Analysis of Evidence for Local Impact Funds - Full Report by Social Investment Business

Contents

ANALYSIS OF EVIDENCE FOR LOCAL IMPACT FUNDS 03 February 2015

Contents

Market failure

Black Country

Introduction 4

Strategic approach

Key findings

Broader context

Recommendations for a Local Impact Fund

Overview of the area

Market failure

Liverpool City Region

Strategic approach

Key findings

Overview of the area

Recommendations for a Local Impact Fund

Market failure

Greater Lincolnshire

Strategic approach

Key findings

Recommendations for a Local Impact Fund

Overview of the area

Market failure

North East

Strategic approach

Key findings

Overview of the area

Recommendations for a Local Impact Fund

Market failure

Cornwall and the Isles of Scilly

Strategic approach

Key findings

Recommendations for a Local Impact Fund

Overview of the area

Market failure

Tees Valley

Strategic approach

Key findings

Overview of the area

Recommendations for a Local Impact Fund

Market failure

The Heart of the South West

Strategic approach

Key findings

Recommendations for a Local Impact Fund

Overview of the area

Market failure

The Humber

Strategic approach

Key findings

Overview of the area

Recommendations for a Local Impact Fund

Market failure

West of England

Strategic approach

Key findings

Recommendations for a Local Impact Fund

Overview of the area

Market failure

Leeds City Region

Strategic approach

Key findings

Overview of the area

Recommendations for a Local Impact Fund

Market failure

Strategic approach

Recommendations for a Local Impact Fund

Executive Summary

Key findings

3 5 6

Methodology 7 Summary of our findings

Conclusions 12 Greater London

Key findings

Overview of the area

Market failure

Strategic approach

Recommendations for a Local Impact Fund

Cheshire and Warrington

Key findings

Overview of the area

Market failure

Strategic approach

Recommendations for a Local Impact Fund

Cumbria

Key findings

Overview of the area

Market failure

Strategic approach

Recommendations for a Local Impact Fund

Greater Manchester

Key findings

Overview of the area

Market failure

Strategic approach

Recommendations for a Local Impact Fund

Lancashire

Key findings

Overview of the area

EXECUTIVE SUMMARY This report presents the findings of a research exercise undertaken by Social Investment Business (SIB) to better understand the potential demand for social investment in Local Enterprise Partnership (LEP) areas across England and make recommendations for how Local Impact Funds (LIFs) could potentially meet unmet demand for local social investment. The results have been gathered mainly from two sources: •

SIB’s historical investments

•

SIB’s Future Financing & Support Needs survey

The research provides solid evidence of how historically there has been a strong demand for grant support and social investment across LEP areas and highlights the significant funding gap for charities and social enterprises across the LEPs. Our research comprises data collected from five main funds that have been managed by SIB. It is one of the most comprehensive studies on the state of the sector that has been done with evidence of over 1,200 charities and social enterprises taking on over £300 million of social investment and / or grant support. Our research indicates that there are significant levels of social investment activity, especially in the larger city region LEP areas, such as of London, Greater Manchester and the Liverpool City Region.

Based on our research we found that: •

Charities and social enterprises work primarily in physical, mental health and healthy living (28%) followed by education and learning skills (23%) and employment and training (14%).

•

The main beneficiary groups are children, young people and families (23%) followed by the general public or community (23%) and people with disabilities (15%).

•

Charities and social enterprises tend to work in the most socially deprived areas.

•

There has been a significant demand for unsecured loans of less than £250,000.

•

The median average size of loans was £141,270.

•

The average repayment terms for loans less than £250,000 was 8 years.

Based on our survey and latest data collected from 411 respondents, we found that: •

Charities and social enterprises tend to have a small geographic reach, mainly serving their local area or community.

•

There is an increasing interest in social investment, with 87% of respondents indicating they would consider taking on investment, mainly to grow an existing business and to start a new project.

•

The main barrier to growth cited by most charities and social enterprises is having difficulty accessing finance.

•

There is an existing demand for smaller loans of less than £250,000, with 74% of respondents indicating they are seeking loans of less than £500,000 out of which 53% indicated they sought for a loan of less than £100,000.

SIB has been at the centre of the social investment movement for the last 12 years helping charities and social enterprises working in communities and deprived areas. SIB has developed Local Impact Funds as a new financial product that will help leverage inward investment into local areas. LIFs are a local social investment fund product that provide appropriate and tailored support and finance to charities and social enterprises in a local community. Our research shows that each LEP area requires different levels of funding and would benefit from their own distinct investment priorities and focus, and LIFs can help meet this need as a flexible, off the shelf product that LEPs can engage with and align to their broader economic and social objectives.

Introduction The purpose of this analysis is to understand better the state of the charity and social enterprise sector across England, get a sense of the potential demand for social investment in LEP areas across England, and make some recommendations for how Local Impact Funds (LIFs) could potentially meet unmet demand for local social investment.

This analysis will be used to inform the exante evaluation for financial engineering instruments (FEIs) being led by the European Investment Bank (EIB) and Regeneris, which in turn will inform the argument for FEIs in the operational programme for the European Regional Development Fund (ERDF).

It will also be used to inform development of LIFs in individual LEP areas, and to support the rationale and evidence case for a national fund of funds structure for LIFs.

Broader context This study focuses in particular on the demand for social investment amongst charities and social enterprises as we know from all of the available research that access to appropriate finance is the single biggest barrier to the growth of the sector.1 Data from Social Enterprise UK (SEUK) suggests that 48% of social enterprises sought to raise external finance in the past 12 months (from a range of options including grants, loans, overdrafts and equity), twice the proportion of SMEs; 39% cited access to finance as the single largest barrier to growth and sustainability – the most common barrier experienced. The national picture The social investment market is small when compared to other financial markets, but is growing at a significant rate. Recent evidence shows that there were an estimated 180,000 SME social enterprise employers in the UK. They are creating jobs, employing around two million people in 2012 and contributing some £55 billion to the UK economy, bringing wealth into communities and helping to rebuild the economy.2 And this sector is growing. When compared with SMEs, 38% of social enterprises saw an increase in turnover compared with 29% of SMEs, and 22% of social enterprises experienced a decrease compared with 31% of SMEs.3

1 The People’s Business, SEUK, July 2013 2 Social enterprise: market trends, based upon BIS Small Business Survey 2012, BMG research, Cabinet Office, May 2013. 3 The People’s Business, SEUK, July 2013.

The potential funding gap for charities and social enterprises in the UK is estimated at £1.3 £2.1 billion annually.4 In contrast, the provision of social investment to charities and social enterprises in 2012 was £286 million in 2012.5 A report commissioned by BSC in 2012 indicated that demand for social investment could rise from £165 million of done deals in 2011 to £286 million in 2012, £750 million in 2015 and to as much as £1 billion by 2016.6 This amounts to an average 38% growth in demand year on year. Yet this is not enough to meet the demand from the sector. The local picture Evidence indicates that the broader voluntary sector, in particular charities and social enterprises, is well placed to access more social investment in local areas. The landscape at the local level is evolving as a result of the Government’s public service reform agenda. There has been a steady change in levels of voluntary income (grants) and earned income (contracts) from Government funders to charities and social enterprises. From 2000-01 to 2010-11, grants from government declined from £4.6 billion to £3 billion.7 In contrast, contract income from government was worth £11.2 billion in 2010-11, a real increase of £6.7 billion (151%) since 2000-01 (when it was worth £9.1 billion). Of the £11.2 billion of services being delivered by charities and social enterprises, only £6.1 billion currently is from contracts for services at a local level.

4 5 6 7

Mind the Finance Gap, CDFA, January 2013. The First Billion, BCG, September 2012. The First Billion, BCG, September 2012. UK Civil Society Almanac, NCVO 2012

This constitutes 8.8% of the total value of local government annual expenditure on commissioning and procurement of goods and services and represents the immense potential offered by the Localism Act and other initiatives to encourage people to take on services at a local level. Many charities and social enterprises will look to develop existing and new income streams in response to the economic downturn, seeking social investment to cover a range of financing requirements. There are over 163,763 charities in the UK, controlling assets valued at over £36.7 billion. Many of these are organisations already delivering critical services in communities, and are well placed to take advantage of the Localism Bill to take on more assets and deliver additional services in their local area.8 In addition, social enterprises are more likely than mainstream SMEs to reinvest profits locally, actively recruit local staff, employing people that are disadvantaged in the labour market from disadvantaged communities.9 Evidence indicates, in fact, that every £1 of public sector expenditure invested in social enterprise creates £6.25-£8.33 of gross value added. This compares to a lower return of £3.57 across all markets.10

Investment readiness needs of the sector In addition, a recent survey of voluntary, community and social enterprise organisations commissioned by the Big Lottery Fund, indicates that:11 •

Investment readiness, or lack of it, appears to be a major cause of drag to the acceleration of social investment, reflecting a similar experience in the ‘mainstream’ SME market.

•

The potential demand for investment readiness support from the VCSE sector is in the region of 70,000 or more organisations in the ‘foreseeable’ future (up to five years).

Key findings The principal finding from the analysis shows that that there is substantial unmet demand for social investment in local areas across England, demonstrating a significant market failure that ERDF can be used to redress. Analysis based primarily on data from Social Investment Business (SIB) historic portfolio of investments and grant awards, and from a national ‘future financing needs’ survey demonstrates that there is a potential £73 million annual demand for local social investment at the present time. This analysis complements data collected at national level which demonstrates an annual demand of £1.3 billion - £2.1 billion for investment into charities and social enterprises.

8 UK Civil Society Almanac, NCVO, 2012. 9 Fightback Britain, Social Enterprise UK (SEUK), November 2011. 10 Evaluation of Community Development Finance Institutions (CDFIs), GHK, March 2010.

11 Investment Readiness in the UK, ClearlySo and New Philanthropy Capital, June 2012.

Other key findings include: •

A total of 1,200 charities and social enterprises in this analysis have taken on social investment and / or grant support, with a total value of over £300 million.

•

A total of 411 surveys responses were provided by charities and social enterprises.

•

SIB has made out over 460 loans with a total value of over £170 million.

•

The median average size of loans was £140,000.

The majority of loans made out were in the LIF target sub £250k area, as 69% of loans were less than £250,000.

The average interest rate for loans of less than £250,000 ranged between 4% - 5% (compared to the average interest rate for loans over £250,000 ranged between 5% 6%).

The average repayment terms for loans of less than £250,000 was of 8 years.

SIB has made out 1,600 grants with a total value of c. £130 million. --

Of these 60% were development grants and 40% capital grants.

•

Charities and social enterprises work primarily in physical, mental health and healthy living (28%) followed by education and learning skills (23%) and employment and training (14%).

•

The main beneficiary groups are children, young people and families (23%) followed by the general public or community (23%) and people with disabilities (15%).

Methodology

•

Communitybuilders Fund: a £40 million fund endowment from the Department of Community and Local Government. It provides loan financing, often combined with grants and professional support. It aims to make sustainable investments in community enterprises to build their long term financial viability and increase their ability to deliver significant social impact in their communities.

•

Investment and Contract Readiness Fund: a £10 million grant fund, managed by Social Investment Business on behalf of the Cabinet Office. It provides grants to high growth potential social ventures to enable them buy in external business support. It aims to ensure social enterprises are better

Sample characteristics Evidence for this research was gathered from six main sources: five funds managed by Social Investment Business (please see below), and the “Future Financing & Support Needs” survey. Below is a brief description of each fund: •

Futurebuilders England Fund: a £150 million fund managed by Social Investment Business on behalf of the Office for Civil Society in the Cabinet Office. It provides loan financing, often combined with grants and professional support, to third sector organisations in England that needed investment to help them bid for, win and deliver public service contracts.

equipped to secure new forms of investment and compete for public service contracts. •

•

Social Enterprise Investment Fund: a £90 million fund managed by the Social Investment Business on behalf of the Department of Health. It provides grant and loan financing, and aims to enhance the role of social enterprises in the provision of health and social care services. Adventure Capital Fund: a £10 million fund offering grants and loans to medium-sized, community-based organizations wishing to engage in social enterprise activities. Managed by Social Investment Business, it was funded by the Home Office, Office of the Deputy Prime Minister and four Regional Development Agencies.

Additional data was collected for two LEP areas: Pan London and the Greater Lincolnshire from two different sources, Funding London and CAN Invest. CAN Invest provided information from two different funds: •

CAN Breakthrough Fund: a £1.6 million fund providing grant funding and management support to enable established social ventures with a minimum turnover of £500k, three years’ trading and a scalable business model, to scale up and maximise social impact.

•

West Lindsey Community Assets Fund: a £1m fund managed by CAN Invest on behalf of the West Lindsey Authority. It provides grant and loan finance and business support to help community groups manage community assets and start up or scale up community enterprises in West Lindsey.

One important caveat is associated with our data collection: data has been gathered from different funds, each of which had different

investment priorities and requirements (i.e. size of social enterprises, minimum annual turnover, and minimum trading years) and focus (i.e. health and social care, community assets). Another important caveat is the limited sources of data: our research is mainly based on our own portfolio of historic grant and loan investments. SIB is one of UK’s largest social investors, however, we understand any additional local investment data would contribute to a more robust enhanced analysis. It is also worth noting that we have excluded certain SIB managed funds from this analysis, including the £20 million Social Action Fund (SAF) and the £27 million Community Assets and Services Grants Fund (CASG) as they are grant funds primarily related to revenue for project delivery, and would not shed any light on the organisational development and social investment needs of the sector. Our ‘Future Financing & Support Needs’ survey is a 30 question needs analysis survey that has been conducted since 201It seeks to better understand the current financing gap in the sector in order to offer products and services best suited to the needs of existing charities and social enterprises. SIB used all its existing relationships and networks available to develop the sample frame and obtain the data. The sample frame was further enhanced by relevant organisations contacting their own network/ members and encouraging them to participate in the survey. We note certain areas may risk being underrepresented. We note certain areas, in particular Pan London and the Liverpool City Region, have obtained a higher number of survey respondents. This can in part be explained due to close connections to local intermediaries in certain areas encouraging the sector to respond.

Research focus

Glossary of terms

In our research, we have primarily focused on assessing the need for the following products:

Below is a short description of terms, commonly employed during our analysis:

•

Unsecured debt: Unsecured lending accounts for only 5% of the social investment market, even though it is the investment type that is most accessed by social ventures (39% of social ventures access unsecured loans only).12

•

Loans smaller than £250,000: Evidence suggests that there is demand for unsecured loans of under £250,000 that is currently not being met by existing social investment provision. According to our survey data, 69% of social enterprises seek unsecured loans of under £250,000. According to one study, the median average unsecured loan sought is of £25,000, and the mean average is of £53,000.12

Development grants: development grants include capacity building grants, feasibility grants, investment readiness grants and social impact reporting grants. They are mainly focused on helping an organisation develop and strengthen its business to become sustainable and ready to raise investment, bid, win and deliver public contracts.

•

Deprivation: general lack of resources and opportunities. The Department of Communities and Local Government has developed a qualitative study which ranks areas in English local councils (Indeces of Deprivation), which takes into account income, employment, health, education and training, barriers to housing and services, crime and living environment.

•

Capacity building grants: grants to help organisations strengthen their organizational systems and structures, strategies and governance by increasing their sustainability and effectiveness.

•

Capital grants: grants that include property lease or freehold, purchase or refurbishment including associated costs, equipment, intellectual property and working capital.

•

Feasibility grants: grants to help organisations develop viable sustainable projects including support and grants for business development.

•

Investment readiness grants: grants that cover both external support and internal costs. External support must be offered by an approved provider and will include a range of different activities such as: business planning and strategy; marketing, promotion

•

Development grants: There is an urgent need to provide a tailored package of business wrap around support for charities and social enterprises in order to help them become sustainable and investment ready. Financing in deprived areas: In order to achieve equal opportunites amongst different communities in England.

In our LEP analysis, reference has been made to each LEP economic plan and, where applicable, to the LEP 2014-2020 Local Impact Fund allocation. Main investment priorities and major market failures for each LEP have been briefly described in order to better understand how our recommendation for a local impact fund aligns with LEP economic and social priorities.

12 Growing the social investment market: the landscape and economic impact, prepared for the City of London, Big Lottery Fund, Big Society Capital, and Her Majesty’s Government by ICF GHK in association with BMG Research July 2013

and networking; financial modelling; development of products and services; drawing in appropriate talent and skills. Eligible internal costs include additional staffing and equipment costs but do not include capital or general overheads costs. •

LSOAs: Lower Super Output Areas

•

Social impact reporting grants: grants ranging from £1,000 to £10,000 to help an organisation measure and report its social impact.

Summary of our findings

13.52% | Yorkshire and The Humber

a. State of the sector 15.63% | North West

Based on our analysis, over 1,200 charities and social enterprises have taken on social investment and / or grants support. Figure 5.1 shows a breakdown of charities and social enterprises by region. Greater London, with c.300 different charities and social enterprises in our study, is one of the richest areas within England for social enterprise activity followed by the North West (over 200 organisations in our study). •

The main sectors charities and social enterprises cover are the following:13 --

22.18% | London

Figure 5.2 Charities and social enterprises by social sector

28% 1% 14%

Physical, mental health and healthy living (28%);

Education and learning skills (23%);

Employment and training (14%);

Figure 5.2 shows a breakdown by main social sectors.

4% 4%

6% 10%

23%

Physical, mental health and healthy living Education, learning skills Culture, arts, sport and heritage Housing, property and essential needs Consulting, finance and legal assistance

13 Figures are based on our research of 15 LEP areas. We consider these areas to represent national statistics.

Employment and training Community and transport Environment/Recycling/Waste Management Workspace rental

Other

---

Children, young people and families (21%); People with disabilities (15%).

Figure 5.3 Charities and social enterprises by beneficiary group

Figure 5.3 shows a breakdown by beneficiary groups.

22%

24%

b. Grants analysis Based on our data, over 1,600 grants were made totaling over £128.9m. Some of our key findings include14: •

Average size of grants was £60,027;

•

94% of grants were less than £250,000;

•

58% of all grants were development grants out of which 34% were for investment readiness support, 32% were for capacity building, 31% were feasibility grants and 3% were for social impact reporting. The remaining 42% were capital grants.

1% 4% 16%

3% 5%

12%

Pre School, children, young people, families People with disabilities, injuries Elderly people Minorities Women Unemployed

Figure 5.4 shows a breakdown by type of grants.

Ex-offenders and prisoners

c. Loans analysis

Homeless

Based on our data, over 460 loans were made, totalling over £172.5m. Figure 5.5 shows a breakdown of the loans by region.

People with addiction (alcohol, drugs...)

