The recent words of an unattributable senior civil servant.

With the recession biting, how is it impacting on social enterprises? The evidence is mixed. Some suggest that in tough economic times social enterprises are well placed as they are mainly motivated by societal aims rather than profit. As George Leahy, Director of Research and Policy at the Social Enterprise Coalition comments:

One might add that social enterprises may be seen by consumers as having a more trustworthy brand, so while other businesses might face customer desertion, social enterprises are more likely to retain the client base. This might be true, for example, of ethical banks or microfinance institutions.

Others claim that social enterprises are primarily business (albeit with community goals), and hence suffer during credit crunch times. They are faced with the double-whammy of a lack of income through trading and other sources, coupled with a rising social need.

Some suggest the tough economic times have created a heightened social awareness, and a drive towards social innovation. There has been a ‘snowballing’ in Community Interest Company (CIC) applications during the economic downturn. Sara Burgess, the CIC regulator, has commented that CICs have been going from

The big challenge for social enterprises is how to fund the organisation during the period from infant startup to self-sustaining enterprise. At OxFizz, we pass the majority of profits generated through the trading activities of our three enterprises to charity. We’ve generated over £5,000 for charity since starting trading in November 2007 and only now are we moving towards financial sustainability. During this period we have had to rely on the generosity of our Friends of OxFizz, individual supporters who donate £5 a year, plus family handouts, in-kind support and the generosity of charitable trusts such as Coutts, HEACF, the Dragon School Sale and the Oxfordshire Community Foundation. The latter trusts have had the faith to support a social enterprise and have believed in what we do. Many others have turned us down because we’re a CIC rather than a charity, while others argue social enterprises need to be self-sufficient from day one. This isn’t feasible, and we would argue a greater maturity is needed by funders. Thanks to our supporters, we are on course to generate £30,000 for charity this year in addition to providing a wider social impact.

The other challenge social enterprises face is the funding relationship with the state. An increasing number of social enterprises are funded by the government to provide public services. To return to the quote at the start, a growth paradigm has existed within public services and the state. As today’s Prime Minister’s Questions demonstrated, the 2011 comprehensive spending review will inevitable mean cuts in statutory contracts, whichever hue of party is in power. Many social enterprises, and charities, have sought to diversify their income to become more ‘sustainable’ through winning public service contracts. The big challenge of the next fifteen years, or at least the next five, may well be how to cope with a contraction paradigm. Within this context, the prevailing interpretation of ‘sustainability’ may need to be reassessed.