What next for the community business sector in Liverpool City Region?

Posted on: 14 July 2021 by Helen Heap and Alan Southern in Blog

Our latest research into the social and solidarity economy in the Liverpool City Region provides an update on the health of the community business sector.

The report, Financial Analysis of the Liverpool City Region Community Business Market, shows the specific role that the community business sector plays in communities across the city region and the way business and social impact can be combined.  A community business is locally embedded, trades for local benefit, has some degree of local accountability and is impactful.  We suggest that with the right intervention we can grow the community business sector in the city region.  This is important because these types of business can play an important role in addressing global challenges of inequality, climate change and of course, post-pandemic life.

Two of the main aspects that community businesses need for their success are financial sustainability and community engagement.  When they get this right, they offer much for the communities they are located in.  A typical successful community business would offer a variety of services from which they trade, perhaps in transport, education, and food production.  They would employ local people and draw on volunteers that bring in specific skill sets and connections with the wider community.  You can expect to find community businesses working in sectors such as transport, business support, education and training, and food production.  They are good at what they do, and we need to think about how we encourage them to move into new activities.  

Community businesses demonstrate their social value while seeking to ensure their continued presence.  In Liverpool City Region we have over a hundred community businesses that employ 600 people.  Community businesses are a subset of a wider population of social organisations that trade in the social and solidarity economy in the city region, of which we estimate there are currently almost 2,000.  Community businesses generate some £19m per annum and have net assets of £22 million.  Half of the community businesses we looked at in our latest work had experienced growth in the three-year period prior to the pandemic.  One of the interesting things that we have discovered is that the survival rates of community business in Liverpool City Region is better than that for typical for-profit types of business.  Around 83% of community businesses in the city region survive over five-years, while generally for small business we see survival rates over the same time frame of 43%.  

Yet there is an immense difficulty in pursuing social impact while seeking to ensure commercial sustainability.  The decade following the financial crisis of 2007–2009 has proven to be tough for organisations in the social economy, particularly those which rely on contracts from local authorities and other community groups.  We found in our work community businesses who own premises that provide security of tenure and are an asset from which to generate income. However, lack of finance to maintain a building can quickly turn into a downward spiral, resulting in lost income and shortage of capital.  We discovered how community businesses had suffered over ten years of income decline because of government austerity that came close to exhausting their reserves.  What this has meant is that the community business sector has experienced a greater level of precariousness - and it has done so at a time when the demand for the services they provide has increased.

As we show in our report, there is a strong association between where we find community business and the levels of poverty in the immediate community.  When we mapped out the location of each community business, we found most community businesses in the city region to be in Liverpool, in the most ‘deprived’ wards (see page 10 in the report).  In each of Halton, Knowsley, Sefton, St Helens and Wirral, while there are fewer community businesses, those that do exist are to be found in the same type of ward.  This is a general pattern that can be seen in the wider social economy: the higher the prevalence and persistence of poverty, the more likely we are to find community businesses, social enterprises, cooperatives, credit unions, charities, and the like.  It is a simple but often misunderstood association of social and economic need that prompts a counteraction by community members and activists.  Important as this is, it is a reactive response rather than a strategic vision for how we can live.

Generally speaking, our community businesses are located where they are because of the reduction in public services due to austerity since 2010, and the failure of markets to support our communities over a much longer period.  Community businesses can survive longer and have shown an immense resilience during a time of increased difficulty.  Because of this, we should try to incorporate those who run community business into discussions in the city region about how we use the resources we have and how we distribute the wealth we create in the city region economy.  Because they tend to know what they are doing and they are deeply embedded in the communities they serve, we need to engage community businesses in discussions about the types of strategy that can support their sector and localities.  This should be part of a broader consultation that provides plans on how the wider social economy can be shaped to address the grand challenges that face the city region.  If we are able to do this, we can change the narrative about what social and community organisations do, beyond their immediate purpose - to help those most in need - and towards new community business building in sectors responding to climate change, gross inequalities and of course, what is needed in a post-pandemic society.

To do this, research such as our own and from elsewhere, needs to help pinpoint those areas where intervention can aid community businesses.  We can begin by asking how can we develop and expand the volume of community businesses in the city region?  In this way, we can start to plan how we break away from the current geography that exists, to see more community businesses and social organisations starting up in all types of neighbourhood.  We then need to set out a series of interventions that aid the supply side of new start up and existing community businesses, such as through the provision of finance and investment, the development and education of employees and managers, and training for volunteers.  The same can be done for the demand side, particularly around embedding social value in the public and private sectors and demanding more of the anchor institutions in the city region.  We should look to incorporate equality, diversity and inclusion as key social impact metrics and be aided in this by the experience of social and community organisations.  This is how we begin to create new visions for the whole Liverpool City Region as it faces global problems, with community businesses and the social economy playing a central role in shaping our future.