Other or general public

Figure 5.4 Breakdown of grants by type of grant

Some of our key findings are:15 •

The median average size of loans was £140,000;

•

69% of all loans were of less than £250,000. The average interest rate for loans of less than £250,000 ranged between 4% - 5% (compared to the average interest rate for loans over £250,000 ranged between 5% - 6%).

2% 18%

42% 19%

20% 14 Figures are based on our research of 15 LEP areas. We consider these areas to represent national statistics 15 Figures are based on our research of 15 LEP areas. We consider these areas to represent national statistics.

Feasibility Capacity Building Investment Readiness Other Social Impact Reporting

• Figure 5.5 Loans by region

The average repayment terms for loans of less than £250,000 was of 8 years.

According to our analysis, interest rates range between 0% - 6%, with larger loans taking on higher interest rates (mainly 5% - 6%).

6.70% | East Midlands 4.90% | East of England 3.08% | North East

Conclusions

5.71% | West Midlands

Based on our research of over 1,200 charities and social enterprises and the results obtained from Social Investment Business survey, “Future Financing & Support Needs”, we have reached the following conclusions:

7.31% | South West 5.75% | South East 10.10% | Yorkshire and The Humber

•

Current overall demand for unsecured loans based on most recent survey results is approximately £73m.

•

Historically we account for over £172.5m total investments done, more than double the amount, suggesting: 1) an existing larger demand in the market for unsecured loans, and 2) certain areas may have been misrepresented in our survey by a particular low rate of response or due to a lack of existing connections with them.

•

Overall demand for development grants based on our historical data ranges between £70 and £100m.

•

Local Impact Funds require a loan and grant mix in order to provide organisations with the necessary support and capacity to take on repayable finance. The results of our research suggest the average loan and grant mix for a Local Impact Fund should be 40 : 60 (grant : loan).

14.09% | North West 42.36% | London

GREATER LONDON Key findings Summary Greater London is one of the richest areas within the UK for social enterprise activity, and has seen the highest level of social investment of any of the nine old English regions. SIB has reviewed its own portfolio of historic grant and loan investments in Greater London and assessed demand for new social investment and investment readiness support services and analysed investment data from other social investors in London to paint a picture of the social investment needs of the sector in the future. Here are some key findings, explored in further detail below: •

169 charities and social enterprises have taken on over £53.6m social investment and / or grant support.

•

Of these, 149 received grants totalling approximately £20.6m.

•

15% of the grants were for investment readiness support. 30% of organisations that received a grant took on a loan at the same time or subsequently after.

•

And of the 196 organisations, 69 took on loans totalling over £33.0m.

•

70% of all loans were less than £250,000.

•

Based on our survey, the estimated demand for finance from social enterprises ranges between £5.9m and £21.9m.

•

Greater London demographic statistics reflect the national demographics, in that: --

Social enterprises typically work in boroughs with the highest levels of deprivation.

Social enterprises work primarily in physical, mental health and healthy living (27% of the total).

Children, young people and families are the main beneficiary groups supported

Overview of the area

•

LEP allocation: London has been allocated €748.6m from the ERDF and ESF, plus an additional €43m from the Youth Employment Initiative (approx. £678m).

•

Deprivation: Over 26% of London falls within the most deprived 20% of England. The most socially deprived boroughs include: Newham, Hackney, Lambeth, Brent, Tower Hamlets, Haringey, Lewisham, Waltham Forest, Croydon and Southwark.

Introduction The Pan London LEP area includes 33 Local Authorities, as shown in Figure 1.Whilst London is not the biggest LEP area in the UK, it powers the UK economy accounting for over one-fifth of UK’s total output. London is considered the financial centre of Europe and is home to more people than any other city in Europe, yet London is also home to five of England’s most deprived boroughs, its unemployment rate is higher than in any other place in the UK and it is one of the most expensive places to employ workers.

Figure 1.1 Greater London •

Area: 605.95 sq mi

•

Population: 8,416,535 (2013 est.)47

•

Density: 13,870 sq mi

Market failure The key market failure for charities and social enterprises seeking to grow their operations and impact is access to appropriate finance. The section below provides survey data from 60 London-based charities and social enterprises, and identifies some of the key issues they struggle with around access to finance. This information is complemented by historical data from over 189 social investment and investment readiness interventions between 2002 and 2014. Summary of our findings a. Existing finance gap SIB has been conducting a ‘future financing needs’ survey of the sector since 201Out of 411 respondents, 112 were relevant to London (28%). Some interesting key findings include:

16 UK Population Estimates, ONS, June 2014.

•

95% of the survey respondents stated an interest in social investment mainly to start a new project (52%), and to grow an existing project (42%);

•

22% indicated a need for investment readiness support, main areas include: improving social impact measurement (13%), marketing, promotion and networking (12%) and business planning to develop or scale services (10%);

•

72% of respondents serve a local area (out of which 52% serve only a local area and the remaining 48% serve their locality alongside having a larger geographical reach); 19% have a national reach and 9% have an international reach; 55% had an annual turnover of less than £500,000 (out of which 52% of less than £100,000); 10% of the respondents were big established organisations with a turnover greater than £1m and over 20 FTEs. 56% indicated it was difficult or very difficult to access finance;

Based on the results from the survey, the total estimated demand from charities and social enterprises in Greater London ranged between £5.9m and £21.9m.17 b. State of the sector A breakdown of social enterprises by Local Authority shows how those with very high deprivation indeces have the highest concentration of social enterprises. % of total London social enterprise population Hackney

12%

Tower Hamlets

12%

Islington

10%

Lambeth

Southwark

•

Around 40% of all social enterprises in our study work in the 20% most deprived areas of London.

17 Estimates are based on respondents indicated range of demand. Lower and upper levels have been calculated assuming minimum and maximum investment levels.

•

Out of the top 5 most deprived areas, Hackney, Lambeth and Tower Hamlets had a particularly high concentration of social enterprises (35%).

According to our research, data shows a greater concentration of charities and social enterprises working in the following sectors: •

Physical, mental health and healthy living (27%);

•

Education and learning skills (26%);

•

Employment and training (15%).

We note a significant number of charities and social enterprises are currently focused on the further develolopment of education and learning skills. As indicated in Section 3, an important investment priority is supporting the development of necessary skills to ensure employability skills and sustainable jobs. c. Sample study Our analysis and sample is based on information provided by: •

SIB Group18

•

CAN Invest19

•

Funding London

The data collection provided a total dataset of 294 investments:20 14 from Funding London, 273 from SIB Group (16 from ACF, 49 from Communitybuilders Fund, 84 from Futurebuilders Fund, 5 from ICRF and 119 from SEIF) and 7 from CAN Invest.

18 Data collected from SIB’s historical files corresponds to Futurebuilders Fund, Social Enterprise In-vestment Fund, Investment and Contract Readiness Fund, Communitybuilders Fund and Adventure Capital Fund. 19 Historical data collected from CAN Invest corresponds to Breakthrough Venture Fund. 20 Corresponding to 169 social enterprises.

We note this data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study.

Figure 2.1 Loans by total amount Greater than £500,000

d. Grants analysis

£250,000-£500,000

Based on the data, a total of 149 social enterprises received 219 grants, totalling aproximately £20.6m.

13 10

£100,000-£250,000

£50,000-£100,000

•

94% of all grants received were less than £250,000; Average size of grants was £109,887 although the overall sizes of grants varied from small grants for social impact reporting measures of £4,750 up to capital grants of £1m;

Less than £50,000

21 9

•

Over 69% of all loans were less than £250,000, mainly between £100,000 £250,000 and £50,000 - £100,000.

•

47% of total historical grants were capital grants whilst the remaining 53% were development grants;

•

The median average size of loans was £186,105, but amounts ranged between £17k up to £5m;

•

70% of development grants were given as capacity building (42%) and investment readiness support (28%). A small percentage of grants (6%) was destined to help organisations with their social impact reporting (these grants were usually small, averaging £5,000).

•

Interest rates ranged between 0% - 6% with small loans (less than £50,000 and those between £50,000 - £100,000) taking on lower interest rates (0% - 2%) and bigger loans, in particular those between £250,000 - £500,000 and greater than £500,000, had higher interest rates (5% - 6%).

•

30% of social enterprises that received a grant took on a loan at the same time or subsequently after receiving it.

•

Typical interest rate was between 0% - 6% and the median average terms of repayment was 10 years.

e. Loans analysis Based on our data, a total of 65 charities and social enterprises received 75 loans totaling over £33m, as shown in Figure 2.

According to our data, there is an existing demand for investment of £250,000 and upwards (31%). Whilst LIFs will not address this demand, the sector does count with certain social investors such as Social and Sustainable Capital, able to provide unsecured lending of £250,000 and upwards.

Strategic approach

•

Statement of position a. Major market failures and weaknesses According to London’s LEP Jobs and Growth Plan,21 major market failures and challenges that need to be addressed include: •

•

Unemployment: The gap between London’s employment rate and that of the country has not closed - based on the June 2014 ONS Regional Labour Market Statistics, unemployment in London reached 7.5%, compared to 6.6% in UK. Child poverty: London has the highest rate of child poverty in the country; according to Child Poverty Action Group, a total of 592,000 children (circa 37% of all children living in London) are living below the poverty line. Rough sleeping and homelessness: The number of households in London experiencing homelessness is increasing – in 2012/13 it reached 16,000, compared to just under 9,500 in 2010/1Additionally, 28,150 households sought assistance from local authorities and a total of 6,437 people were reported to be sleeping in the street (13% increase from the previous year). Pollution: Despite the fact that London’s air quality is continuously monitored, levels of PM10 and NO2 continue to exceed EU limit values.

We believe disabled people and people living with an impairment represent an important failure that needs to be addressed and that therefore has been included in our analysis:

21 2014-2020 European Structural & Investment Funds Strategy for London, London Enterprise Panel, January 2014.

Deaf and disabled: According to the 2012/13 Family Resources Survey,22 a total of over 1.2m people living in London have a disability or impairment. Looking at the data from July 2012, disabled people on the Work Programme were half as likely to achieve a job as those without a disability

b. LEP investment priorities and objectives The London LEP has been allocated £678m for the period 2014-2020. The investment priorities for this LEP area include: •

SME competitiveness: enhancing the competitiveness of London’s SMEs to support innovation and growth; (estimated £49m)

•

Skills and employment: ensuring Londoners have the appropriate skills to gain sustainable jobs; (estimated £488m)

•

Investing in technology and innovation: strengthening science and technological development and fostering innovation in London enterprises to drive innovation and growth; (estimated £39m)

•

Reducing carbon emissions: promoting the adoption of low carbon and resource efficiency technologies (estimated £102m)

Additionally, a special focus is drawn upon social inclusion: •

“(…) Intensive support for the most disadvantaged and disengaged to help them become job ready using mentoring and other tailored interventions, with a focus on children in care/care leavers, those with care responsibilities, homeless young people, travellers, children and young people that

22 2012/13 Family Resources Survey https://www.gov.uk/government/ uploads/system/uploads/attachment_data/file/325491/family-resources-survey-statistics-2012-2013.pdf, pp. 61-64.

offend in custody and community particularly those involved in gang-related activity or who have committed gang-related offences, refugee/migrant children, young people who have been excluded from school, young people with mental health, drugs/ alcohol abuse or other disabilities (…)” c. LEP 2014-2020 LIF allocation (…) “Further work will be commissioned to inform the development of financial instruments to identify, for instance, options for implementing, financial products to be offered, and financial recipients targeted. This will also examine support for businesses in the social economy, which can deliver social and environmental benefits through, for example, the establishment of a Local Impact Fund.”

Recommendations for a Local Impact Fund Our approach Based on our research and our findings from 169 social enterprises in Greater London, we would recommend a Local Impact Fund for the London LEP area with the following characteristics: •

A large investment fund of > £10m.

•

A wrap around business support programme, providing organisational development support, especially investment readiness support.

•

Investment funding of under £1m,with a primary focus of sub £250,000.

A focus on providing unsecured loans.

At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

•

Supporting organisations in the most deprived areas that achieve the greatest social impact; especially: --

Targeting social enterprises that work in the most deprived boroughs.

Supporting start-ups and existing organizations.

Providing a comprehensive programme of wrap around business support, including small business grants, access to space and networks and investment readiness support.

CHESHIRE AND WARRINGTON Key findings Summary SIB has reviewed its own portfolio of historic grant and loan investments in Cheshire and Warrington and assessed demand for new social investment and investment readiness support services to paint a picture of the social investment needs of the sector in the future. Here are some key findings, explored in further detail below: •

13 charities and social enterprises have taken on approximately £1.5m social investment and / or grant support.

•

13 charities and social enterprises received grants totalling over £1.3m. Of these, 71% were development grants and 29% capital.

•

47% of all grants were for investment readiness support.

•

And of the 13 organisations, 2 took on loans totalling over £133k.

•

100% of loans were of less than £250,000. 50% of charities and social enterprises that received a loan had received a grant.

•

A fixed interest rate of 6% was applied to both organisations that took on a loan, for a period between 5 - 10 years.

•

People with disabilities are the main beneficiary group supported (26%) followed by elderly people (19%) and children, young people and families (15%).

•

Social enterprises in Cheshire and Warrington reflect national statistics in that: --

Social enterprises work primarily in physical, mental health and healthy living (43%); education and learning skills (24%); and housing, property and essential needs (14%).

Overview of the area Introduction Cheshire and Warrington includes 3 Local Authorities: Cheshire West and Chester, Warrington and Cheshire East, as shown in Figure 1.It is one of the strongest and best performing economies in England, with high workforce productivity levels and strong built-in enterprise culture. The ambition of the LEP is to build upon existing strengths and opportunities and address those issues that are constraining growth.23 Figure 1.1 Cheshire and Warrington •

Area: 913.3 sq mi

•

Population: 902,200 (2011 est.)28

•

Density: 988.61 sq mi

LSOAs suffer from high levels of deprivation (32 rank amongst the 10% most deprived in England) and others rank amongst the least deprived in the country.

Market failure Access to suitable finance on the rights term to support business growth and competitiveness has been a key challenge for many years. This is especially true for charities and social enterprises seeking make a growing contribution to both urban and rural economies, tackling market failures and enhancing key service provision. The section below provides information on charities and social enterprises based in Cheshire and Warrington. Summary of our findings a. State of the sector A breakdown of social enterprises by local authority indicates that Cheshire West and Cheshire has the highest concentration of charities and social enterprises (62% of all social enterprises in our study). According to our research, the main sectors social enterprises are involved with in Chester and Warrington are: physical, mental health and healthy living (43%); education and learning skills (24%); and housing, property and essential needs (14%). b. Sample study

•

LEP allocation: The Cheshire and Warrington LEP has been allocated £124.2m from the ERDF, ESF and EAFRD (£66.8m, £54.8m and £2.5m respectively).

•

Deprivation: There are large health inequalities between communities in Cheshire and Warrington whereby certain

23 UK Population Estimates, ONS, June 2011

Our analysis and sample is based on SIB’s own portfolio of historic grant and loan investments in Cheshire and Warrington. The data collection provided a total dataset of 18 investments:24 2 from Communitybuilders Fund, 4 from Futurebuilders Fund, 2 from ICRF and 9 from SEIF.

24 Corresponding to 13 social enterprises.

Our research identified one social enterprise receiving two additional investments (a capital grant totaling £1.4m and a capital loan totaling over £2.5m). These figures have been excluded from our analysis as we consider it could potentially skew the results of our findings, however, it does highlight an existing demand for larger investments.

Figure 2.1 Loans by total amount Greater than £500,000 £250,000-£500,000

£100,000-£250,000

Nonetheless, data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study. c. Grants analysis Based on the data, a total of 13 social enterprises received 16 grants, totalling over £1.3m. •

88% of all grants received were less than £250,000;

•

Average size of grants was £85,292 although the overall sizes of grants varied from small revenue feasibility grants of £2,420 up to capital grants of £450,000;

•

71% of all grants were development grants and out of these 67% for investment readiness support, 17% for capacity building and 17% feasibility grants.

d. Loans analysis The data from our sample study has only identified two loans25 to two different social enterprises, totalling over £133k.

£50,000-£100,000

Less than £50,000

•

One of the social enterprises had also received a business support grant;

•

The median and mean average size of loans was £66,600;

•

The interest rate applied to both loans was 5% for a period of 5-10 years;

•

All loans received capital repayment holidays of 1-12 months.

We note our sample indicates a small historical demand for social investment in the area, however, we also consider our sample study of 13 organisations not representative enough for the whole Cheshire and Warrington.

Strategic approach Statement of position a. Major market failures and weaknesses

Figure 2.1 shows both loans were in the range of £50,000 - £100,000. Some key findings are:

According to Cheshire and Warrington’s European Structural and Investment Funds Strategy,26 major market failures and challenges that need to be addressed include:

25 We have excluded a capital loan of £2,535,000 from our analysis as we considered it would skew the figures of our analysis.

26 Cheshire and Warrington LEP Strategic Economic Plan, 2014-2020, Cheshire and Warrington LEP, January 2014.

•

Unemployment: Pockets of worklessness are still present and in certain parts of Warrington, Ellesmere Port and Crewe, more than 30% of the working age residents are in receipt of out of work benefits. Youth unemployment is particularly high with 14% of 18-24 year olds unemployed in 2012, compared to less than 5% of 25-49 year olds.

The main investment priorities for this LEP area include: •

Technological development and innovation: support innovation and specialisation in systems, processes, products and services in order to gain and maintain competitive advantage; (£19.8m)

•

SME competitiveness: supporting businesses to respond to challenges and exploit opportunities for growth, enabling them to start-up, grow and prosper in a competitive marketplace; (estimated £21.3m)

•

Education and skills: supporting young people to secure the skills needed training on current and anticipated future skills gaps and encouraging a culture of workforce development and lifelong learning; (estimated £21.9m)

•

Employment and labour mobility: supporting people who are outside employment to make progress towards and access work, including self-employment; (estimated £21.9m)

We believe an important market failure for Cheshire and Warrington is an ageing population, as it could have considerable consequences on the delivery of public services:

•

Social inclusion: support disadvantaged groups to help them overcome barriers they face to inclusion, including building skills and confidence through tailored programmes; (estimated £11m)

•

Low carbon economy: support businesses to explore and develop low carbon markets and technologies and improve their energy and resource efficiency. (estimated £13.8m)

•

Growing demand for skills: Despite overall strong skills performance, there are recognised skills gaps in the Cheshire and Warrington economy. People with low skills level report the highest levels of inactivity (around half of them are qualified below Level 2), demonstrating the importance to invest in skills to support economic engagement. Business competitiveness: Forces of globalisation in services and manufacturing (key sector in the area) are providing an increasingly competitive trading environment for their businesses and challenges to attract high quality investment.

