Community spirit may have made a comeback amid the anxieties of lockdown Britain, but the dramatic loss of income across the voluntary and not-for-profit sector has brought the need for charities to have a diverse range of income streams into sharp focus.
While most of the sector broadly welcomed the review by Danny Kruger MP, which called for a £500m fund to boost pandemic support for the sector, it lacked a financial commitment to community shares that some co-operative business networks have been calling for.
Between April and June the UK economy slumped into the largest recession on record, as GDP plunged 20.4 per cent compared with the previous three months, and traditional funding models continue to struggle. Could community share offers (CSO) – the social investment mechanism that raises money for enterprises that benefit communities – bridge the gap for charities looking to diversify their incomes?
Co-operatives UK, a network for thousands of co-operative businesses, seems to think so. The group estimates that member-owned businesses are worth more than £38bn to the British economy; and that community shares “allow enhanced commercial rigour and self-sustainability in community ownership for charities, with more local people having a direct stake… in a way that mobilises social and financial capital in the community.”
Isla McCulloch, programme manager at Co-operatives UK, explains: “From the term ‘community shares’ being almost unheard of in 2011, to over £150m raised in community shares by 2020, the model has gone from strength to strength and reached all corners of the UK.”
Charities and social enterprises have traditionally been wary of social investment, with 2019 figures from Big Society Capital suggesting just 4,000 of them had accessed some form of social investment since 2013.
But a new report published by Co-operatives UK provides a solid evidence base for future development of the community shares market, McCulloh says, with positive implications for raising finance, and for businesses, investors and communities at large.
“Ordinary people are investing in community shares and democratising ownership of our economy,” she says. “Institutions, funders and local government all have a role to play in the development of this market, investing in or alongside community share offers.”
The network also works with the membership body Locality, Power to Change and the Architectural Heritage Fund, to operate a Community Shares Booster Programme – a scheme that makes match investments of up to £100,000 alongside communities that can demonstrate higher-than-average community benefit, engagement and innovation.
£132,000 in 64 days
Manchester-based skatepark Projekts MCR launched a CSO in 2018 with the aim of expanding its outreach and upgrading its facilities in response to increased attendance.
The organisation was established in 2004 as a not-for-profit co-operative and community benefit society, with the aim of developing people and places through skateboarding and other skatepark activities. It focuses on making skateboarding accessible to under-represented groups, particularly people living in areas of high deprivation, girls and women, and people with disabilities.
The skatepark now hosts more than 18,000 visits a year, and delivers more than 20 coaching sessions a week to schools and youth-related groups in Greater Manchester. The CSO was used to replace the skatepark’s wooden ramps with a more robust concrete surface, while creating a café area, community space, spectators’ viewing platform, enhanced ramp use, and increased capacity for all.
John Haines is the chief executive of Projekts MCR. He’s been involved for 16 years and credits the CSO, combined with the booster scheme and match funding, for enabling the co-operative to realise its ambitions.
“A share offer was right for us as we found funding was capped in other areas,” he explains. The project needed capital for building work, having turned shipping containers into a café to generate more income.
“It’s quite a strange thing to do compared to applying for funding, because you need to get the message out to the community in a way that appeals to as many people as possible,” Haines says. Seventy investors raised more than £132,000 for the initiative in just 64 days.
There are clear benefits for those looking to make investments: CSO projects are eligible for Social Investment Tax Relief, which means investors can reduce their income tax by 30 per cent of the value of their investment. Projekts MCR offered investors four per cent interest on their investment each year, as well as making it withdrawable after year three.
Investors additionally have a say in how the charity is run by attending annual general meetings and other events. Supporter David Kilmartin invested £1,000 to help to “improve his community”, and says it’s nice to hear of progress at shareholder meetings: “There’s an extra ‘bang for the buck’ with social investment, which is a wonderful thing.”
CSO projects also offer a unique opportunity for community members to shape initiatives that matter to them. For Andy Gridley, a lecturer at the University of Manchester, the decision to invest was easy, as his three daughters use the skatepark. “I live in Moss Side where the density of kids is huge,” he says. “It was a chance to invest in something for them to do.”
Projekts MCR’s Haines adds that without the extra income generated by the improvements, the organisation may have struggled.
“We are hugely grateful for all the support – it shows what local people can do when they trust and believe in a project, especially when you’re working with young people,” he said.