If the UK matched Europe for the amount of social enterprises in the economy, wages, investment and living standards would be higher

Yet more proof of our mantra that “the resources for the future are already here”—we just need to apply them more generally. A cross-post from Pioneers Post:

Research reveals gulf between UK and European counterparts in strength of the social economy, pointing to the Basque Country and Emilia-Romagna as regions to emulate, as lobbying steps up for business reform ahead of general election.

Increasing the proportion of social enterprises and cooperatives in the UK economy to a similar level to France, Germany and the Netherlands would increase average wages and investment, says Social Enterprise UK.

The report - Ending the monoculture: How diversity of business can bring prosperity - published by Social Enterprise UK, with the support of the Alex Ferry Foundation, says: “To build a better economy, we cannot keep returning to failed orthodoxies, hoping that tax cuts and subsidies alone will unlock investment and new business opportunities.

“Instead, we need to pluralise our economy and shift decision making power to a more diverse business base committed to the communities they serve and prioritising long-term development, over short-term profit.”

The report estimates increasing the UK’s GDP contribution of social enterprises and cooperatives from 3% to 12% (the median of France, Germany and the Netherlands) would result in average wages increasing by £2,640 per worker. The higher proportion of social enterprises and cooperatives would also result in a £14bn increase in investment, through social enterprises reinvesting half of their profits.

Emily Darko, director of research and policy at Social Enterprise UK, emphasised that because of the governance structures of social enterprises and cooperatives, the benefits would be more than just financial.

She said: “If workers and communities have more of a say in how businesses that affect them are run, then those people are more likely to benefit from them. Not only that, but leadership of social enterprises tends to be more representative of society as a whole.

“Social enterprises are more likely to have leadership from women or people from minoritised racial communities, etc, so they are then also more likely to hire women or people of colour, are more likely to that provide jobs viable for people with caring responsibilities.”

With a higher proportion of social enterprises and cooperatives, the report says other businesses will be encouraged to raise their standards of social and environmental responsibility.

Workers would receive more education and training, benefiting both the workers themselves and the wider economy when those workers move to new jobs. Workers would also benefit from decreased work intensity, leading to higher levels of job satisfaction and greater work/life balance.

Examples of thriving economies from Europe

As examples of the societal and economic benefits of a high density of social enterprises and cooperatives, the report highlights Emilia-Romagna in Italy and the Basque Country in Spain.

15,000 out of Italy’s 43,000 cooperatives are based in Emilia-Romagna. Cooperatives directly account for 30% of the region’s GDP, significantly higher than most parts of Europe. GDP per capita in Emilia-Romagna is 20% higher than the rest of Italy and 17% higher than the EU average.

The cooperative model in Emilia-Romagna is based around patient investment, supported by a supportive regional policy environment. Undistributed profits are not taxed, providing an incentive for cooperatives to continue investing into the business. Cooperatives are obliged to provide a portion of their profits for investment into new cooperatives, bringing in new investment into the sector as a whole.

At the end of the 1940s, after the Spanish Civil War, the Basque Country was one of the poorest areas in Spain. It is now one of the richest areas in the EU and at the centre of this revival has been the development of a high density of cooperatives, including the Mondragon Corporation. This cluster of more than 100 cooperatives alone contributes 12% of the GDP of the Basque Country.

Konfekoop, the regional body representing cooperatives in the Basque country, estimates 10% of all firms in the region are cooperatives. GDP per capita in the Basque Country is 26% higher than the rest of Spain and the region has the lowest levels of inequality in the country.

A key part of the cooperative model in the Basque Country is democratic voting by workers on key decisions and profit reinvestment, with at least 10% of profits from each cooperative put aside for investment into research and development or other funds to guard against contingencies. Profits are also shared with workers, depending on the financial conditions of the business.

Campaigning for business reform

Ahead of the 2024 UK general election, Social Enterprise UK is campaigning as part of the Future Economy Alliance for business reform, political devolution and climate action. The campaign’s website calls for business to work for everybody by sharing profits and power with communities and actively tackling social and environmental issues.

Darko said the Future Economy Alliance was looking to level the playing field for social enterprises to enable the sector to grow. She said: “We’re pushing for reform in transparency, governance, reporting and infrastructure that will make it easier for businesses to operate like social enterprises.”

Arvinda Gohil, chair of the Future Economy Alliance, said: “Our economy shapes our world, creating prosperity and opportunity – but also some of our greatest environmental and social challenges, which the state alone cannot resolve. With a general election imminent, our new generation of purpose-driven pioneers is ready to guide the next Parliament in the bold reforms needed to make the UK economy deliver for people and planet.”