Ageing population: The 2011 ONS population projections suggest the retirement age population will increase by 27% between the years 2011 and 202Levels of economic activity and employment will need to increase in order to maintain its economic contribution and support the growth aspirations of the business base.

b. LEP investment priorities and objectives The Cheshire and Warrington LEP has been allocated £124.2m for the period 2014-2020.

c. LEP 2014-2020m LIF allocation “In consultation with our local and North West social enterprise support organisations and relevant national partners, it is proposed that Cheshire and Warrington Social Enterprise Partnership with SENW and the Social Investment Group will design a Local Impact

Fund to provide a joined up financial offer to charities and social enterprises in the LEP area. (...) We anticipate that the fund will offer loan finance and have a package of support alongside to help social enterprise and charities grow and expand. It is estimated that the fund will allow 80 social enterprises to receive business support along their growth journey with 20 investments to be made to enable social enterprises to develop and scale up their services.”

Recommendations for a Local Impact Fund Our approach Based on our research and our findings from 169 social enterprises, we would recommend a Local Impact Fund for Cheshire and Warrington with the following characteristics: •

A small investment fund of < £5m.

•

A wrap around business support programme, providing organisational development support, especially investment readiness support.

•

Investment funding of under £250,000, with a primary focus of sub £100,000.

•

A focus on providing unsecured loans.

At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

Supporting organisations in the most deprived areas that achieve the greatest social impact; especially: --

Supporting local authority delivery of public services.

Focusing on disadvantaged groups, including an ageing population.

CUMBRIA Key findings Summary SIB has reviewed its own portfolio of historic grant and loan investments in Cumbria and assessed demand for new social investment and investment readiness support services to paint a picture of the social investment needs of the sector in the future. Here are some key findings, explored in further detail below:

16 charities and social enterprises have taken on approximately ÂŁ1.5m social investment and / or grant support.

16 charities and social enterprises received grants totalling over 894k. Of these, 83% were development grants and 17% capital grants.

21% of all grants were for investment readiness support.

And of the 16 organisations, 3 took on a loans totalling over ÂŁ577k.

67% of loans were of less than ÂŁ250,000. 100% of charities and social enterprises that received a loan had received a grant.

Social enterprises in Cumbria work primarily in culture, arts, sports and heritage (29%); education and learning skills (14%); and physical, mental health and healthy living (14%).

The main beneficiary group supported by charities and social enterprises in Cumbria is the general public (53%), followed by children and young families (11%) and people with disabilities (11%). The fact that most of these address their activities to the general public can be mainly explained because of the significant number of them that have taken over a community asset to provide services to the population (please refer to Section 2).

Overview of the area Introduction Cumbria includes 6 Local Authorities: Carlisle, Allerdale, Copeland, South Lakeland, Eden and Barrow-in-Furness, as shown in Figure 1.Cumbria is the second largest County in England, constituting almost half the land mass of the North West, and a very sparse population. It is mainly a rural area with manufacturing being its key sector in terms of output and employment.

Figure 1.1 Cumbria •

Area: 2,613 sq mi

•

Population: 499,800 (2011 est.)32

•

Density: 191 sq mi

•

Deprivation: Even though Cumbria’s ranking continues to improve, there are still pockets of both urban and rural deprivation across the area. Barrow-in-Furness is the most socially deprived local authority in Cumbria (ranked 32nd most deprived district in England) followed by Copeland.

Market failure Based on the main market failures of Cumbria, an important challenge for charities and social enterprises seeking to grow their operations and impact is access to appropriate finance. The LEP recognises the importance of wide employment support and local programmes to develop the social enterprise activity in communities to create a bridge to employment in disadvantaged areas. Summary of our findings a. State of the sector A breakdown of social enterprises by local authority indicates that social enterprises in Cumbria are widely spread across the different local authorities, with no specific concentration in any local authority. According to our research, the main sectors social enterprises are involved in include: culture, arts, sports and heritage (29%); education and learning skills (14%); and physical, mental health and healthy living (14%).

•

LEP allocation: The Cumbria LEP has been allocated approximately £87.2m from the ERDF, ESF and EAFRD (£32m, £46m and £9.2m respectively).

Our study has revealed a significant number of social enterprises in Cumbria have taken over community assets with heritage value and significance to provide a facility for lessons, meetings and venue hiring for conferences and weddings.

27 UK Population Estimates, ONS, June 2011

b. Sample study Figure 2.1 Loans by total amount

Our analysis and sample is based on SIB’s own portfolio of historic grant and loan investments in Cumbria. The data collection provided a total dataset of 27 investments:28 2 from ACF, 15 from Communitybuilders Fund, 4 from Futurebuilders Fund, 1 from ICRF and 5 from SEIF).

Greater than £500,000

We note this data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study.

£250,000-£500,000

£100,000-£250,000

£50,000-£100,000 Less than £50,000

c. Grants analysis Based on the data, a total of 16 social enterprises received 24 grants, totalling over £894k.

As shown in Figure 2.1, a total of 3 social enterprises took on 3 loans, with the following characteristics:

•

67% of all loans were of less than £250,000;

•

100% of all social enterprises that received a loan had received grants for capacity building and investment readiness support;

•

The mean average size of loans was £192,480;

•

Interest rates ranged between 2% - 5%, with larger loans taking on higher interest rates (5%) and the largest loan (£282,440) taking on the longest repayment period (25 years).

•

100% of all grants received were less than £250,000; Average size of grants was £37,275 although the overall sizes of grants varied from small feasibility grants of £3,000 up to capital grants of £145,000;

•

83% of all grants were development grants: 40% for capacity building, 35% for feasibility, and 25% for investment readiness support;

•

19% of social enterprises that received a grant took on a loan at the same time or subsequently after receiving it.

d. Loans analysis Based on our data, 3 social enterprises took on three investments, totalling over £577k.

28 Corresponding to 16 charities and social enterprises.

Strategic approach Statement of position a. Major market failures and weaknesses According to Cumbria’s European Structural and Investment Fund Strategy,29 major market failures and challenges that need to be addressed include:

29 Cumbria LEP Strategic Economic Plan, 2014-2020, Cumbria LEP, January 2014.

•

Unemployment: Despite overall unemployment rate remaining low, there are still pockets of both urban and rural unemployment and worklessness, particularly among the young population. Certain neighbourhoods in west Cumbria have been included on the list of hotspots where the proportion of young people claiming out of work benefits is double the national average.

•

Physical connectivity: Cumbria’s expansive rural area is geographically isolated and distant from regional, national and European markets. Road and rail communications remain inadequate and improved access is required to Cumbria’s seaports is needed in order to exploit all trading opportunities.

•

Housing shortages: Cumbria faces a shortage of appropriate and affordable housing, which fails to meet the needs of the population. Housing costs exceed in many instances the income of local people and in certain localised areas there is an outdated housing stock and a shortage of decent attractive family homes.

•

Geographical differences: Difference between the levels of deprivation in each district remains very high: whilst Barrowin-Furness falls in the bottom 10% most deprived areas in the UK and 3rd most deprived in terms of health, South Lakeland is between the 30% least deprived in the UK and 7th least deprived in terms of crime.

b. LEP investment priorities and objectives

reduce barriers to business growth alongside providing high quality specialist support to enable businesses within the key sectors to thrive. •

Skills development: supporting workforce progression and development programmes to ensure a strong local supply of skilled people.

•

Transport infrastructure improvements: develop a network of key transport initiatives to support growth and improvements to existing infrastructure to enable companies to grow and compete and help individuals (particularly those in the most disadvantaged areas) to have access to job opportunities which are created.

•

Low carbon economy: developing a programme for low carbon business growth and energy efficient measures that includes: support to companies using renewable energy generation, development of effective supply chains and appropriate, up-to-date skills within the low carbon and environmental technologies sectors.

c. LEP 2014-2020m LIF allocation (…) “ We are currently investigating how we can develop a Local Impact Fund model for Cumbria, drawing together the funding available through Structural Funds alongside, national Investors such as the Social Investment Business (SIB) (national provider), Big Society Capital and also local investors i.e. local authorities and social housing providers.”

The Cumbria LEP has been allocated £87.2m for the period 2014-2020. The main investment priorities for this LEP area include: •

Business growth: fostering an entrepreneurial culture and working through the network of partners to identify and

Recommendations for a Local Impact Fund Our approach Based on our research and our findings, we would recommend a Local Impact Fund for Cumbria with the following characteristics: •

A small investment fund of < £5m.

•

A wrap around business support programme, providing organisational development support, especially investment readiness support.

•

Investment funding primarily of under £250,000.

•

A focus on providing unsecured loans.

At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

Supporting organisations in the most deprived areas that achieve the greatest social impact; especially: --

Social enterprises that engage with the broader public.

Focusing on investment readiness and community asset development.

GREATER MANCHESTER Key findings Summary SIB has reviewed its own portfolio of historic grant and loan investments in Greater Manchester and assessed demand for new social investment and investment readiness support services to paint a picture of the social investment needs of the sector in the future. Here are some key findings, explored in further detail below: •

55 charities and social enterprises have taken on over £14.9m social investment and / or grant support.

•

50 charities and social enterprises received grants totalling approximately £5.4m. Of these, 61% were development grants and 39% capital grants (mainly to buy or refurbish an asset).

•

24% of all grants were for investment readiness support.

•

And of the 55 organisations, 26 took on loans totalling over £9.5m.

•

61% of loans were of less than £250,000.

•

77% of charities and social enterprises that received a loan had received a grant.

•

Based on our survey, the estimated demand for finance from social enterprises is £6.6m.

•

The Greater Manchester demographic statistics reflect national demographics, in that: --

Social enterprises typically work in boroughs with the highest levels of deprivation.

Social enterprises work primarily in physical, mental health and healthy living (29%), education and learning skills (21%) and employment and training (18%).

Young families and children are the main beneficiary group supported (21%) followed by people with disabilities (14%) and unemployed (13%).

fourth most deprived local authority in England and second in terms of income deprivation.

Overview of the area Introduction Greater Manchester includes 10 Local Authorities as shown in Figure 1.It is home to nearly 100,000 businesses and generates a GVA of £48bn (approximately 4% of the national economy). However, the global economic downturn created unprecedented and extremely difficult economic conditions which need to be addressed.30 Figure 1.1 Greater Manchester

•

Area: 493 sq mi

•

Population: 2,682,500 (2011 est.)35

•

Density: 5,441 sq mi

LEP allocation: The Greater Manchester LEP has been allocated approximately £356m from the ERDF and ESF (£194m and £162m respectively).

Based on the major market failures of Greater Manchester, a key problem for charities and social enterprises seeking to grow their operations and impact is access to appropriate finance. The section below provides information on charities and social enterprises based in Greater Manchester. Summary of our findings a. Existing finance gap SIB has been conducting a ‘future financing needs’ survey of the sector since 201Latest data collected includes a total of 411 respondents, out of which 5% were relevant to Greater Manchester. The information contains some key findings: •

89% of the survey respondents stated an interest in social investment, mainly to grow an existing business (32%) and to become investment ready (24%);

•

37% of respondents sought investment of less than £250,000;

•

63% of respondents serve a local area (out of which 58% serve only a local area and the remaining 37% serve their locality alongside having a larger geographical reach);

•

84% of respondents were social enterprises with an annual turnover of less than £500,000, 37% had an annual turnover between £100,000 – 500,000;

•

58% of respondents indicated having difficulty accessing finance.

Deprivation: Manchester followed by Salford are the most deprived local authorities in Greater Manchester. Manchester is ranked

30 Greater Manchester Met. C: Total Population, Great Britain Historical GIS, 2011.

Market failure

Based on the survey results, the total estimated demand for finance from social enterprises in Greater Manchester is of £6.6m.31 b. State of the sector A breakdown of social enterprises by local authority indicates that Manchester has the highest concentration of charities and social enterprises (42% of all social enterprises in our study) followed by Salford (11%). Manchester is considered the most deprived local authority in Greater Manchester, followed by Salford (ranked 4th and 18th most deprived local authorities in England and Wales, respectively). This reinforces the idea that social enterprises do work in the most socially deprived areas. According to our research, the main sectors social enterprises are involved with in Greater Manchester are: physical, mental health and healthy living (29%); education and learning skills (21%); and employment and training (18%). c. Sample study Our analysis and sample is based on SIB’s own portfolio of historic grant and loan investments in Greater Manchester. The data collection provided a total dataset of 114 investments:32 9 from ACF, 12 from Communitybuilders Fund, 51 from Futurebuilders Fund, 10 from ICRF and 32 from SEIF). We note this data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study.

d. Grants analysis Based on the data, a total of 50 social enterprises received 83 grants, totalling over £5.4m. •

98% of all grants received were less than £250,000;

•

Average size of grants was £65,356 although the overall sizes of grants varied from small grants for social impact reporting measures of £1,750 up to capital grants of £550,000;

•

61% of all grants were development grants: 40% for investment readiness support, 29% for capacity building, 25% for feasibility and 6% for social impact reporting;

•

42% of social enterprises that received a grant took on a loan at the same time or subsequently after receiving it.

Our analysis suggests that charities and social enterprises in Greater Manchester received smaller grants when compared to other LEPs such as London or West of England. e. Loans analysis Based on our data, a total of 26 charities and social enterprises received 31 loans, totalling approximately £9.5m. Figure 2.1 Loans by total amount Greater than £500,000

£250,000-£500,000

£100,000-£250,000

8 5

£50,000-£100,000

31 We note there was a low rate of response for Greater Manchester, and therefore the demand is not considered representative for the area. 32 Corresponding to 55 social enterprises.

Less than £50,000

8 6

Figure 2.1 shows a breakdown of the loans by range of size. Some of the key findings are: •

61% of all loans were of less than £250,000;

•

77% of all social enterprises that received a loan had received business support in the form of grants, mainly for capacity building;

•

The median average size of loans was around £120,000;

•

Interest rates ranged between 0% - 6%, with larger loans taking on higher interest rates and longer repayment periods (up to 25 years for loans greater than £500,000)

•

Typical interest rate was between 5%6% and the median average terms of repayment was 7 years.

We note an existing demand (39%) for loans greater than £250,000. Whilst a LIF would not address this demand, other social investors such as Social and Sustainable Capital would be able to provide unsecured lending of £250,000 and upwards.

Strategic approach

and as at January 2014, 278,00034 people were unemployed. •

Low skilled workforce: 11.6% of people hold no qualifications (compared to 9.7% across the UK), which accounts for three quarters of the £7.2bn difference in productivity between Greater Manchester and UK’s average.

•

Business base deficit: Despite strong numbers of high-growth firms, Greater Manchester suffers from low levels of new start-ups, weak business density and poor business survival rates.

•

Child poverty: Over a quarter of all children living in Greater Manchester (dependants under the age of 20) are living in poverty; 40% of children living in Manchester fall below the poverty line.

We believe an important market failure in Greater Manchester is fuel poverty: with more than 250,000 households living in fuel poverty, this highlights the need to develop affordable, efficient energy infrastructure. •

Statement of position a. Major market failures and weaknesses According to Greater Manchester’s European Structural and Investment Fund Strategy,33 major market failures and challenges that need to be addressed include: •

Unemployment: Unemployment has risen sharply since the start of the recession with unemployment rates higher than the national average (9% against 6.6% of UK average). Young people are the most severely affected

33 Greater Manchester LEP Strategic Economic Plan, 2014-2020, Greater Manchester LEP, January 2014.

Fuel poverty: 16% of all households in Manchester are living in fuel poverty; 11% in Trafford, Salford, Bolton, Oldham and Rochdale; 10% in Bury Tameside and Stockport.

b. LEP investment priorities and objectives The Greater Manchester LEP has been allocated £356m for the period 2014-2020. The main investment priorities for this LEP area include: •

SME competitiveness: to support the growth of existing SME’s and encourage individuals to start and grow a business to enhance and diversify Greater Manchester’s business base; (estimated £70m)

34 ONS, January 2014.

•

Skills, employment and inclusion: providing intensive “wrap around” support for young people, long term unemployed and inactive working age residents to overcome complex barriers to finding and sustaining a job (estimated £138m) Investing in science and innovation: strengthening science and technological development and supporting Greater Manchester’s companies to innovate and exploit the commercialisation opportunities of areas of strength; (estimated £52m) Low carbon economy: increasing the capacity and funding to promote a low carbon infrastructure and increased resource efficiency (estimated £50m).

Recommendations for a Local Impact Fund Our approach Based on our research and our findings, we would recommend a Local Impact Fund for Greater Manchester with the following characteristics: •

A medium sized investment fund of £5m £10m.

•

A wrap around business support programme, providing organisational development support, especially investment readiness support.

•

Investment funding of under £500,000, with a primary focus of sub £250,000.

c. LEP 2014-2020m LIF allocation (…) “Part of the Social Innovation Driver (SID) will be a Local Impact Fund which will allow for investment in the development of Social Enterprises in GM, this will be supported by a social enterprise support programme which will provide tailored business support to social enterprise. SID will provide business support and loans to the social enterprise sector, assisting the sector to grow and become investment ready, as well as investing in the potential for social innovation. (…) Supporting the growth of the sector will deliver more devolved, resilient and empowered local communities, especially if SID can support the development of a greater number of financially sustainable social enterprises. A LIF would support the delivery of social outcomes, reducing demand for public services, create, and foster a mechanism to invest in social innovation.”

•

A focus on providing unsecured loans.

At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

Supporting organisations in the most deprived areas that achieve the greatest social impact; especially: --

Social enterprises with high growth potential that could be supported to deliver larger public size contracts.

LANCASHIRE Key findings Summary SIB has reviewed its own portfolio of historic grant and loan investments in Lancashire and assessed demand for new social investment and investment readiness support services to paint a picture of the social investment needs of the sector in the future. Here are some key findings of charities and social enterprises in Lancashire, explored in further detail below: •

26 have taken on circa £4.6m social investment and / or grant support.

•

26 received grants totalling over £3.7m. Of these, 50% were development grants and 50% capital grants (mainly to buy or refurbish an asset).

•

26% of all grants were for investment readiness support.

•

And of the 26 organisations, 7 took on loans totalling over £853k.

•

100% of loans were of less than £250,000.

•

100% of charities and social enterprises that received a loan had received a grant.

•

Based on our survey, the estimated demand for finance from social enterprises ranges between £1.5m - £7m.

•

Organisations in the Lancashire region are mainly supporting the general public (23%), followed by people with disabilities (18%) and elderly people (16%). This can be explained in great part due to the nature of social enterprises in the area, whereby many are care and medical centres offering services to the community.

•

The Lancashire demographic statistics reflect national demographics, in that:

Social enterprises typically work in boroughs with the highest levels of deprivation.

