Crunch time for social enterprises

The current financial downturn is a make-or-break moment for the social enterprise sector, a leading social entrepreneur has warned.

Prior (left) and Marley
Prior (left) and Marley

Cliff Prior, chief executive of enterprise support charity UnLtd, said many social enterprises were already suffering from the effects of the credit crunch.

"This is the big test of how well the movement towards social entrepreneurship is going to endure," Prior told Third Sector. "If it can survive a financial downturn, then it's really going to last. This is a big time for us, and the results will depend on the resourcefulness and creativity of social entrepreneurs."

His comments came after 984 social enterprises and small businesses responded to a poll by UnLtd, which found that 21 per cent of respondents had been "badly affected" by the economic climate and 34 per cent had used personal loans and credit cards to boost their organisations' growth.

Social entrepreneur Renuka Marley, who took part in the survey, said her Phoenix Business Academy, a business training enterprise, was struggling to find new contracts.

"Most of our clients can't afford to pay for the services we provide because we're selling to small businesses," she said. "Two or three of our regular companies are not making any profit at all at the moment, and training is a luxury that they can't afford."

Prior advised entrepreneurs to make sure that they understood their customers' changing needs as eco-nomic conditions deteriorated. "The public will want economical basics and the Government will want straightforward services," he said. "Some of the more extraneous contracts will go. Enterprises need to fund ways to add value in difficult financial times."

George Leahy, policy and research director at enterprise membership body the Social Enterprise Coalition, said that it was conducting its own research into the impact of the credit crunch for members.

"The Government needs to act upon all these results to protect the interests of social enterprises, particularly as these businesses are in the front line of preventing the worst outcomes of an economic downturn, which include unemployment and social exclusion," Leahy said.

Key points

984 social enterprises and small businesses responded to the poll
21 per cent had been 'badly affected' by the economic climate
34 per cent had used personal loans and credit cards to boost growth
40 per cent had experienced cash flow problems

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