Mythbusting: there are 68,000 social enterprises in Britain

Mythbusting: there are 68,000 social enterprises in Britain
The Guardian, by David Floyd

"There are some 62,000 [social enterprises] in Britain today, contributing more than £24bn to the economy and employing nearly one million people," according to Conservative peer, Baroness Byford, speaking in the House of Lords in June 2012.

The Baroness was using what’s widely recognised as the official figure. Since 2005, this figure has been generated based on some questions in the Annual Small Business Survey (ASBS), which is published by the Department for Business & Skills (BIS).

The mythical 62,000 statistic is an estimate based on the ASBS figures published in 2007. It’s particularly impressive when you compare it to the estimate from 2003, then published by the Department of Trade and Industry (DTI), that there were then 5,300 social enterprises in the UK.

In a recent paper – The Politically Motivated Modification of ‘Truth’: A methodological critique of the social enterprise growth myth, Simon Teasdale of the University of Birmingham and colleagues note that "the extent to which this myth of social enterprise growth has been accepted can be seen by a search on Google for "62,000 social enterprise" which yields 13,200 results (as of 14 December 2011)."

The 62,000 stat, though still widely quoted, has since been updated. According to the website of umbrella body, Social Enterprise UK: "The best government data (the Annual Survey of Small Businesses UK 2010) estimates that there are approximately 68,000 social enterprises in the UK contributing at least £24bn to the economy."

The 2003 research, which told the DTI that there were 5,300 social enterprises, was looking for social enterprises that had a specifically social ownership structure. The researchers used regional data to estimate the numbers of "autonomous organisations with a governance and ownership structure based on participation by stakeholder groups (users or clients, local community groups, etc) or by trustees. Profits are distributed as profit sharing to stakeholders or used for the benefit of the community."

The ASBS research uses a far looser definition of social enterprise. As Teasdale’s paper explains: "For a business to be classified as a social enterprise they should:

• Think of themselves as a "social enterprise" (Q37 in the 2006-07 survey).

• Not pay more than 50% of profits to owners/shareholders (Q36).

• Generate more than 25% of income from traded goods/services (Q34A).

• Think that they are a very good fit with the DTI definition (Q38)".

Even if you accept this woolly identification process, it’s still slightly unclear where the headline figure comes from. Teasdale paper’s notes that: "In 2006-7, 5.9% of organisations with employees were classified as social enterprises (151 social enterprises out of 2,535 businesses) as they met all the social enterprise test questions. When applied to the national population of businesses with employees (1.2 million), this equates to between 63,000 and 77,000 social enterprises … We assumed that the 62,000 figure was derived by averaging the totals of 55,000 social enterprises in 2005 and 70,000 social enterprises in 2007."

Frankly, we’re already in wild guess territory here, but a further twist is provided by the fact that: "Closer analysis of the 2006-7 survey data yields the interesting finding that the overwhelming majority (89%) of the 151 social enterprises have a legal form that places no constraints on the distribution of profits to external shareholders".

So 89% of the 62,000 (now 68,000) ‘social enterprises’ in the UK can be entirely owned by private individuals and can, at any given point, decide to pay 100% of their profits to their owners.

There’s nothing wrong with people setting up private businesses to deliver positive social outcomes but that isn’t what social enterprise support bodies or politicians are talking about when they talk about social enterprises. As Social Enterprise UK explains: "Social enterprises do not make profits for shareholders (because they don’t have any) or exist to make their owners very wealthy."

The 62,000-68,000 figure is particularly annoying because its public use is so comically disconnected from its factual basics. Even if it’s impossible to define social enterprise into one neat answer, is it really too much for sector leaders and politicians to be consistent about what they mean when they talk about them?

But this inconsistency doesn’t necessarily mean we’re overestimating the number of social enterprises. For example, according to NCVO’s Civil Society Almanac, 45% of the UK’s 180,000 registered charities self-identify as a social enterprise. That’s 81,000 and many of them wouldn’t be covered by the ASBS research.

Ultimately, the problem is that politicians and sector leaders have, often with good intentions, chosen to describe a massive increase in the number of organisations describing themselves as social enterprises, as a massive increase in the number of social enterprises.

The danger is that, as a result, ‘social enterprise’ may end up meaning nothing at all.