Social enterprises work primarily in physical, mental health and healthy living (34%), education and learning skills (17%) and employment and training (13%).

Overview of the area

•

LEP allocation: The Lancashire LEP has been allocated approximately £243.83m from the ERDF and ESF.

•

Deprivation: Lancashire contains large areas of severe ingrained deprivation: 6 local authorities are ranked in the 50 most deprived in the country, with three of these, Blackpool, Burnley and Blackburn with Darwen, falling into the 10% most deprived.

Introduction Lancashire includes 14 Local Authorities (Blackpool, Burnley, Chorley, Fylde, Hyndburn, Lancaster, Pendle, Preston, Ribble Valley, Rossendale, South Ribble, West Lancashire, Wyre and Blackburn with Darwen) as shown in Figure 1.Lancashire is the 4th largest local economy in the North of England, generating over £23bn in GVA and over 44,000 businesses. Although it has experienced sustained economic growth over the last decade, the area’s average economic performance still lags behind that of the UK and neighbouring areas.

Market failure

•

Area: 1,189 sq mi

Based on the major market failures of Lancashire, a key problem for charities and social enterprises seeking to grow their operations and impact is access to appropriate finance. The section below provides information on charities and social enterprises based in Lancashire.

•

Population: 1,461,400 (2011 est.)40

Summary of our findings

•

Density: 1,229 sq mi

a. Existing finance gap

Figure 1.1 Lancashire

SIB has been conducting a ‘future financing needs’ survey of the sector since 201Latest data collected includes a total of 411 respondents, out of which 3% were relevant to Lancashire. The information contains some key findings:

35 UK Population Estimates, ONS, June 2011.

•

91% of the survey respondents stated an interest in social investment, mainly to grow an existing business (43%) or to start a new project (36%);

•

45% of respondents were unclear about the level of investment they would need, 36% sought investment of less than £250,000;

•

82% of respondents serve a local area (out of which 67% serve only a local area and the remaining 33% serve their locality alongside having a larger geographical reach);

•

67% of respondents were social enterprises with an annual turnover of less than £500,000, 36% had an annual turnover

between £100,000 – 500,000; •

67% of respondents indicated finding it difficult or very difficult to access finance.

Based on the survey results, the total estimated demand for finance from social enterprises in Lancashire ranges between £1.5m and £7m.36

Based on the data, a total of 26 social enterprises received 42 grants, totalling over £3.7m. •

91% of all grants received were less than £250,000;

•

Average size of grants was £88,671 although the overall sizes of grants varied from small grants for social impact reporting measures of £4,750 up to capital grants of £366,363;

•

50% of all grants were development grants out of which 52% were for investment readiness support, 24% were for capacity building, 19% were for feasibility and 5% were for social impact reporting;

•

27% of social enterprises that received a grant took on a loan at the same time or subsequently after receiving it.

b. State of the sector A breakdown of social enterprises by local authority indicates that Blackburn with Darwen has the highest concentration of charities and social enterprises (19% of all social enterprises in our study) followed by Pendle (15%) and Blackpool (12%). Blackpool and Blackburn with Darwen are considered to be amongst the most deprived local authorities in Lancashire. This reinforces the idea that social enterprises do work in the most socially deprived areas. According to our research, the main sectors social enterprises are involved with in Lancashire are: physical, mental health and healthy living (34%), education and learning skills (17%) and employment and training (13%).

Our analysis indicates that charities and social enterprises in Lancashire received significant support in the form of capital grants (total £2.7m) compared to the amount received in development grants (£1m).

c. Sample study

e. Loans analysis

Our analysis and sample is based on SIB’s own portfolio of historic grant and loan investments in Lancashire. The data collection provided a total dataset of 49 investments:37 3 from Communitybuilders Fund, 13 from Futurebuilders Fund, 3 from ICRF and 30 from SEIF).

Based on our data, a total of 7 charities and social enterprises received 7 loans, totalling over £853k.

We note this data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study. d. Grants analysis

36 Estimates are based on respondents indicated range of demand. Lower and upper levels have been calculated assuming minimum and maximum investment levels. 37 Corresponding to 26 charities and social enterprises.

Figure 2.1 Loans by total amount Greater than £500,000 £250,000-£500,000

£100,000-£250,000 £50,000-£100,000

Less than £50,000

Figure 2.1 shows a breakdown of the loans by range of size. Some of the key findings are: •

100% of all loans were of less than £250,000;

•

71% of all loans were in the range of £100,000 - £250,000 and the median average size of loans was around 121,857;

•

77% of all social enterprises that received a loan had received business support mainly in the form of capital grants and investment readiness;

•

Interest rates ranged between 0% - 6%, with larger loans taking on higher interest rates and longer repayment periods (up to 26 years for loans greater than £250,000)

•

Typical interest rate was between 2% - 6% and the median average terms of repayment was 6 years.

•

57% of all social enterprises that received a loan received capital repayment holidays, ranging between 1 and 18 months (longer repayment holidays were granted to larger loans).

Strategic approach Statement of position a. Major market failures and weaknesses According to Lancashire’s European Structural and Investment Fund Strategy,38 major market failures and challenges that need to be addressed include: •

Economic inactivity: There are significant geographic differences across Lancashire: 6 districts have economic inactivity rates well below the national average, with Blackburn

38 Lancashire LEP Strategic Economic Plan, 2014-2020, Lancashire LEP, January 2014.

with Darwen and Wyre’s rates exceeding 30%. At the same time, the level of entrepreneurial activity is lower than the rest of UK with business formation rates, long term business survival rates and business densities performing below the national average. •

Low skilled workforce: Only 36% of employed people in the Lancashire area are actually qualified a level 4 or above, which is below the national average of 40%. Changes within the economy will increase the demand for higher skills in key growth sectors.

•

Business base deficit: Only 20% of Lancashire’s wealth is generated by the private services sector although 78% of employment is in service related activities. Professional, business and financial services remain heavily underrepresented.

•

Health inequalities: Lancashire has some of the worst life expectancy figures in England and Wales with Blackpool, Burnley, Blackburn with Darwen and Hyndburn ranked in the worst eight districts.

b. LEP investment priorities and objectives The Lancashire LEP has been allocated £243.83m for the period 2014-2020. The main investment priorities for this LEP area include: •

Investing in infrastructure, development and environment: developing, promoting and protecting key infrastructure and environmental assets to unlock growth potential in the economy; (estimated £34.14m)

•

Business growth and innovation: encouraging the formation of new enterprises, expansion of existing businesses and supporting innovation, including the dissemination and adoption of new technologies; (estimated £65.89m)

•

Growth sectors and supply chain: supporting the development of key growth and employment sectors so they can compete in global markets and create wealth within the local economy; (estimated £52m) Skills and employment: promoting the development of basic level and employability skills and higher-level workforce skills to support to support research, development and innovation; (estimated £49.8m) Social inclusion: investment in employability, skills and social inclusion infrastructure to help the most disadvantaged individuals into employment. (estimated £33m).

Recommendations for a Local Impact Fund Our approach Based on our research and our findings, we would recommend a Local Impact Fund for Lancashire with the following characteristics: •

A small investment fund of < £5m.

•

A wrap around business support programme, providing organisational development support, especially investment readiness support.

•

Investment funding of under £250,000.

c. LEP 2014-2020m LIF allocation

A focus on providing unsecured loans.

(…) “Social Enterprises, like other parts of the economy, are experiencing difficulties with accessing appropriate finance to support growth. In particular this problem is being felt most acutely by smaller/and or developing Social Enterprises. (…) Local Impact Funds Financial Engineering Instrument will add to the opportunities available for this sector. This model will promote investment into the social economy through loans and finance to Social Sector Organisations (SSOs). It would provide affordable finance to achieve sustainable social and economic outcomes together with support for social organisations to develop the financial, managerial and business skills needed to apply for, manage and repay investments. This proposal would likely provide a mix of investment in SSOs together with a programme of tailored business and investment readiness support. It would complement activity being supported through BOOST, Lancashire’s Growth Hub.”

At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

•

Supporting organisations in the most deprived areas that achieve the greatest social impact; especially: --

Focusing on social enterprises that work in physical, mental health and healthy living.

LIVERPOOL CITY REGION Key findings Summary SIB has reviewed its own portfolio of historic grant and loan investments in the Liverpool City Region and assessed demand for new social investment and investment readiness support services to paint a picture of the social investment needs of the sector in the future. Here are some key findings, explored in further detail below: •

49 charities and social enterprises have taken on over £13m social investment and / or grant support.

•

43 charities and social enterprises received grants totalling approximately £4.7m. Of these, 62% were development grants and 38% capital grants (mainly to buy or refurbish an asset).

•

21% of all grants were for investment readiness support.

•

And of the 49 organisations, 22 took on loans totalling over £8.3m.

•

67% of loans were of less than £250,000.

•

73% of charities and social enterprises that received a loan had received a grant.

•

Based on our survey, the estimated demand for finance from social enterprises is £4.1m.

•

The Liverpool City Region demographic statistics reflect national demographics, in that: --

Social enterprises typically work in boroughs with the highest levels of deprivation.

Social enterprises work primarily in physical, mental health and healthy living (35%), education and learning skills (18%) and employment and training (13%).

Young families and children are the main beneficiary group supported (25%) followed by people with disabilities (18%).

Overview of the area

•

Introduction The Liverpool City Region includes 6 Local Authorities (Liverpool, Sefton, St. Helens, Wirral, Halton and Knowsley) as shown in Figure 1.It is considered a strong and important driving force in Northern England’s economy, however, even though its economy has strengthened over recent years, the Liverpool City Region still suffers from an output gap of £8.2m compared to the national picture and requires co-ordinated intervention to ensure latent potential is exploited.

•

Market failure

Figure 1.1 Liverpool City Region

Based on the major market failures of the Liverpool City Region, a key problem for charities and social enterprises seeking to grow their operations and impact is access to appropriate finance. The section below provides information on charities and social enterprises based in the Liverpool City Region.

•

Area: 279 sq mi

Summary of our findings

•

Population: 1,512,600 (2011 est.)44

a. Existing finance gap

•

Density: 5,421 sq mi

SIB has been conducting a ‘future financing needs’ survey of the sector since 201Latest data collected includes a total of 411 respondents, out of which 5% were relevant to the Liverpool City Region. The information contains some key findings:

LEP allocation: The Liverpool City Region LEP has been allocated approximately £190m from the ERDF and ESF (£112.3m and £77.7m respectively).

39 “Resident population”, http://www.nomisweb.co.uk.

Deprivation: The Liverpool City Region contains 34 of the top 100 most severely income deprived LSOAs, with Liverpool being the most deprived local authority in the country. It also has an above average level of people in receipt of Job Seekers Allowance.

•

94% of the survey respondents stated an interest in social investment, mainly to start or grow an existing project;

•

72% of respondents were already established social enterprises with an annual turnover greater than £100,000, 17% had an annual turnover of £20,000 or less, 11% had an annual turnover between £20,000 £100,000;

•

67% of respondents indicated having difficulty accessing finance.

Based on the survey results, the total estimated demand for social investment in the Liverpool City Region is of £4.1m.

b. State of the sector A breakdown of social enterprises by local authority indicates that Liverpool has the highest concentration of charities and social enterprises (61% of all social enterprises in our study). Liverpool is considered the most deprived local authority in England, with certain neighbourhoods falling in the 1% most deprivedAnfield, Speke, Everton and Toxteth. This reinforces the idea that social enterprises do work in the most socially deprived areas. According to our research, the main sectors social enterprises are involved with in the Liverpool City Region are: physical, mental health and healthy living (35%); education and learning skills (18%); and employment and training (13%). c. Sample study Our analysis and sample is based on SIB’s own portfolio of historic grant and loan investments in the Liverpool City Region. The data collection provided a total dataset of 100 investments:40 17 from ACF, 10 from Communitybuilders Fund, 36 from Futurebuilders Fund, 5 from ICRF and 32 from SEIF). We note this data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study.

•

Average size of grants was £65,621 although the overall sizes of grants varied from small grants for social impact reporting measures of £5,000 up to capital grants of £430,000;

•

36% of all development grants were for capacity building, 33% investment readiness support, 29% for feasibility and 2% for social impact reporting;

•

37% of social enterprises that received a grant took on a loan at the same time or subsequently after receiving it.

•

Our analysis suggests that charities and social enterprises in the Liverpool City Region received smaller grants when compared to other LEPs such as London or West of England. At the same time, 32% of these received more than one grant, suggesting a strong demand for business support.

e. Loans analysis Based on our data, a total of 22 charities and social enterprises received 28 loans, totalling approximately £8.3m.

Figure 2.1 Loans by total amount Greater than £500,000 £250,000-£500,000

4 5

d. Grants analysis £100,000-£250,000

Based on the data, a total of 43 social enterprises received 72 grants, totalling over £4.7m. •

Over 95% of all grants received were less than £250,000;

£50,000-£100,000 Less than £50,000

8 5 6

40 Corresponding to 49 social enterprises.

Figure 2.1 shows a breakdown of the loans by range of size. Some of the key findings are: •

Over 67% of all loans were less than £250,000;

•

73% of all social enterprises that received a loan had received business support in the form of grants, mainly for capacity building and investment readiness;

•

The median average size of loans was around £118,250;

•

Interest rates ranged between 0% - 6%, with larger loans taking on higher interest rates and longer repayment periods (up to 25 years for loans greater than £500,000).

Whilst most loans were in the range of £100,000 - £250,000, we note an existing demand (32%) for loans greater than £250,000. Whilst a LIF would not address this demand, other social investors such as Social and Sustainable Capital would be able to provide unsecured lending of £250,000 and upwards.

Liverpool and Knowsley. It is estimated that in order to reach the equivalent national rate, 46,200 would need to enter employment. •

Health inequalities: The gap in average life expectancy for Liverpool City Region and England is around 7 years; the gap between different areas of the city is 10. Moreover, 33% of children are classified as living in poverty (compared to 20% in England).

•

Business base deficit: The Liverpool City Region has some 37,600 businesses, however, when compared to the national average there exists a deficit of 18,500. Business start-up rates are low and there is a requirement to stimulate new enterprises.

•

Productivity: Productivity in the Liverpool City Region is 83% of the national average, with particular deficits in the service industries.

Strategic approach

Despite the increase in the number of disabled people in employment, we believe this represents an important failure that needs to be addressed and therefore has been included in our analysis:

Statement of position

•

a. Major market failures and weaknesses According to Liverpool City Region’s European Structural and Investment Fund Strategy,41 major market failures and challenges that need to be addressed include: •

Low skilled workforce: 13% of the workforce hold no qualifications and only 25% of people hold a level 4 and above.

•

Unemployment: Employment rates are below the national average, particularly in

41 Liverpool City Region LEP Strategic Economic Plan, 2014-2020, Liverpool City Region LEP, January 2014.

Disabled: The gap between disabled and non-disabled employment rates is larger than nationally – 39.9% of disabled people are in employment compared to 48.8% nationally.

b. LEP investment priorities and objectives The Liverpool City Region has been allocated £190m for the period 2014-2020. The investment priorities for this LEP area include: •

Skills and entrepreneurship: promoting basic, employability and generic work related skills, along with career guidance, wage subsidies and apprenticeships (estimated £64.7m)

•

Key transport and economic infrastructure: to support businesses to be globally competitive and connect to export markets; (estimated £65.8m)

Recommendations for a Local Impact Fund

Increase trade and export: developing further areas of relative strength (including life sciences, bio-medical, high-value manufacturing and advanced materials) by stimulating indigenous sector growth, inward investment and diversification; (estimated £31.5m)

Based on our research and our findings from 49 charities and social enterprises, we would recommend a Local Impact Fund for the Liverpool City Region LEP area with the following characteristics:

Shifting towards a blue/green economy: investing in the transition to a low carbon economy, including renewable energy, low carbon environmental goods and services, logistics, marine energy and maritime sectors (estimated £28m).

Our approach

•

A medium sized investment fund of £5m £10m.

•

A wrap around business support programme, providing organisational development support, especially investment readiness support.

•

Investment funding of under £500,000, with a primary focus of sub £250,000.

c. LEP 2014-2020m LIF allocation (…) “In the coming EU SIF Strategy, we will support a LCR Local Impact Fund. The LCR LIF is designed to support and finance the development of innovative new public services delivery (such as spin outs and mutuals), of early stage preventative support, of community owned and managed assets, of rapid scaling of social businesses through incubation, etc. thus delivering against several objectives, including social innovation, SME/Competitiveness and Social Inclusion. The LIF would work with other wider business support projects to ensure that social businesses also have access to mainstream support.” (…)

•

A focus on providing unsecured loans.

At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

Supporting organisations in the most deprived areas that achieve the greatest social impact; especially: --

Providing a comprehensive investment readiness offer.

Supporting jobs and growth in the most deprived areas.

NORTH EAST Key findings Summary SIB has reviewed its own portfolio of historic grant and loan investments in the North East LEP and assessed demand for new social investment and investment readiness support services to paint a picture of the social investment needs of the sector in the future. Here are some key findings, explored in further detail below: •

60 charities and social enterprises have taken on over £11.5m social investment and / or grant support.

•

46 received grants totalling over £5.7m. Of these, 57% were development grants and 43% capital grants.

•

18% of all grants were for investment readiness support.

•

And of the 60 organisations, 22 took on a loans totalling circa £5.8m.

•

74% of loans were of less than £250,000.

•

88% of charities and social enterprises that received a loan had received a grant.

•

Based on our survey, the estimated demand for finance from social enterprises is over £3.5m.

•

The general public or community is the main beneficiary group (36%) followed by people with disabilities (20%) and elderly people (16%).

•

The North East LEP demographic statistics reflect national demographics, in that: --

Charities and social enterprises work primarily in physical, mental health and healthy living (27%); education and learning skills (20%); and culture, arts, sport and heritage (19%).

Overview of the area Introduction The North East LEP includes 7 Local Authorities (Durham County, Gateshead, Newcastle upon Tyne, North Tyneside, Northumberland, South Tyneside and Sunderland), as shown in Figure 1.The LEP economy has a number of important economic assets, including sector strengths in automotive, low carbon technology, marine, pharmaceuticals or biotechnology, but still has considerable challenges that remain in the area. In order to reach its full potential and become competitive at a national level, it will need to outperform the national average in terms of output, productivity and employment for the next 10 years. •

LEP allocation: The North Eastern LEP has been allocated approximately £473m from the ERDF and ESF plus an additional £7.7m from the Youth Employment Initiative and £10.5m from the EAFRD.43

•

Deprivation: There are pockets of deprivation and multi-generational worklessness across the North East continuously increasing the barriers to employment for individuals and communities.

