they just don’t know. Ultimately, nobody will know for at least two years – at which point – Third Sector Trends will return to find out.

New opportunities

It should not be taken as read that the future for all community businesses will be bleak. The pandemic may help to produce changes in the way communities think and act in future.  Maybe local people will feel a stronger sense of commitment to community and to the organisations which champion and service it, such as community businesses?

There may be a lot we don’t yet know, but we do have a body of evidence to help make sense of what is going on. In 2019, Power to Change supported the Third Sector Trends study across the North of England alongside the Community Foundation serving Tyne & Wear and Northumberland and Garfield Weston Foundation.

Community businesses are resilient

This report shows that community businesses are resilient entities which are financed at least in part through self-generated trading activity. And while community businesses cannot be said to be more committed to their communities than general charities, they usually have more capacity to deliver support because they are larger organisations.

When compared with other charities, community businesses also tend to be more ambitious to grow, are keener to engage with local policy makers and invest more energy in attending events and meetings to debate or decide upon policy and action to improve community life.

Resilience is underpinned by the agility and flexibility of community businesses to spread financial risks.  Usually, as this research shows, they do this by engaging in more than one form of self-generated trading activity at a time.  For example, amongst organisations which are involved with retailing and hospitality activities, 67% also manage a community building and 43% offer other types of paid-for services.

Trading is crucially important to the financial wellbeing of community businesses, but few can keep going on the surpluses they produce from self-generated trading alone. Even in the best of times, most also rely on a variety of other sources of income such as contracts, grants, fundraising, subscriptions, investments, gifts and so on.  Few community businesses choose to keep all their eggs in one basket.

Diversity is key

Those community businesses that face an immediate cash-flow crisis due to Covid-19 will be feeling pretty vulnerable just now. And for those who are almost wholly reliant on trading to sustain themselves it may be hard for them to see a viable future.

Most community businesses rely on income from grants to some extent. To keep this source of income flowing, they must communicate the impact of their work to trusts and foundations. Unlike contracts, grants are often focused on ‘soft outcomes’ such as giving people confidence to manage their lives, reducing social isolation, empowering people in the community, strengthening community cohesion and enhancing people’s pride in their community.

Community businesses, as this report shows, can and do achieve these objectives in all kinds of ways – by running a shop, pub, library or swimming pool, by delivering public services under contract or under a grant programme, by hosting community activities within their village hall or community centre, and so on.

Disaggregating different elements of impact, as some funding organisations demand, can be a tall order. A community business may have been given, for example, a grant to attend to one issue (such as social isolation) and a contract to attend to another (such as the delivery of domiciliary care). But the reality is that these factors can rarely be disaggregated – and as a consequence, attribution of impact is inevitably shared.

Strength through collaboration

Sector-wide impact should be recognised too because community businesses rarely work in isolation. They play a part in a collective contribution to communities alongside other third sector organisations, private businesses and public sector bodies. Through their individual and collective effort, social and community impact can accumulate – providing that organisations work in complementary ways or, at least, are good neighbours to one another.

The findings presented in this report shows that investment in communities is complex, so the attribution of evidence to show positive change is tricky. And as this report argues that it would be better if more funding bodies could focus on the role of community businesses holistically.

Reassuringly, the reality is that many funders already resist the temptation to concentrate too closely on one aspect of change but look at the bigger picture. Recognising the collective and cumulative contribution of community businesses helps funding bodies to see the benefits of in investing trust at the organisational level rather than getting too hung up on the detail. There’s not much point in trying to nail things down that cannot, frankly, be nailed.

It is not being suggested that funders should adopt ‘blind trust’ – where it is assumed that all community businesses are effective organisations. But instead, once funding bodies have looked quite closely at what a community business does, they allow themselves to value that contribution for what it is – in the context of the community.

There is so much uncertainty ahead. Temporary measures such as emergency loans, grants, rent holidays and furloughing are welcome – but these are only stop-gap measures for community businesses.

But one thing is abundantly clear from this report – funding bodies must not assume that community businesses can be left to their own devices in the longer term just because they trade.

Read the full report here. 

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