Community ownership popularity rising

Community ownership popularity rising
The Guardian, by Simon Birch

While UK banks may be playing hardball in providing vital start-up finance for new businesses, one sector of the economy is having no such difficulties.

Community-owned and run businesses are currently enjoying a surge in interest and have been able to successfully raise launch capital without having to rely on all too often tight-fisted banks.

Instead these businesses are being launched with the help of their local community who have been stumping up the cash in the form of community shares.

"Since 2009 around 15,000 people have invested in more than 100 community share issues raising more than £15m," says Simon Borkin from the recently launched Community Shares Unit.

Backed by the Department for Communities and Local Government and run by Co-operatives UK and Locality, the unit is now looking to get more community share schemes off the ground with a target of doubling their number within the next three years.

"Right across the UK people have the opportunity to become members of community-run co-ops. The most popular are those which aim to produce renewable energy or re-open important community services such as local shops and pubs," says Borkin who wants to extend community shares into other areas including community housing and transport.

Members of the local community and those who want to support these projects but who don’t live locally can invest in them by buying shares or by providing loan stock, a sum of money which is lent over a specific period of time.

The returns that investors can expect to receive vary but can be as much as 6% or 7% per annum.

"What is important to remember, however," points out Borkin, "is that community shares aren’t an investment proposition. It’s all about promoting and supporting a community service or asset."

So what’s the most important thing that communities should be aware of when looking at launching a community share scheme?

"It’s essential that you make sure that there really is demand within the local community for the project that you’re planning," replies Borkin.

"It’s all too easy for a small group of people to get swept away with enthusiasm without properly researching whether or not there’s enough support out there for your project. If there isn’t, then it’s unlikely that you’ll ever get the level of community investment needed."

The other crucial piece of advice that Borkin gives is that any community-run enterprise needs to have a rock-solid business plan, just like any other commercial operation.

"Underpinning any community share offer is a viable business," says Burkin. "Sustainable income generation lies at the heart of all community share offers."

One of the biggest success stories in the community share movement has been the opening of over 50 new local shops since 2009 which have been funded with the help of community share offers.

Many of these schemes have been brought to life with the help of the Plunket Foundation which provides valuable support for new community shops.

"Community shares have become an important way that communities can raise significant levels of finance to save their local shop and pub," says Peter Couchman chief executive of the Plunkett Foundation.

"They are important because alongside raising finance from the local community and often further afield, they also give their members real ownership and a say in how their shop or pub is run."

Another source of help for new community share schemes is the £500,000 Co-operative Community Shares Fund which was launched last year with finance from the Co-operative Group and which is managed by Co-operative & Community Finance.

"The fund is not intended as a long term investment as we want the local community to own and control the society," explains Ian Rothwell, development manager of Co-operative & Community Finance.

"However we can offer help in a number of ways including carrying out a full due diligence on a community’s share offer plus our offer to invest acts as reassurance to other potential investors."

Case Studies

Pompey Supporters’ Trust

Portsmouth Football Club is currently in administration and fans of the club are now looking to buy out the club and become the club’s majority shareholder. Pompey Supporters’ Trust have already raised £1.25m of their £2m target through community shares.

"Don’t be defensive in your communications about your project," advises Colin Farmery from Pompey Supporters’ Trust. "Some people will be sceptical and negative but if you believe in what you’re doing, stay positive about your message, eventually the sceptics will come round."

"Supporters Direct is an organisation which lobbies for community engagement in sports clubs and has been extraordinarily helpful in guiding us through the legal pitfalls. If you’re connected with a sports club which is thinking of going down the community ownership route then make sure you use Supporters Direct."

Slindon Forge Community Shop

Having lost their only shop and one of two pubs, residents of Slindon, a small picture-postcard village in the heart of the South Downs decided to launch their own community shop.

Their community share offer raised £50,000 which enabled the community to access additional funding of £150,000 and in October 2012 a new village shop and café opened in what was the old forge.

"Networking is crucial for uncovering people and skills you’d never thought of approaching," says Mike Imms secretary of Slindon Forge Society. Plus it’s crucial to get the local press onside as soon as you can."

"As well as providing services and somewhere for people to meet, the shop acts as a vital hub for the village and has made Slindon much more sociable and vibrant."

Westmill Solar Co-op

The Westmill Solar Co-op is based on the Oxfordshire and Wiltshire border is the largest community-owned solar project in the world. The 5MW solar power station now has solar panels spread over 30 acres.

In just six weeks the co-op attracted the support of more than 1,500 people who together raised £4m in community share capital, the largest amount raised by any one single community share offer in the UK.

"One of the biggest challenges facing groups wanting to launch a community share funded renewable energy scheme is to find the relevant expertise to help deliver the project," says Jamie Hartzell, the social entrepreneur who advised Westmill on their share launch and who is now director of Ethex, the ethical investment platform. "It’s vital that groups have access to the right skill set."