Figure 1.1 North East •

Area: 3,195 sq mi

•

Population: 1,945,300 (2013 est.)85

•

Density: 609 sq mi

Market failure Based on the main market failures of the North East, an important challenge for charities and social enterprises seeking to grow their operations and impact is access to appropriate finance. The LEP recognises the importance of wide employment support and local programmes to grow and deliver improved social outcomes in the communities. Summary of our findings a. Existing finance gap

42 Resident population 2013, http://www.nomisweb.co.uk. 43 Durham County has a ring-fenced allocation of £134.2m of ERDF and ESF support, and will receive £7.7m as part of the Youth Employment Initiative.

SIB has been conducting a ‘future financing needs’ survey of the sector since 201Latest data collected includes a total of 411 respondents, out of which 5% were relevant to the North East.

The information contains some key findings: •

78% of the survey respondents stated an interest in social investment, mainly to grow an existing business (40%) or to buy or refurbish an asset (25%);

•

39% of respondents sought investment of less than £500,000, 17% sought investment of over £500,000 and 44% were unclear about the level of investment they would need;

•

94% of respondents serve a local area (out of which 59% serve only a local area and the remaining 41% serve their locality alongside having a larger geographical reach) and 6% have a national reach; 67% of respondents were social enterprises with an annual turnover of less than £500,000 (out of which 60% had an annual turnover of less than £100,000);

Our analysis and sample is based on SIB’s own portfolio of historic grant and loan investments in the North East LEP. The data collection provided a total dataset of 116 investments:44 2 from ACF, 29 from Communitybuilders Fund, 28 from Futurebuilders Fund, 4 from ICRF and 53 from SEIF). We note this data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study. d. Grants analysis Based on the data, a total of 46 social enterprises received 93 grants, totalling over £5.7m. •

96% of all grants received were less than £250,000;

•

Average size of grants was £61,372 although the overall sizes of grants varied from small grants of £4,750 for social impact reporting up to capital grants of over £500,000;

•

57% of all grants were development grants out of which 55% were for capacity building, 33% were for investment readiness support, 11% were for feasibility grants and 1% were for social reporting measurement;

•

22% of social enterprises that received a grant took on a loan at the same time or subsequently after receiving it.

Based on the survey results, the total estimated demand for finance from social investment in the North East is over £3.5m. b. State of the sector A breakdown of social enterprises by local authority indicates that social enterprises in the North East LEP are widely spread across the different local authorities, with a slightly higher concentration in Newcastle upon Tyne (25%), which is considered the most deprived local authority in the North East. This reinforces the fact that social enterprises tend to work in the most deprived areas. According to our research, the main sectors social enterprises are involved in include: physical, mental health and healthy living (27%); education and learning skills (20%); and culture, arts, sport and heritage (19%). c. Sample study

Our analysis suggests there has been a historical strong business support demand from charities and social enterprises in the North East LEP, mainly in the form of capital grants but also as capacity building and investment readiness support (circa £900k). e. Loans analysis

44 Corresponding to 60 charities and social enterprises.

Based on our data, 22 social enterprises took on an investment, totalling over £5.8m as shown in Figure 2.

Strategic approach

•

a. Major market failures and weaknesses

74% of all loans were of less than

According to the North East LEP European Structural and Investment Fund Strategy,45 major market failures and challenges that need to be addressed include:

Figure 2.1 Loans by total amount Greater than £500,000

£250,000-£500,000

£100,000-£250,000

•

Low productivity: Measures of productivity are significantly below England’s average, with an output per worker of £37,300 compared to £48,200 in England, resulting in lower wages and lower standards of living.46

•

Business base deficit: The number of businesses per head of population stands at 633 per 10,000 compared to 984 per 10,000 in England. Furthermore, only 1,500 businesses currently export.

•

Low skilled workforce: Only 27.5% of the working age population have skills at Level 4 or above (6.7% below England’s average).

•

Youth unemployment: Overall unemployment in the area stands at 9.8%,47 youth unemployment is a significant problem with 37,900 16-24 year olds unemployed.48

•

Lack of innovation: the current spend on research and development is well below the national levels (0.83% of GDP compared to 1.62% at a UK level) as well as the level of patent applications (53.8 per million inhabitants compared to 90.2 across the UK).

£50,000-£100,000 Less than £50,000

Statement of position

8 2

£250,000; •

88% of all charities and social enterprises that received a loan had received grants mainly in the form of capacity building support and capital grants;

•

The median average size of loans was £128,000;

•

Interest rates ranged between 0% - 6%, with larger loans taking on higher interest rates and longer repayment periods (up to 25 years for loans greater than £500,000);

•

The typical interest rate was between 4%-5% and the median average terms of repayment was 6 years;

•

61% of all charities and social enterprises that took on a loan received capital repayment holidays.

45 North East LEP Strategic Economic Plan, 2014-2020, NELEP, January 2014 46 Office for National Statistics, 2012. 47 North East LEP, September 2013. 48 http://www.nomisweb.co.uk.

We believe an ageing population and the high percentage of disabled and people living with an impairment in the North East LEP represent two important market failures that need to be addressed: •

•

Ageing population: the North East LEP has one of the largest ageing populations in England and is expected to double in the next 20 years (the population aged over 85 across Tyne and Wear is due to rise up to 41,400).49 Disabled: the North East LEP has one of UK’s largest percentage of adults with impairments - 24.5% of people living in Durham County have a limiting long term illness.

b. LEP investment priorities and objectives

•

Recommendations for a Local Impact Fund Our approach Based on our research and our findings from 60 charities and social enterprises, we would recommend a Local Impact Fund for the North East LEP area with the following characteristics: •

A medium sized investment fund of £5m £10m.

•

A wrap around business support programme, providing organisational development support, especially investment readiness support.

•

Investment funding of under £500,000, with a primary focus of sub £250,000.

The North East LEP has been allocated £473m for the period 2014-2020. The main investment priorities for this LEP area include: •

•

Business growth: increasing entrepreneurship, number of start-ups, levels of trading, and contribution to business growth. This will include improving access to finance and business support. Skills and employment: improving skills provision by matching it to economic opportunities and better meeting the needs of businesses, including skills at intermediate and higher level. Innovation: increasing the levels of research and development, and improving the commercialisation of innovation with particular focus on sectors of growth. Inclusive growth: improving employability and skills to overcome barriers preventing access to the labour market.

49 Office for National Statistics, 2013.

Low carbon economy: promoting a low carbon economy through enhanced environmental sustainability, resource efficiency and sustainable transport systems to drive business growth.

•

A focus on providing unsecured loans.

At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

Supporting organisations in the most deprived areas that achieve the greatest social impact; especially: --

Supporting jobs and growth in the most deprived areas.

Addressing health and social care issues regarding an increasing, ageing population.

TEES VALLEY Key findings Summary SIB has reviewed its own portfolio of historic grant and loan investments in Tees Valley and assessed demand for new social investment and investment readiness support services to paint a picture of the social investment needs of the sector in the future. Here are some key findings of charities and social enterprises in Tees Valley, explored in further detail below: •

16 have taken on approximately £2.2m social investment and / or grant support.

•

15 received grants totalling over £1.2m. Of these, 57% were development grants and 43% capital grants (mainly to buy or refurbish an asset

•

And of the 16 organisations, 5 took on loans totalling circa £917k.

•

80% of loans were of less than £250,000.

•

80% of charities and social enterprises that received a loan had received a grant.

•

Tees Valley demographic statistics reflect national demographics, in that: --

Charities and social enterprises work primarily in physical, mental health and healthy living (31%), education and learning skills (22%) and employment and training (11%).

Children, young people and families are the main beneficiary group (29%), followed by people with disabilities (17%) and elderly people (17%).

Overview of the area Introduction Tees Valley includes 5 Local Authorities (Darlington, Hartlepool, Middlesborough, Redcar and Cleveland and Stockton-on-Tees), as shown in Figure 1.It is an area of innovation that contributes over £10bn to the national economy. Although it is considered a major hub for process industries and advanced manufacturing, the area faces challenges which must be addressed to secure future growth.

•

Deprivation: A quarter of Tees Valley’s LSOAs fall within the most deprived 10% in England and only 5% are in the national 10% least deprived.

Market failure Access to finance is a particular problem in Tees Valley acting as an important barrier to charities and social enterprises seeking to grow their operations and impact. The section below provides further information on charities and social enterprises based in Tees Valley.

Figure 1.1 Tees Valley

Summary of our findings

•

Area: 304 sq mi

a. State of the sector

•

Population: 663,000 (2011 est.)24

•

Density: 2,180 sq mi

A breakdown of social enterprises by local authority indicates that social enterprises in Tees Valley are widely spread across the different local authorities. We do note however a slight concentration in Middlesborough, considered the most socially deprived local authority in Tees Valley, which highlights the fact that social enterprises tend to work in the most deprived areas. According to our research, the main sectors social enterprises are involved with in Tees Valley are: physical, mental health and healthy living (31%), education and learning skills (22%) and employment and training (11%).

•

LEP allocation: The Tees Valley LEP has been allocated approximately £173.5 from the ERDF and ESF (around £104m and £69.4m respectively) plus an additional £1.1m from the EAFRD and £187.1m from the Youth Employment Initiative.

50 UK Population Estimates, ONS, June 2011

b. Sample study Our analysis and sample is based on SIB’s own portfolio of historic grant and loan investments in Tees Valley. The data collection provided a total dataset of 28 investments:51 1 from ACF, 5 from Communitybuilders Fund, 10 from Futurebuilders Fund and 12 from SEIF).

51 Corresponding to 16 charities and social enterprises.

We note this data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study.

Figure 2.1 Loans by total amount Greater than £500,000

c. Grants analysis

£250,000-£500,000

Based on the data, a total of 15 social enterprises received 23 grants, totalling over £1.2m. •

•

57% of all grants were development grants out of which 54% feasibility grants, 23% for capacity building and 23% for investment readiness support; 27% of social enterprises that received a grant took on a loan at the same time or subsequently after receiving it.

Our analysis suggests that charities and social enterprises in Tees Valley have received a significant amount of business support in the form of capital grants (over £1m). We note however a low amount spent on investment readiness support (£80,000) which may be reflected in the few number of organisations taking on mainly small loans.

£100,000-£250,000

96% of all grants received were less than £250,000; Average size of grants was £54,590 although the overall sizes of grants varied from small feasibility grants of £1,125 up to capital grants of £398,500;

£50,000-£100,000

Less than £50,000

•

80% of all loans were of less than £250,000;

•

80% of all organisations that received a loan had received business support in the form of grants, either as a capital grant, capacity building or investment readiness;

•

The median average size of loans was around £118,500;

•

Interest rates ranged between 1% - 6%, with larger loans taking on higher interest rates and longer repayment periods (up to 20 years for loans greater than £250,000);

•

Typical interest rate was between 4%-6% and the median average terms of repayment was 9 years;

•

50% received capital repayment holidays, which ranged between 1 and 8 months.

d. Loans analysis Based on our data, a total of 5 charities and social enterprises received 5 loans, totalling approximately £917k. Figure 2.1 shows a breakdown of the loans by range of size. Some of the key findings are:

increased and a quarter of LSOAs rank amongst the 10% most deprived in England. There are clear links between deprivation and access to employment which results in poor levels of public health, poor neighbourhoods and shorter life expectancy.

Strategic approach Statement of position a. Major market failures and weaknesses According to Tees Valley’s European Structural and Investment Fund Strategy,52 major market failures and challenges that need to be addressed include: •

Low skilled workforce: Tees Valley is behind the national average for both basic and higher level skills: the percentage of residents with no qualifications in 2012 was 13.1% compared to 9.7% nationally and just 25% held degree level qualifications compared to over 33% nationally.

•

Youth unemployment: The rate of unemployment amongst 16-24 year olds is the highest of all LEPs standing at 10.3% compared to 4.9% nationally.53

•

Weak economic activity: There is a small amount of SME exporting activity (only 6.5% of Tees Valley SME’s export and the rate of start-ups is considerably lower than the national average (61% compared to 70%).

•

Housing shortages: Challenges with affordability, low demand and outdated stock and a lack of quality housing risks resulting in unbalanced communities, polarisation of the housing offer and a lack of social mobility.

We believe an important market failure for Tees Valley is the high levels of deprivation, particularly amongst the most disadvantaged groups: •

Deprivation: The gap between the most affluent areas and the poorest areas has

52 Tees Valley European Structural and Investment Funds Strategy, Tees Valley Unlimited, January 2014. 53 Department for Education, May 2013.

b. LEP investment priorities and objectives The Tees Valley LEP has been allocated around £173.5m for the period 2014-2020. The main investment priorities for this LEP area include: •

Innovation: providing direct support for innovation to businesses and enhancing business capacity, including physical infrastructure, for innovation support in enterprises; (estimated £25m)

•

SME competitiveness: providing relevant support to grow existing businesses and develop new start-ups and spin out businesses, develop sustainable supply chains, increase exports and overcome access to finance problems; (estimated £63.46m)

•

Skills: supporting individuals to gain new skills to respond to opportunities arising and increase the availability of intermediate, advanced and higher apprenticeships leading to graduate opportunities in key and supporting sectors; (estimated £23.45m)

•

Employment: providing relevant work related experience and training to young people to help them into moving from education / training into work; (estimated £32m)

•

Social inclusion: providing bespoke support for individuals and communities who are disadvantaged/furthest away from the labour market to engage them with the community and improve their prospects for employment; (estimated 13.87m)

•

Low carbon economy: investing in the development, production and efficient use of low carbon energy, resources and reduction in carbon emissions. (estimated £15.6m)

c. LEP 2014-2020m LIF allocation (...) “There is a critical need for available and affordable finance to enable the birth of new businesses and Tees Valley is keen to encourage a mix of loans (be this venture capital, angel finance or through Local Impact Funds), grants, bonds and vouchers for business support. This can ensure relevant solutions are provided to address the particular issues faced by both existing firms and new starts and forms a major part of our Business Growth Hub.”

Recommendations for a Local Impact Fund Our approach Based on our research and our findings, we would recommend a Local Impact Fund for Tees Valley with the following characteristics: •

A small investment fund of < £5m.

•

A wrap around business support programme, providing organisational development support, especially investment readiness support.

•

Investment funding of under £250,000. --

A focus on providing unsecured loans.

At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

THE HUMBER Key findings Summary SIB has reviewed its own portfolio of historic grant and loan investments in the Humber and assessed demand for new social investment and investment readiness support services to paint a picture of the social investment needs of the sector in the future. Here are some key findings, explored in further detail below: •

24 charities and social enterprises have taken on over £5.2m social investment and / or grant support.

•

24 charities and social enterprises received grants totalling over £3.4m. Of these, 48% were development grants and 52% capital grants (mainly to buy or refurbish an asset). 17% of all grants were for investment readiness support.

•

And of the 24 organisations, 8 took on loans totalling over £1.8m.

•

91% of loans were of less than £250,000. 100% of charities and social enterprises that received a loan had received a grant.

•

Based on our survey, the estimated demand for finance from social enterprises ranges between £2m – 6.4m.

•

The Humber demographic statistics reflect national demographics, in that:

Social enterprises typically work in boroughs with the highest levels of deprivation.

Social enterprises work primarily in physical, mental health and healthy living (29%), education and learning skills (27%), and housing, property and essential needs (15%).

Young families and children are the main beneficiary group supported (29%) followed by the general public (29%) and people with disabilities (14%).

Overview of the area

•

Introduction The Humber includes 4 Local Authorities (East Riding of Yorkshire, Kingston upon Hull, North Lincolnshire and North East Lincolnshire), as shown in Figure 1.1.54 It is the largest trading estuary in the UK, and the fourth largest in Europe, supporting a petrochemicals/chemicals sector worth £6bn per year. However, nearly 90% is rural,55 Figure 1.1 The Humber •

Area: 2,261 sq mi

•

Population: 918,000 (2011 est.)75

•

Density: 406 sq mi

Deprivation: 20% of the Humber’s LSOAs fall within the top 10% most deprived areas of England. The city of Hull in particular has very high concentrations of deprivation, whilst East Riding of Yorkshire is the least deprived.

Market failure Access to finance is a particular problem in the Humber, mainly due to difficult access to finance locally. This represents an important barrier to charities and social enterprises seeking to grow their operations and impact. The section below provides further information on charities and social enterprises based in the Humber. Summary of our findings a. Existing finance gap SIB has been conducting a ‘future financing needs’ survey of the sector since 201Latest data collected includes a total of 411 respondents, out of which 2% were relevant to the Humber. The information contains some key findings:

•

LEP allocation: The Humber LEP has been allocated approximately £87.7m from the ERDF and ESF (around £52.6m and £35.1m respectively).

54 The neighbouring areas North East Lincolnshire and North Lincolnshire have been included in our analysis, as they are in the Humber LEP area. Please note however that they are also represented in the Greater Lincolnshire LEP area, as both LEPs partially overlap. 55 UK Population Estimates, ONS, June 2011.

•

71% of the survey respondents stated an interest in social investment, mainly to grow an existing business (50%) and to buy or refurbish property (30%);

•

33% of all respondents were unclear on the amount of investment needed to fund their project;

•

67% of respondents serve a local area, the remaining 33% serve their locality alongside having a larger geographical reach;

•

71% of respondents were social enterprises with an annual turnover of less than £500,000, 43% had an annual turnover of less than £100,000;

•

67% of respondents indicated having difficulty accessing finance.

•

Based on the survey results, the total

estimated demand for finance from social enterprises in the Humber ranges between £2m – 6.4m.56 b. State of the sector A breakdown of social enterprises by local authority indicates that the city of Hull has the highest concentration of social enterprises and charities (38% of all organisations in our study). 43% of the city of Hull’s LSOAs fall within the top 10% most deprived nationally and of the 21 Yorkshire and Humber local authorities, Hull has the highest proportion of children living in poverty (30%). This highlights the fact that social enterprises tend to work in the most deprived areas. According to our research, the main sectors social enterprises are involved with in the Humber are: physical, mental health and healthy living (29%), education and learning skills (27%), and housing, property and essential needs (15%).

over £3.4m. •

98% of all grants received were less than £250,000;

•

Average size of grants was £74,589 although the overall sizes of grants varied from small feasibility grants of £1,122 up to capital grants of £262,000;

•

48% of all grants were development grants out of which 36% were investment readiness grants, 32% were for capacity building and the remaining 32% were feasibility grants;

•

29% of social enterprises that received a grant took on a loan at the same time or subsequently after receiving it.

e. Loans analysis Based on our data, a total of 8 charities and social enterprises received 11 loans, totalling over £1.8m.

c. Sample study

Figure 2.1 Loans by total amount

Our analysis and sample is based on SIB’s own portfolio of historic grant and loan investments in the Humber. The data collection provided a total dataset of 57 investments:57 2 from ACF, 12 from Communitybuilders Fund, 10 from Futurebuilders Fund, 1 from ICRF and 32 from SEIF). We note this data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study.

Greater than £500,000

£250,000-£500,000

£100,000-£250,000

£50,000-£100,000

Less than £50,000

d. Grants analysis Based on the data, a total of 24 charities and social enterprises received 46 grants, totalling

56 We note there was a low rate of response for the Humber, and therefore the demand is not considered representative for the area. 57 Corresponding to 24 charities and social enterprises.

Figure 2.1 shows a breakdown of the loans by range of size. Some of the key findings are: •

91% of all loans were of less than £250,000;

•

100% of all social enterprises that received a loan had received business support in the

form of grants, mainly for capacity building or capital grants; •

The median average size of loans was around £168,037;

•

The typical interest rate was between 5%-6% and the median average terms of repayment was 11 years.

•

Pollution: Due to a concentration of carbon intensive industries, the Humber is a significant source of carbon emissions. At 48.1 tonnes per capita, North Lincolnshire has the highest rate of emissions in the country, twice as high as the second ranked local authority.

•

Business deficit base: The density and size of businesses in the Humber is smaller than in similar LEPs, with lower wages and a higher proportion of businesses dying within the first 5 years.

Strategic approach Statement of position a. Major market failures and weaknesses According to the Humber’s European Structural and Investment Fund Strategy,58 major market failures and challenges that need to be addressed include: •

•

Low skilled workforce: Even though skills levels are improving, general low skills profile and poor employability skills are inhibiting growth, diversification and innovation. In order to reach national productivity levels, the Humber requires an additional 25,400 residents in highly skilled employment. Unemployment: The rate of unemployment is currently above the national average (11% compared to 8% nationally) and rises to 16% in the City of Hull. Youth unemployment is particularly high (second highest of all 39 LEPs), rising up to 32% between 18-24 year olds. Low productivity levels: In 2011, the Humber economy generated £14.6bn in GVA, which represents 85% of the national average (ranking 31 out of the 39 LEPs in England). To close the gap with national productivity levels, an additional £1.3bn GVA would be required.

58 The Humber EU Structural and Investment Strategy, 2014-2020, Humber LEP, January 2014.

We believe child poverty represents an important market failure for the Humber that needs to be addressed, and therefore has been included in our analysis: •

Child poverty: the City of Hull has the highest proportion of children living in poverty (30%) followed by North East Lincolnshire (25%). The Humber has approximately 2,500 troubled families, out of which 1,000 are in the City of Hull.59

b. LEP investment priorities and objectives The Humber LEP has been allocated around £87.7m for the period 2014-2020. The main investment priorities for this LEP area include: •

SME growth and innovation: supporting the growth capabilities of SMEs, including those in key sectors, to foster a more entrepreneurial culture, stimulate innovation and build the market in low carbon goods and services;

•

Skills and employment: supporting the skills development of Humber residents at all levels, from access to employment and the sustainable integration of young people, to technical and higher levels skills and leadership and management;

59 End Child Poverty, Centre for Research in Social Policy (CRSP), Loughborough University, February 2013.

•

Sustainable communities and social inclusion: supporting active inclusion through the use of local initiatives, addressing persistent pockets of poverty and tackling barriers to work to allow all adults to play an active role in the labour market; Flood protection and housing improvements: stimulating economic development through further investment in flood and coastal risk management, alongside structural and energy efficiency improvements to social homes in the areas of greatest need; Infrastructure: improving transport infrastructure to facilitate economic growth and promoting resource efficiency that can generate environmental benefits and support improvements in business performance.

c. LEP 2014-2020m LIF allocation (…) “Discussions are taking place with the Key Fund and the Social Investment Business Group with a view to establishing a Local Impact Fund to ensure that Social Sector Organisations are able to take on and manage repayable finance, and thereby achieve sustainable social and economic outcomes for the Humber area. This may form part of the fund of funds model.”

Recommendations for a Local Impact Fund Our approach Based on our research and our findings, we would recommend a Local Impact Fund for the Humber with the following characteristics: •

A small investment fund of < £5m.

•

A wrap around business support programme, providing organisational

development support, especially investment readiness support. •

•

Investment funding of under £250,000. --

A focus on providing unsecured loans.

At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

Supporting organisations in the most deprived areas that achieve the greatest social impact; especially: --

Existing social enterprises seeking to grow their businesses.

Social enterprises that work in deprived boroughs, supporting disadvantaged groups into education and employment, and redressing child poverty.

LEEDS CITY REGION Key findings Summary SIB has reviewed its own portfolio of historic grant and loan investments in the Leeds City Region and assessed demand for new social investment and investment readiness support services to paint a picture of the social investment needs of the sector in the future. Here are some key findings, explored in further detail below: •

58 charities and social enterprises have taken on circa £14.6m social investment and / or grant support.

•

57 charities and social enterprises received grants totalling over £8.0m. Of these, 45% were development grants and 55% capital grants (mainly to buy or refurbish an asset). 10% of all grants were for investment readiness support.

•

And of the 58 organisations, 22 took on loans totalling over £6.5m.

•

59% of loans were of less than £250,000. 95% of charities and social enterprises that received a loan had received a grant.

•

Based on our survey, the estimated demand for finance from social enterprises is £2.8m.

•

The Leeds City Region demographic statistics reflect national demographics, in that:

•

Social enterprises typically work in boroughs with the highest levels of deprivation.

Social enterprises work primarily in physical, mental health and healthy living (24%), education and learning skills (23%), and culture, arts, sport and heritage (19%).

The main beneficiary group supported in the Leeds City Region is general public or community (40%) followed by young families and children (15%) and people with disabilities (13%). This can be explained in great part due to the significant number of organisations that have taken an asset to provide services to the community.

Overview of the area

•

LEP allocation: The Leeds City Region LEP has been allocated approximately £334.95m from the ERDF and ESF (around £170.82m and £164.12m respectively) plus an additional £5.23m from the EAFRD.

•

Deprivation: The Leeds City Region has higher than average levels of overall deprivation, with 27% of the Super Output Areas in the 20% most deprived in the country. Bradford is the most affected authority followed by Leeds, Barnsley and Wakefield.

Introduction The Leeds City Region includes 10 Local Authorities (Barnsley, Bradford, Calderdale, Craven, Harrogate, Kirklees, Leeds, Selby, Wakefield and York), as shown in Figure 1.It is the largest employment centre for financial, business and manufacturing services after London, and has one of the largest concentrations of higher education institutions in Europe, however, it is not achieving its full potential. The Leeds City Region lags the national average and international competitors on density, growth and quality of economic activity.60 Figure 1.1 Leeds City Region •

Area: 2,200 sq mi

•

Population: 3,000,000 (2011 est.)80

•

Density: 1,363 sq mi

Market failure Access to finance is a particular problem in the Leeds City Region, mainly due to difficult access to finance locally. This represents an important barrier to charities and social enterprises seeking to grow their operations and impact. The section below provides further information on charities and social enterprises based in the Leeds City Region. Summary of our findings a. Existing finance gap SIB has been conducting a ‘future financing needs’ survey of the sector since 201Latest data collected includes a total of 411 respondents, out of which 7% were relevant to the Leeds City Region. The information contains some key findings:

60 UK Population Estimates, ONS, June 2011.

•

89% of the survey respondents stated an interest in social investment, mainly to grow an existing business (52%) and to start a new project (36%);

•

46% of all respondents were unclear on the amount of investment needed;

•

60% of respondents serve a local area, 20% serve their locality and the neighbouring boroughs and the remaining 20% have a larger geographical reach;

•

59% of respondents were social enterprises with an annual turnover of less than £500,000; 67% of respondents indicated having difficulty accessing finance.

Based on our survey, the estimated demand for finance from social enterprises is £2.8m.

d. Grants analysis Based on the data, a total of 57 charities and social enterprises received 101 grants, totalling over £8.0m. •

94% of all grants received were less than £250,000;

•

Average size of grants was £79,515 although the overall sizes of grants varied from small feasibility grants of £4,696 up to capital grants of £750,000;

•

45% of all grants were development grants out of which 47% were for feasibility grants, 24% were for capacity building grants, 22% were investment readiness grants, and the remaining 7% were for social impact reporting;

•

39% of social enterprises that received a grant took on a loan at the same time or subsequently after receiving it.

b. State of the sector A breakdown of social enterprises by local authority indicates that the city of Leeds has the highest concentration of social enterprises and charities (36% of all organisations in our study) followed by Bradford (24%). Bradford has the largest gap between rich and poor anywhere in England and is considered the fourth most income-deprived district nationally. This highlights the fact that social enterprises tend to work in the most deprived areas. According to our research, the main sectors social enterprises are involved with in the Leeds City Region are: physical, mental health and healthy living (24%), education and learning skills (23%), and culture, arts, sport and heritage (19%).

e. Loans analysis Based on our data, a total of 22 charities and social enterprises received 29 loans, totalling over £6.5m.

c. Sample study Our analysis and sample is based on SIB’s own portfolio of historic grant and loan investments in the Leeds City Region. The data collection provided a total dataset of 130 investments:61 7 from ACF, 38 from Communitybuilders Fund, 32 from Futurebuilders Fund, 1 from ICRF and 52 from SEIF). We note this data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study.

Figure 2.1 Loans by total amount Greater than £500,000

£250,000-£500,000

£100,000-£250,000 £50,000-£100,000 Less than £50,000

9 4 6 7

61 Corresponding to 58 charities and social enterprises.

Figure 2.1 shows a breakdown of the loans by range of size. Some of the key findings are: •

59% of all loans were of less than £250,000;

•

95% of all social enterprises that received a loan had received business support in the form of grants, mainly for capacity building or capital grants;

•

The median average size of loans was around £120,000;

•

The typical interest rate was between 4%-5% and the median average terms of repayment was 14 years.

Strategic approach Statement of position a. Major market failures and weaknesses According to the Leeds City Region’s European Structural and Investment Fund Strategy,62 major market failures and challenges that need to be addressed include: •

•

Low productivity levels: Between 2000 and 2011 the economy in the Leeds City Region grew by 45% compared to 56% in England. As a result of this below-average growth, the share of national GVA has fallen from 5.1% to 4.8% and would need to generate an extra £8.5bn of annual output to reach average UK performance. Skills shortages: Based on a 2011 Employer Skills Survey, approximately 2,800 businesses are struggling to fill vacancies as they cannot find sufficient skilled staff. This can have a detrimental impact on their ability to grow.

62 The Leeds City Region EU Structural and Investment Strategy, 20142020, Leeds City Region LEP, February 2014.

•

Youth unemployment: The rate of unemployment is slightly above the national average (8.5% compared to 8% nationally) and but rises to 23% between 16-24 year olds (compared to 21% nationally).63

•

Housing affordability: Overall affordability remains challenging for many households – in 2012, the average ratio of house prices to incomes was 5.2, which exceeds average lending terms. Additionally current development building rates remain below needs – 2011/12 figures suggest house building remains nearly 5,000 per annum below needs, even though there is land with planning permission for over 60,000 homes.

We believe an important market failure for the Leeds City Region is an ageing population, as it could have considerable consequences on the economic growth and public delivery of services: •

Ageing population: the Leeds City Region population is forecasted to grow by 14% by 2030, however, the vast majority of this growth will be in the population aged +65 (a rise of 46% by 2030 compared to 7% for those aged 25-64).

b. LEP investment priorities and objectives The Leeds City Region LEP has been allocated around £334.95m for the period 2014-2020. The main investment priorities for this LEP area include: •

SME growth and competitiveness: fostering a more entrepreneurial culture and building the growth capability of SMEs both at domestic and international level to prosper in a competitive marketplace;

63 Leeds City Region Skills Plan 2013-2015, Leeds City Region LEP, 2012.

•

Skills and employment: helping businesses increase investment in skills and employment activities to boost productivity and profitability, and support those who are unemployed to find and maintain jobs; Combating poverty and social inclusion: identifying and tackling specific local barriers to employment and skills and supporting active inclusion through the development of a local economic plan, including social integration activities and improved spaces for local community benefit; Low carbon economy: investing directly in the development of decentralised energy generation, bioenergy, low carbon gas to grid, transport fuels and energy efficiency interventions.

•

Investment funding of under £500,000, with a primary focus of sub £250,000. --

A focus on providing unsecured loans.

At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

Supporting organisations in the most deprived areas that achieve the greatest social impact; especially: --

Social enterprises that engage with the broader public.

Addressing health and social care issues regarding an increasing, ageing population.

c. LEP 2014-2020m LIF allocation (…) “The LCR LEP remains interested in the option of using Social Impact Bonds (SIBs) and Local Impact Funds over the programming period of ESIF. However, further evidence and evaluation will need to inform any future action in this area.”

Recommendations for a Local Impact Fund Our approach Based on our research and our findings, we would recommend a Local Impact Fund for the Leeds City Region with the following characteristics: •

A medium sized investment fund of £5m £10m.

•

A wrap around business support programme, providing organisational development support, especially investment readiness support.

BLACK COUNTRY Key findings Summary SIB has reviewed its own portfolio of historic grant and loan investments in the Black Country and assessed demand for new social investment and investment readiness support services to paint a picture of the social investment needs of the sector in the future. Here are some key findings of charities and social enterprises in the Black Country, explored in further detail below: •

22 have taken on circa £7.9m social investment and / or grant support.

•

21 received grants totalling over £4.5m. Of these, 63% were development grants and 47% capital grants (mainly to buy or refurbish an asset).

•

28% of all grants were for investment readiness support.

•

And of the 22 organisations, 5 took on loans totalling over £3.3m.

•

88% of loans were of less than £250,000.

•

83% of charities and social enterprises that received a loan had received a grant.

•

Based on our survey, the estimated demand for finance from social enterprises range between £2m and £12m.

•

The Black Country demographic statistics reflect national demographics, in that:

Charities and social enterprises typically work in boroughs with the highest levels of deprivation.

Charities and social enterprises work primarily in physical, mental health and healthy living (35%), education and learning skills (26%) and employment and training (22%).

Children, young people and families are the main beneficiary group (25%) followed by people with disabilities (19%) and elderly people (14%).

Overview of the area

Market failure

Introduction

Based on the major market failures of the Black Country, a major barrier to growth for charities and social enterprises is access to appropriate finance. The section below provides information on charities and social enterprises based in the Black Country.

Black Country includes 4 Local Authorities (Wolverhampton, Walsall, Sandwell and Dudley), as shown in Figure 1.It is a dense urban metropolis with a strong industrial base, however, it has one of the lowest growth rates in all England.

Summary of our findings a. Existing finance gap

Figure 1.1 Black Country •

Area: 220.7 sq mi

•

Population: 1,152,500 (2013 est.)69

•

Density: 5,222 sq mi

SIB has been conducting a ‘future financing needs’ survey of the sector since 201Latest data collected includes a total of 411 respondents, out of which 3% were relevant to Black Country. The information contains some key findings: •

89% of the survey respondents stated an interest in social investment, mainly to grow an existing business (31%) or to start a new project (31%);

•

44% of respondents sought investment of less than £250,000, 33% sought investment of over £500,000 and 23% were unclear about the level of investment they would need;

•

87% of respondents serve a local area (out of which 66% serve only a local area and the remaining 44% serve their locality alongside having a larger geographical reach) and 13% have a national reach;

•

LEP allocation: The Black Country LEP has been allocated approximately £152m from the ERDF and ESF (£76m each, respectively).

•

78% of respondents were social enterprises with an annual turnover of less than £500,000, 44% had an annual turnover between £100,000 – 500,000;

•

Deprivation: 22% of the Black Country falls within the most deprived 10% of England and 44% falls within the 20% most deprived. Sandwell ranks as the most deprived borough in the Black Country.

•

78% of respondents indicated finding it difficult or very difficult to access finance.

Based on the survey results, the total estimated

64 Resident Population, Nomis, June 2013.

demand of social enterprises in Black Country ranges between £2m and £12m.65

•

88% of all grants received were less than £250,000;

b. State of the sector

•

Average size of grants was £113,562 although the overall sizes of grants varied from small prefeasibility grants £5,100 up to capital grants of over £1m;

•

63% of all grants were development grants out of which 44% were feasibility grants, 44% for investment readiness support and 12% for capacity building;

•

24% of all organisations that received a grant took on a loan at the same time or subsequently after receiving it.

A breakdown of social enterprises by local authority indicates that Sandwell has the highest concentration of charities and social enterprises (68% of all social enterprises in our study) followed by Wolverhampton (14%). Sandwell is considered to be the most deprived local authority in the Black Country (and amongst the 12 most deprived in England). This reinforces the fact that social enterprises do work in the most socially deprived areas. According to our research, the main sectors social enterprises are involved with in Black Country are: physical, mental health and healthy living (35%), education and learning skills (26%) and employment and training (22%).

Our analysis indicates that charities and social enterprises in the Black Country have received significant support in the form of development and capital grants, with 43% of them receiving more than one grant.

c. Sample study

e. Loans analysis

Our analysis and sample is based on SIB’s own portfolio of historic grant and loan investments in Black Country. The data collection provided a total dataset of 46 investments:66 2 from ACF, 14 from Communitybuilders Fund, 4 from Futurebuilders Fund, 6 from ICRF and 20 from SEIF).

Based on our data, a total of 5 charities and social enterprises received 6 loans, totalling approximately £3.3m.

We note this data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study. d. Grants analysis Based on the data, a total of 21 charities and social enterprises received 40 grants, totalling over £4.5m.

65 Estimates are based on respondents indicated range of demand. Lower and upper levels have been calculated assuming minimum and maximum investment levels. 66 Corresponding to 22 charities and social enterprises.

Figure 2.1 Loans by total amount Greater than £500,000

£250,000-£500,000

£100,000-£250,000

£50,000-£100,000 Less than £50,000

Figure 2.1 shows a breakdown of the loans by range of size. Some of the key findings are:

•

67% of all loans were of less than £250,000;

•

83% of all organisations that received a loan had received business support mainly in the form of capital grants and capacity building;

•

Interest rates ranged between 3% - 6%, with larger loans taking on higher interest rates and longer repayment periods (up to 25 years for loans greater than £250,000);

•

Median average terms of repayment was 10 years;

•

67% received capital repayment holidays, ranging between 1 and 12 months (longer repayment holidays were granted to larger loans).

We note a significant demand (39%) for loans greater than £250,000. Whilst a LIF would not address this demand, other social investors such as Social and Sustainable Capital would be able to provide unsecured lending of £250,000 and upwards.

•

Unemployment: Unemployment is higher than in any other LEP area and the employment rate is significantly lower than the national average (66% in 2012, whilst the national average was 71%). Youth unemployment is particularly high, with 9.1% of 16-24 year olds claiming jobseekers benefits, compared to 4.8% nationally.

•

Low skilled workforce: A clear mismatch between the skill levels in the labour market and the needs of businesses in key growth sectors. Black Country has far fewer people with degree-level qualifications than the national average (21% compared to 33% nationally).

•

Child poverty: Over 30% of children in Wolverhampton live in poverty, followed by 29.6% in Sandwell and 28.5% in Walsall. These figures are very high compared to the average in England (20.1%).

•

Business base deficit: The Black Country has a very low business stock – business birth rates is 29 per 10,000 population, compared to 41 nationally, and low business survival rates – and ranks 38 out of the 39 LEP areas in level of self-employment (6% compared to 9% nationally).

Strategic approach Statement of position a. Major market failures and weaknesses According to Black Country’s European Structural and Investment Fund Strategy,67 major market failures and challenges that need to be addressed include:

We believe disabled people and people with long term illnesses represent an important failure that needs to be addressed and therefore has been included in our analysis:

•

Economic growth: Black Country has the lowest growth rate of all LEP areas in England68 and would need to generate an extra £6.2bn of annual output in order to reach average UK performance.

67 Black Country LEP EU Structural and Investment Funds Strategy, 20142020, Black Country LEP, January 2014. 68 Creating successful local economies: Review of Local Enterprise Partnership area economies in 2012, The LEP Network, 201

Disabled: A total of 131,156 people in working age (20% of working age adults) have declared a disability or limiting long term illness.

b. LEP investment priorities and objectives The Black Country LEP has been allocated £151.9m for the period 2014-2020. The main investment priorities for this LEP area include:

•

SME competitiveness: providing an easy access to generic business support and debt/equity finance to SMEs for business creation, growth and improved productivity ; (estimated £30m) Innovation: building on a detailed smart specialisation review to ensure investment and interventions are built around the knowledge assets, sector assets, technology opportunities, innovation trends and emerging strategic opportunities; (estimated £20m) Skills and employment: ensuring the right level of skills and qualifications to meet the needs of businesses, particularly in key growth sectors; (estimated £60.8m)

Our approach Based on our research and our findings, we would recommend a Local Impact Fund for the Black Country LEP area with the following characteristics •

A medium sized social investment fund of £5 - £10m.

•

A wrap around business support programme, providing organisational development support, especially investment readiness support.

•

Investment funding of under £250,000.

Social inclusion: supporting key disadvantaged groups by investing in bespoke activities that tackle barriers to employability and skills development; (estimated £15.2m) Low carbon environment: supporting key manufacturing industries to reduce their emissions by adopting low carbon and environmental technologies. (estimated £26m)

c. LEP 2014-2020m LIF allocation (…) “The range of FEI intervention (all sub £2m per investment) that will be included within the scope of the framework for financial instruments; will include some or all of the following; micro loans (sub £100k), loan guarantees, seedcorn equity/mezzanine finance, development capital for start-ups, growth capital for early stage SMEs, finance for innovation, finance for low carbon and other green projects, finance for social enterprises and specific financial interventions designed to meet certain specific LEP economic development ambitions.”

Recommendations for a Local Impact Fund

•

A focus on providing unsecured loans.

At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

Supporting organisations in the most deprived areas that achieve the greatest social impact; especially: --

Focusing on child poverty.

Providing a programme of wrap around support focusing on employability of disadvantaged groups and economic growth in deprived areas.

GREATER LINCOLNSHIRE Key findings Summary SIB has reviewed its own portfolio of historic grant and loan investments in Greater Lincolnshire and assessed demand for new social investment and investment readiness support services to paint a picture of the social investment needs of the sector in the future. Here are some key findings, explored in further detail below: •

45 charities and social enterprises have taken on approximately £6.6m social investment and / or grant support.

•

45 charities and social enterprises received grants totalling over £3.0m. Of these, 75% were development grants and 25% capital grants (mainly to buy or refurbish an asset). 41% of total grants were feasibility grants.

•

And of the 45 organisations, 13 took on loans totalling circa £3.6m.

•

82% of loans were of less than £250,000. 92% of charities and social enterprises that received a loan had received a grant.

•

Based on our survey, the estimated demand for finance from social enterprises is £2.4m.

•

Social enterprises in Greater Lincolnshire work primarily in education and learning skills (27%), physical, mental health and healthy living (17%) and housing, property and essential needs (17%). This clearly reflects how social enterprises address the main market failures in the area, such as housing shortages and a low skilled workforce.

•

Young families and children are the main beneficiary group supported (26%) followed by elderly people (14%) and people with disabilities (11%). As mentioned in Section 3, a main challenge for this area is an ageing population.

Overview of the area

•

Introduction Greater Lincolnshire includes 7 Local Authorities, as shown in Figure 1.169. The geography of the area is mixed as the county of Lincolnshire is mainly rural and sparsely populated, whilst North and North East Lincolnshire are urban and more densely populated. These geographical differences lead to important problems that need to be addressed.70

Deprivation: 4% of Lincolnshire’s population (approximately 30,500 people) live in the top 10% most deprived areas of England Lincoln has been consistently ranked as one of the most socially deprived area, whilst North Kesteven is the least deprived.

Market failure

•

Area: 4,340 sq mi

•

Population: 1,042,000 (2011 est.)17

Access to finance is a particular problem in Greater Lincolnshire, mainly due to difficult access to finance locally. This represents an important barrier to charities and social enterprises seeking to grow their operations and impact. The section below provides further information on charities and social enterprises based in Greater Lincolnshire.

•

Density: 240 sq mi

Summary of our findings

Figure 1.1 Greater Lincolnshire

a. Existing finance gap SIB has been conducting a ‘future financing needs’ survey of the sector since 201Latest data collected includes a total of 411 respondents, out of which 3% were relevant to Greater Lincolnshire. The information contains some key findings:

•

LEP allocation: The Greater Lincolnshire LEP has been allocated approximately £120m from the ERDF and ESF (around £70m and £50m respectively).

69 The neighbouring areas North East Lincolnshire and North Lincolnshire have been included in our analysis, as they are in the Greater Lincolnshire LEP area. Please note however that they are also represented in the Humber LEP area, as both LEPs partially overlap. 70 UK Population Estimates, ONS, June 2011.

•

85% of the survey respondents stated an interest in social investment, mainly to grow an existing business (55%) and to buy or refurbish property (36%);

•

36% of all respondents were unclear on the amount of investment needed to fund their project and 36% of respondents sought investment of less than £250,000;

•

75% of respondents serve a local area, the remaining 25% serve their locality alongside having a larger geographical reach;

•

45% of respondents indicated having difficulty accessing finance.

Based on the survey results, the total estimated demand for finance from social enterprises in Greater Lincolnshire is of £2.4m.71 We note that a significant 45% of respondents were small charities and social enterprises with an annual turnover of less than £20,000, which is directly reflected in the low demand for funding in the area. 27% had an annual turnover between £100,000 – 500,000 and 27% over £500,000.

The data collection provided a total dataset of 81 investments:74 16 from Communitybuilders Fund, 14 from Futurebuilders Fund, 1 from ICRF, 16 from SEIF and 34 from Community Assets Fund (“CAF”). We note this data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study. d. Grants analysis

b. State of the sector A breakdown of social enterprises by local authority indicates that social enterprises in Greater Lincolnshire are widely spread across the different local authorities. We do note however that no social enterprise in our sample was working in North Kesteven, ranked the least deprived local authority in Greater Lincolnshire which is consistent with evidence that social enterprises tend to work in the most deprived areas. According to our research, the main sectors social enterprises are involved with in Greater Lincolnshire are: education and learning skills (27%), physical, mental health and healthy living (17%) and housing, property and essential needs (17%). c. Sample study Our analysis and sample is based on information provided by: •

SIB Group72

•

CAN Invest73

71 We note there was a low rate of response for Greater Lincolnshire, and therefore the demand is not considered representative for the area. 72 Data collected from SIB’s historical files corresponds to Futurebuilders Fund, Social Enterprise Investment Fund, Investment and Contract Readiness Fund and Communitybuilers Fund. 73 Data collected from CAN Invest corresponds to Community Assets Fund.

Based on the data, a total of 45 social enterprises received 64 grants, totalling over £3.0m. •

98% of all grants received were less than £250,000;

•

Average size of grants was £47,113 although the overall sizes of grants varied from small feasibility grants of £1,122 up to capital grants of £400,000;

•

75% of all grants were development grants: 54% feasibility grants, 31% for capacity building and 15% for investment readiness support;

•

31% of social enterprises that received a grant took on a loan at the same time or subsequently after receiving it.

e. Loans analysis Based on our data, a total of 13 charities and social enterprises received 17 loans, totalling approximately £3.6m.

74 Corresponding to 45 social enterprises.

Strategic approach

Figure 2.1 Loans by total amount

Statement of position Greater than £500,000 £250,000-£500,000

a. Major market failures and weaknesses

£100,000-£250,000 £50,000-£100,000

According to Greater Lincolnshire’s European Structural and Investment Fund Strategy,76 major market failures and challenges that need to be addressed include:

Less than £50,000

•

Low skilled workforce: 27% of people hold no qualifications (compared to 9.7% across the UK) and only 20% hold a level 4 and above. This lower skills profile is even more accentuated in the eastern half of the Greater Lincolnshire area.

•

Unemployment: The rate of unemployment is currently above the national average (mainly due to significant skills gaps/ shortages, as mentioned below) and as at June 2014, there were 17,328 JSA claimants.

•

Geographical differences: Across Greater Lincolnshire, access to certain primary services such as health, education and training can differ greatly - more rural communities tend to be the most affected.

•

Housing shortages: The number of annual housing completions is well below the 3,620 target and it is estimated that around 21,000 are on housing waiting lists. Rural housing has become less affordable and rural social housing has low availability.

•

Business deficit base: Manufacturing is Greater Lincolnshire’s single most important sector, however, compared to the number of people employed in the sector, the number of businesses is relatively low.

Figure 2.1 shows a breakdown of the loans by range of size. Some of the key findings are: •

82% of all loans were of less than £250,000;

•

92% of all social enterprises that received a loan had received business support in the form of grants, mainly for capacity building;

•

The median average size of loans was around £103,394;75

•

Interest rates ranged between 0% - 6%, with larger loans taking on higher interest rates and longer repayment periods (up to 25 years for loans greater than £500,000)

•

The typical interest rate was between 5%-6% and the median average terms of repayment was 10 years.

75 We have excluded one capital loan of £1,928,500 as we consider it an outlier that misrepresents our data.

76 The Greater Lincolnshire Local Enterprise Partnership EU Structural and Investment Strategy, 2014-2020, Greater Lincolnshire LEP, January 2014

We believe an important market failure for Greater Lincolnshire is an ageing population, as it could have considerable consequences on the delivery of public services:

Recommendations for a Local Impact Fund

•

Based on our research and our findings, we would recommend a Local Impact Fund for Greater Lincolnshire with the following characteristics:

Ageing population: The 65+ age group is set to make up an increasingly larger proportion of the overall population, raising demand for health and care services.

Our approach

b. LEP investment priorities and objectives

•

A small investment fund of < £5m.

The Greater Lincolnshire LEP has been allocated around £120m for the period 2014-2020. The main investment priorities for this LEP area include:

•

A wrap around business support programme, providing organisational development support, especially investment readiness support.

•

Investment funding of under £500,000, with a primary focus of sub £100,000.

•

Business competitiveness: driving growth to those sectors with a competitive advantage by securing supplies, innovative approaches in production and people capacity and skills to meet customer demand and enter new markets; Skills, innovation and advanced technologies: identifying and prioritising long-term needs for key manufacturing and engineering employers (along with other key sectors) to ensure the right education and training is available;

•

Transport and infrastructure: developing transport infrastructure to unlock growth into regional, national and international markets and overcome transport bottlenecks;

•

Housing: supporting effective delivery of high levels of housing in Greater Lincolnshire;

•

Low carbon economy: encouraging and facilitating businesses to take on renewable technologies, reduce waste throughout their processes and become resource efficient.

•

A focus on providing unsecured loans.

At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

Supporting organisations in the most deprived areas that achieve the greatest social impact; especially: --

Existing social enterprises seeking to grow their businesses.

Organisations seeking to develop a community asset.

CORNWALL AND THE ISLES OF SCILLY Key findings Summary SIB has reviewed its own portfolio of historic grant and loan investments in Cornwall and the Isles of Scilly and assessed demand for new social investment and investment readiness support services to paint a picture of the social investment needs of the sector in the future. Here are some key findings of charities and social enterprises in the Cornwall and the Isles of Scilly, explored in further detail below: •

11 have taken on over £2.3m social investment and / or grant support.

•

11 received grants totalling circa £1.4m. Of these, 59% were development grants and 41% capital grants (mainly to buy or refurbish an asset).

•

29% of all grants were for investment readiness support.

•

And of the 11 organisations, 3 took on loans totalling approximately £974k.

•

33% of these loans were of less than £250,000. 100% of charities and social enterprises that received a loan had received a grant.

•

Organisations tend to address a whole different range of beneficiary groups with a slight concentration in children, young people and families along with unemployed people (representing 15% each), followed by elderly people and people with disabilities (representing 10%).

•

Cornwall and the Isles of Scilly demographic statistics reflect national demographics, in that: --

Charities and social enterprises work primarily physical, mental health and healthy living (25%), education and learning skills (14%) and employment and training (14%).

•

Overview of the area Introduction Cornwall and the Isles of Scilly includes 2 Local Authorities (Cornwall and the Isles of Scilly) as shown in Figure 1.Its GDP stands at 72% of the EU average and despite recent strong growth rates, structural weaknesses remain within the economy.

Figure 1.1 Cornwall and the Isles of Scilly •

Area: 1,382 sq mi

•

Population: 534,500 (2011 est.)

•

Density: 386.7 sq mi

Deprivation: There are pockets of severe deprivation with 10% of the population living in socially deprived areas, mainly due to the decline of historically significant industries

Market failure The section below provides information on charities and social enterprises based in Cornwall and the Isles of Scilly. Summary of our findings a. State of the sector

A breakdown of charities and social enterprises by local authority indicates that all organisations in our study were based in Cornwall, however, their services covered or were combined with the area of the Isles of Scilly too. According to our research, the main sectors social enterprises are involved with are: physical, mental health and healthy living (25%), education and learning skills (14%) and employment and training (14%). b. Sample study

•

LEP allocation: Cornwall and the Isles of Scilly LEP has been allocated approximately £508m from the ERDF and ESF (£381m and 127m respectively). Cornwall and the Isles of Scilly LEP is an EU convergence region, allowing it to draw on additional structural funds.

77 UK Population Estimates, ONS, June 2011.

Our analysis and sample is based on SIB’s own portfolio of historic grant and loan investments in Cornwall and the Isles of Scilly. The data collection provided a total dataset of 20 investments:78 7 from Communitybuilders Fund, 2 from Futurebuilders Fund, 1 from ICRF and 10 from SEIF). We note this data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study.

78 Corresponding to 11 charities and social enterprises.

c. Grants analysis Based on the data, a total of 11 charities and social enterprises received 17 grants, totalling circa £1.4m. •

100% of all grants received were less than £250,000;

•

Average size of grants was £80,109 although the overall sizes of grants varied from small prefeasibility grants of £2,990 up to capital grants of £239k;

•

59% of all grants were development grants out of which 50% were feasibility grants and 50% for investment readiness support;

•

27% of all organisations that received a grant took on a loan at the same time or subsequently after receiving it.

Our analysis indicates that, given the small size of our sample, charities and social enterprises in Cornwall and the Isles of Scilly have received significant support in the form of development and capital grants. d. Loans analysis Based on our data, a total of 3 charities and social enterprises received 3 loans, totalling approximately £974k. Figure 2.1 Loans by total amount Greater than £500,000

£250,000-£500,000

Figure 2.1 shows a breakdown of the loans by range of size. Some of the key findings are: •

33% of all loans were of less than £250,000;

•

All organisations that received a loan had received business support mainly in the form of capital grants and investment readiness support;

•

Interest rates ranged between 0% - 6%.

Even though our sample was very limited, we note a demand (66%) for loans greater than £250,000. Whilst a LIF would not address this demand, other social investors such as Social and Sustainable Capital would be able to provide unsecured lending of £250,000 and upwards.

Strategic approach Statement of position a. Major market failures and weaknesses According to Cornwall and the Isles of Scilly’s European Structural and Investment Fund Strategy,79 major market failures and challenges that need to be addressed include: •

Low skilled workforce: There are significant skill gaps, in particular amongst the young people which are not attaining the skills levels or qualifications they need to progress through the labour market. It is estimated that 75,000 people are not qualified to a level 2 and an additional 13,000 people need to develop skills to a level 4 in order to meet demand.

£100,000-£250,000 £50,000-£100,000 Less than £50,000

1 79 Cornwall and the Isles of Scilly LEP EU Structural and Investment Funds Strategy, 2014-2020, Cornwall and the Isles of Scilly LEP, February 2014.

•

Low wages: incomes are significantly lower than the national and regional averages due to the preponderance of low paid, part-time and low skilled jobs. Low productivity: The area has the lowest levels of productivity of any of the LEPs in the country. GDP is £16,900 per annum per capita, which represents 72% of the EU average and 65% of the UK average. Lack of innovation: There is a weak innovation and R&D culture within the business base of Cornwall and the Isles of Scilly. In 2009, R&D spend was 0.19% of GDP compared to 1.85% nationally Health inequalities: Even though life expectancy in Cornwall and the Isles of Scilly is in line with the average in England, there is a big gap in life expectancy between the most deprived and least deprived areas (up to 5.7 years for men and 5.2 for women).

b. LEP investment priorities and objectives Cornwall and the Isles of Scilly LEP has been allocated £508m for the period 2014-2020. The main investment priorities for this LEP area include: •

•

SME competitiveness: enhancing the competitiveness of existing SMEs by removing physical barriers to business growth, encouraging new enterprises and supporting business growth through innovation; Research and innovation: developing and supporting appropriate models that encourage research and innovation to develop business opportunities in identified growth markets. Skills and employment: supporting the development of workforce skills, particularly at higher levels, and providing access to comprehensive, impartial and market-

led careers information and advice to individuals. •

Social inclusion: promoting the development of the VCSE sectors to meet community challenges and provide support to tackle inwork poverty and reduce average household indebtedness.

•

Low carbon environment: supporting the development of technology and innovation and improving resource and energy efficiency to make the transition to a low carbon economy.

c. LEP 2014-2020m LIF allocation (…) “Social Enterprise and Low Carbon Fund: Funding for enterprises and community initiatives that produce social outcomes, including small scale low carbon initiatives, between £5m-£10m.”

Recommendations for a Local Impact Fund Our approach Based on our research and our findings from 11 charities and social enterprises in Cornwall and the Isles of Scilly, we would recommend a Local Impact Fund with the following characteristics: •

A small investment fund of < £5m.

•

A wrap around business support programme, providing organisational development support, especially investment readiness support.

•

Investment funding of under £500,000, with a primary focus of sub £250,000. --

A focus on providing unsecured loans.

At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

â&#x20AC;˘

Supporting organisations in the most deprived areas that achieve the greatest social impact; especially: --

Social enterprises that work in deprived communities, support disadvantaged groups into employment, and contribute to a low carbon economy.

Supporting people with physical health, mental health and healthy living options.

THE HEART OF THE SOUTH WEST Key findings Summary SIB has reviewed its own portfolio of historic grant and loan investments in the Heart of the South West and assessed demand for new social investment and investment readiness support services to paint a picture of the social investment needs of the sector in the future. Here are some key findings of charities and social enterprises in the Heart of the South West, explored in further detail below: •

41 have taken on approximately £11.5m social investment and / or grant support.

•

39 received grants totalling circa £6m. Of these, 61% were development grants and 39% capital grants.

•

26% of all grants were for investment readiness support.

•

And of the 41 organisations, 17 took on a loans totalling circa £5.5m.

•

68% of loans were of less than £250,000.

•

88% of charities and social enterprises that received a loan had received a grant.

•

Based on our survey, the estimated demand for finance from social enterprises ranges between £500k and £1m.

•

The main beneficiary group in the Heart of the South West is children, young people and families (31%) followed by the general public (27%) and people with disabilities (12%).

•

The Heart of the South West demographic statistics reflect national demographics, in that: --

Charities and social enterprises work primarily in education and learning skills (26%); physical, mental health and healthy living (23%) and culture, arts, sport and heritage (20%).

Overview of the area

•

Introduction The Heart of the South West includes 15 Local Authorities (Torridge, West Devon, South Hams, Teignbridge, Exeter, East Devon, Mid Devon, North Devon, Plymouth, West Somerset, Taunton Deane, Sedgemoor, Mendip, South Somerset and Torbay), as shown in Figure 1.It is a significant economic entity with an output of £25bn per year, however, its dispersed and diverse economic geography faces a number of challenges in terms of lower than average wages, productivity levels and distance from market.

•

Market failure

Figure 1.1 The Heart of the South West

Based on the main market failures of the Heart of the South West, an important challenge for charities and social enterprises seeking to grow their operations and impact is access to appropriate finance. The LEP recognises the importance of wide employment support and local programmes to grow and deliver improved social outcomes in the communities.

•

Area: 6,297 sq mi

Summary of our findings

•

Population: 1,667,000 (2011 est.)57

a. Existing finance gap

•

Density: 265 sq mi

SIB has been conducting a ‘future financing needs’ survey of the sector since 201Latest data collected includes a total of 411 respondents, out of which 3% were relevant to The Heart of the South West. The information contains some key findings:

LEP allocation: The Heart of the South West LEP has been allocated approximately £101.3m from the ERDF and ESF (£57.9m and £43.4m respectively), plus an additional £15.5m from the EAFRD.

80 UK Population Estimates, ONS, June 2011.

Deprivation: A total of 38 LSOAs fall amongst the 10% most deprived in England, mainly in Plymouth and Torbay. There are significant differences with 9.8% of the population living in the 20% most deprived LSOAs compared to 3.9% in more developed areas.

•

100% of the survey respondents stated an interest in social investment, mainly to grow an existing business (44%) or to start a new project (33%);

•

50% of respondents sought investment of less than £250,000, 8% sought investment of over £500,000 and 17% were unclear about the level of investment they would need;

•

75% of respondents serve a local area (out of which 77% serve only a local area and the remaining 23% serve their locality alongside having a larger geographical reach) and 25% have a national reach;

•

100% of respondents were social enterprises with an annual turnover of less than £500,000;

•

75% of respondents indicated having difficulty accessing finance.

Based on the survey results, the total estimated demand for finance from social investment in the Heart of South West ranges between £500k and £1m.81

We note this data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study. d. Grants analysis Based on the data, a total of 39 social enterprises received 74 grants, totalling circa £6.0m. •

92% of all grants received were less than £250,000;

•

Average size of grants was £80,969 although the overall sizes of grants varied from small grants of £4,750 for social impact reporting up to capital grants of £577,571;

•

61% of all grants were development grants out of which 42% were for investment readiness support, 40% were for feasibility grants, 16% were for capacity building and 2% were for social reporting measurement;

•

41% of social enterprises that received a grant took on a loan at the same time or subsequently after receiving it.

b. State of the sector A breakdown of social enterprises by local authority indicates that social enterprises in the Heart of the South West are widely spread across the different local authorities, with a slightly higher concentration in Exeter (24%) and Plymouth (20%). No organisations from our study were based in East Devon, considered amongst the least deprived local authorities in the South West, which reinforces the fact that social enterprises tend to work in the most deprived and needing areas. According to our research, the main sectors social enterprises are involved in include: education and learning skills (26%); physical, mental health and healthy living (23%) and culture, arts, sport and heritage (20%). c. Sample study Our analysis and sample is based on SIB’s own portfolio of historic grant and loan investments in the Heart of the South West. The data collection provided a total dataset of 96 investments:82 2 from ACF, 27 from Communitybuilders Fund, 36 from Futurebuilders Fund, 7 from ICRF and 24 from SEIF).

81 Estimates are based on respondents indicated range of demand. Lower and upper levels have been calculated assuming minimum and maximum investment levels. 82 Corresponding to 41 charities and social enterprises.

Our analysis suggests there has been a historical strong business support demand from charities and social enterprises in the Heart of the South West, mainly in the form of capital grants but also as investment readiness support (over £1.5m). e. Loans analysis Based on our data, 17 social enterprises took on an investment, totalling circa £5.5m as shown in Figure 2. •

68% of all loans were of less than £250,000;

•

88% of all charities and social enterprises that received a loan had received grants mainly in the form of investment readiness support and capital grants;

that need to be addressed include: Figure 2.1 Loans by total amount Greater than £500,000

£100,000-£250,000

£50,000-£100,000

•

Business productivity: Measures of productivity and business competitiveness are significantly below national averages, such as output per worker which is below £32,000 compared to £45,000 in England. This results in wages over 12% below the national average.

•

Physical connectivity: Peripherality and distance from markets has a direct impact on productivity and evidence shows that transport connections are inhibiting growth – increasing business costs and reinforcing insularity among businesses.

•

Housing shortages: Demand for homes is very strong, with the average home costing £212,205, over 11.5 times the average wage.84 5,800 houses are currently being per year, which is insufficient to match growth aspirations. This puts pressure on housing stock, causing prices and rents to rise.

•

The median average size of loans was £124,480;

•

Average terms of repayment was 10 years and interest rates ranged between 0% - 5%, with larger loans taking on higher interest rates (6%) and longer repayment period (up to 25 years);

•

64% of all charities and social enterprises that took on a loan received capital repayment holidays between 6 - 24 months.

We note a significant demand (32%) for loans greater than £250,000. Whilst a LIF would not address this demand, other social investors such as Social and Sustainable Capital would be able to provide unsecured lending of £250,000 and upwards.

Strategic approach Statement of position a. Major market failures and weaknesses According to the Heart of South West’s European Structural and Investment Fund Strategy83, major market failures and challenges

83 Heart of the South West LEP Strategic Economic Plan, 2014-2020, Heart of the South West LEP, 31 March 2014.

Geographic differences: Over 90% of the land area in the Heart of the South West is rural, however, over 40% of the population is living in urban areas. There are significant differences that need to be addressed properly in order to benefit both urban and rural people, places and businesses.

£250,000-£500,000

Less than £50,000

•

We believe an important market failure for the Heart of the South West is an ageing population, as it could have considerable consequences on productivity and the delivery of public services: •

Ageing population: 21.6% of the population is over the age of 65, considerably higher than the average for England of 16%. This is expected to exceed the 25% mark by 2021.

84 Home Truths 2013/14: the Housing Market in the SW, National Housing Federation, March 2014.

b. LEP investment priorities and objectives The Heart of the South West has been allocated £101.3m for the period 2014-2020. The main investment priorities for this LEP area include: •

•

SME competitiveness: providing relevant and coherent business support to businesses, helping in the development of new starts and improving leadership and management skills to enhance skills utilisation productivity. Skills and employment: investing in skills and development to increase job opportunities and move people into the job market. Innovation: maximising innovation through investment in innovation infrastructure to support high transformational opportunities and smart specialisation.

guidance (linked and integrated with the Growth Hub) and if sufficient demand is identified a Local Impact Fund.”

Recommendations for a Local Impact Fund Our approach Based on our research and our findings, we would recommend a Local Impact Fund for the Heart of the South West with the following characteristics: •

A small investment fund of < £5m.

•

A wrap around business support programme, providing organisational development support, especially investment readiness support.

•

Investment funding of under £500,000, with a primary focus of sub £250,000.

Infrastructure and connectivity: developing a range of major transport schemes to improve connectivity and open up key housing and employment sites. Social inclusion: providing support to new and existing social purpose organisations and supporting those furthest away from the market with dedicated programmes of training and learning, careers advice and job search support. Low carbon economy: building the market with a renewable energy infrastructure and low carbon technology.

c. LEP 2014-2020m LIF allocation

•

A focus on providing unsecured loans.

At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

Supporting organisations in the most deprived areas that achieve the greatest social impact; especially: --

Focusing on providing high quality investment readiness support.

Addressing health and social care issues regarding an increasing, ageing population.

(…) “ERDF activities include supporting the growth of social purpose organisations (including Social Enterprises) – Providing support to new and existing organisations to grow. Activities might include: incubation for new starts, school for social entrepreneurs, Social Innovation (e.g. Social Impact Bond development), advice and

WEST OF ENGLAND Key findings Summary SIB has reviewed its own portfolio of historic grant and loan investments in West of England and assessed demand for new social investment and investment readiness support services to paint a picture of the social investment needs of the sector in the future. Here are some key findings, explored in further detail below: •

31 charities and social enterprises have taken on over £9.2m social investment and / or grant support.

•

All 31 charities and social enterprises received grants totalling approximately £4.5m. Of these, 60% were development grants and 40% capital grants (mainly to buy or refurbish an asset).

•

38% of grants were for investment readiness support.

•

And of the 31 organisations, 10 took on loans totalling approximately £4.7m.

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58% of these loans were of less than £250,000.

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100% of charities and social enterprises that received a loan had received a grant.

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Based on our survey, the estimated demand for finance from social enterprises is £1.9m.

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West of England demographic statistics reflect the national demographics, in that:

Social enterprises typically work in boroughs with the highest levels of deprivation.

Social enterprises work primarily in physical, mental health and healthy living (28%) followed by education and learning skills (26%) and culture, arts, sport and heritage (11%)

People with disabilities are the main beneficiary group supported (19%), followed by children, young people and families (18%) and the general public (17%).

Overview of the area

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Introduction The West of England includes 4 Local Authorities (City of Bristol, South Gloucestershire, Bath and North East Somerset and North Somerset) as shown in Figure 1.It is a key economic centre in the UK, with an economy worth over £25bn.85 Much of its activities are focused within innovative, high-tech and creative sectors, and just recently Bristol was recognised European Green Capital 201With over a million people and half a million jobs, the West of England has the highest Gross Value Added per capita after London. Figure 1.1 West of England

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Area: 828 sq mi

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Population: 1,080,600 (2012 est.)63

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Density: 1,305 sq mi

LEP allocation: West of England has been allocated with £58.7 from the ERDF and ESF, to be split equally and spread across 10 European Thematic Objectives.

85 West of England LEP Strategic Economic Plan, 2015-2030, West of England LEP, March 201http://www.westofenglandlep.co.uk/about-us/ economic-intelligence/evidence-for-sep. 86 UK Population Estimates, ONS, May 2012.

Deprivation: Despite the economic success of certain areas within West of England, Bristol and Weston-Super-Mare are still amongst the 10% most deprived areas in England.

Market failure Based on the major market failures of West of England, a key problem for charities and social enterprises seeking to grow their operations and impact is access to appropriate finance. The section below provides information on charities and social enterprises based in West of England. Summary of our findings a. Existing finance gap SIB has been conducting a ‘future financing needs’ survey of the sector since 201Latest data collected includes a total of 411 respondents, out of which 2% were relevant to West of England. The information contains some key findings: •

75% of the survey respondents stated an interest in social investment, mainly to start or grow an existing project;

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38% of respondents were big established social enterprises with an annual turnover greater than £500,000 looking to buy or refurbish a property;

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75% indicated having difficulty accessing finance.

Based on the survey results, the total estimated demand of social enterprises in West of England is of £1.9m.87

87 We note there was a low rate of response for the West of England, and therefore the demand is not considered representative for the area.

b. State of the sector A breakdown of social enterprises by borough shows how City of Bristol, being the most socially deprived local authority in the West of England has at the same time the largest concentration of social enterprises in the area (73% of all social enterprises in the study). At the same time, Bath and North East Somerset, which are considered less deprived, account for just 9% of all social enterprises. According to our research, the main sectors social enterprises are involved in within the West of England include: physical, mental health and healthy living (26%); education and learning skills (26%); and culture, arts, sport and heritage (11%).

of £5,000 up to capital grants of over £323,000; •

63% of all development grants were for investment readiness support; the remaining were for capacity building (33%) and social impact reporting (4%);

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32% of social enterprises that received a grant took on a loan at the same time or subsequently after receiving it.

e. Loans analysis Based on our data, a total of 10 charities and social enterprises received 12 loans, totalling approximately £4.7m.

Figure 2.1 Loans by total amount

c. Sample study Our analysis and sample is based on SIB’s own portfolio of historic grant and loan investments in West of England. The data collection provided a total dataset of 57 investments:88 2 from ACF, 10 from Communitybuilders Fund, 15 from Futurebuilders Fund, 6 from ICRF and 24 from SEIF).

Greater than £500,000

£250,000-£500,000

£100,000-£250,000

£50,000-£100,000

We note this data has been gathered from different funds, each of which had different investment priorities and requirements which could potentially affect our sample study. d. Grants analysis Based on the data, a total of 31 social enterprises received 45 grants, totalling over £4.5m. •

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Over 91% of all grants received were less than £250,000;

Figure 2.1 shows a breakdown of the loans in the West of England. Some of the key findings are: •

Over 58% of all loans were less than £250,000;

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25% of loans were greater than £500,000, which indicates an existing demand for larger loans;

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100% of all social enterprises that received a loan had received business support in the form of grants;

Overall the size of grants varied, from small grants for social impact reporting measures

88 Corresponding to 31 social enterprises.

Less than £50,000

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The median average size of loans was around £180,000;

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Interest rates ranged between 4% - 6%, with larger loans taking on higher interest rates and smaller loans (mainly £100,000 - £250,000) taking on a lower interest rate (4%).

The volume of investments in the West of England was not particularly high but we do see a link between the support that has been provided in the form of grants (with special focus on capacity building and investment readiness) and the ability of an organisation to take on an investment.

Strategic approach

the average (up to 9.6 for Bath and North East Somerset against 6.7 for England),91 there is a risk this will become a drag-anchor on growth. •

Youth unemployment: During 2013, the proportion of young people between the ages of 18-24 who were NEET rose significantly making it challenging to gain and sustain employment.

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Access to finance: 85% of the West of England’s businesses employ less than 10 people, yet there is a clear and growing lack of access to finance for capital investment, innovation and research and development.

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Social exclusion: Specific groups are underrepresented including: ethnic minorities, women, disabled people and older people. Economic inactivity is particularly high amongst these: Pakistani/Bangladeshi (35.1%), Black or Black British (33.8%) and mixed ethnic groups (31%).

Statement of position a. Major market failures and weaknesses According to the West of England’s European Structural and Investment Fund Strategy,89 major market failures and challenges that need to be addressed include: •

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Low-level skills and poor educational attainment: 46% of the workforce hold qualifications at Level 2 and below (considered to be the minimum for employability).90 These people will have difficulties to access occupations where growth is forecast and will need support in order to increase their skills. High housing prices and housing shortages: Following London, West of England has some of the most unaffordable housing in the country. With a differential house price to salary much higher

89 West of England LEP Strategic Economic Plan, 2015-2030, West of England LEP, March 2014. 90 West of England LEP, http://www.westofenglandlep.co.uk/people-andskills/skills-plan/skills-demand-and-labour-supply/duplicate-of-keychallenges.

b. LEP investment priorities and objectives West of England has been allocated £58.7m for the period 2015-202The investment priorities for this LEP area include: •

Skills and people: identifying pathways into the high skill knowledge economy by promoting employment and labour mobility and investing in education, skills and lifelong learning; (estimated £29.35m)

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Place and infrastructure: promoting a cohesive, strategic approach to deliver an infrastructure that will unlock and accelerate growth in new jobs and homes; (estimated £8m)

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Business support to SME’s: enhancing the competitiveness and growth capability

91 Business West Economic Update, Business West, December 2012.

of SME’s by providing access to business support services and funding; (estimated £14.45m) •

Shifting towards a low carbon economy: stimulating growth in low carbon industries and contributing towards the decarbonisation of the economy (estimated £6.9m)

Additionally, a special focus is drawn on social enterprises: •

(…) “Business support will provide a mixture of information, advice, one-to-one delivery, network and specialist intensive support (e.g. to improve access to finance) to remove barriers to growth and prosperity in key sectors and for the disadvantaged. The business support offer will be open equally to social enterprises and those in deprived urban and disconnected rural areas, with an openness to finding ways to unlock jobs for lower skilled individuals and those furthest from employment opportunity (…)”

Recommendations for a Local Impact Fund Our approach Based on our research and our findings, we would recommend a Local Impact Fund for the West of England LEP area with the following characteristics: •

A small investment fund of < £5m.

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A wrap around business support programme, providing organisational development support, especially investment readiness support.

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Investment funding of under £500,000, with a primary focus of sub £250,000. --

A focus on providing unsecured loans.

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At an appropriate interest rate.

Over the appropriate length of time (1 – 7 years).

Supporting organisations in the most deprived areas that achieve the greatest social impact; especially: --

Through a comprehensive support programme that focuses on start-ups spin outs and existing social enterprises.

That addresses issues associated with unaffordable housing.

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Author: The SIB Group Published: February 2015