The importance of keeping things in proportion5 min read

How many social enterprises are there in the United Kingdom? No-one seems to know. Back in 2003, the Government thought the total was “in the region of 5,300”. By 2012, the number had ballooned to 62,000 (Hansard, 21 Jun 2012, Column 1867). Then, two and a half years ago, it claimed there were “an estimated 471,000” – a figure equivalent to nearly nine per cent of the entire UK small business population. Economic growth on this scale would normally be cause for great celebration and yet the Government’s announcement was met with a strange and awkward silence in the third sector. Why?

The source of Government’s estimate was a joint DCMS/BEIS report, Social Enterprise: Market Trends 2017, published in September 2017. The calculation is based on an elaborate methodology that measures social enterprise against four criteria: sources of income, use of profits, organisational goals and legal form.

Drawing on a survey of 1,300 business owners and managers that it claims is “equivalent to the BEIS Small Business Survey”, the report concludes:

• “[T]here are an estimated 471,000 UK social enterprises overall. This is made up of 99,000 social enterprises with employees and 371,000 social enterprise with no employees.”
• “[T]he number of social enterprise non-employers lies, with a 95 per cent certainty, between 237,000 and 505,000. Similarly, the number of social enterprise employers lies with a 95 per cent certainty between 77,400 and 122,200.”

And yet the trade body Social Enterprise UK (SEUK) claims a much more modest total – around 100,000 – which it argues in its 2018 report, Hidden Revolution, is consistent with “various estimates over many years [that] have suggested at least 70,000 social enterprises in the UK”. (It also notes that the National Council of Voluntary Associations has in the past claimed there are “around 70,000 ‘social companies’.”)

Setting aside the oddity of a trade body that chooses to shrink the size of its sector by a factor of five, how did SEUK come up with a figure 40% larger than the previous consensus figure of 70,000? Well, in its words, “recent Government estimates have suggested [there are] 99,000 social enterprises that collectively employ just over 1 million people. But these figures are out of date or exclude many large social enterprises. Our research shows that … a more realistic and up-to-date estimate of the scale of the sector would be at least 5% greater in number.”

Two things are happening here. First, whilst it clearly accepts the general thrust of the government’s methodology, SEUK choses to ignore the 371,000 social enterprises with no employees. Second, it inflates the Government’s estimate on the basis of unpublished research to come up with a figure of “at least” (99,000 × 1.05 =) 103,950 social enterprises. Neither of these steps is unreasonable in itself but it would certainly help to see a clearer rationale for their application.

This is particularly important because there is another long-standing, authoritative (and published) piece of research that SEUK could have called on: its own State of Social Enterprise survey. These surveys have been providing reliable comparative data every other year since at least 2011. In its latest report, Capitalism in Crisis, SEUK describes the State of Social Enterprise survey as “the largest, most credible, most comprehensive and most representative survey of social enterprises in the UK.”

For our purposes, the most helpful part of the survey is the breakdown of social enterprises by legal type. (It is, in large part, the lack of a single legal form for social enterprises that makes counting them so difficult.) The chart above is taken from Capitalism in Crisis. From it we can see that 23% of social enterprises are Community Interest Companies (CICs) and 15% of them are Registered Societies (confusingly called ‘IPS Bona Fide’ and ‘IPS BenCom’ in the chart; more properly called ‘Cooperative and Community Benefit Societies’ these days). After removing the 4% of respondents that did not know or could not remember their legal form, these proportions are equivalent to 24% and 16% respectively.

And this is where things start to get interesting. With 100,000 social enterprises in total, that must mean 24,000 of them are CICs and 16,000 are Registered Societies. There are however, two inconvenient truths to reconcile:

• According to the CIC Regulator, which tweets regularly on this, there were only 20,066 CICs on the public record on 23 June 2020.
• According to the Financial Conduct Authority, which never tweets on this (and has a wholly antediluvian approach to record keeping and public accountability), there are only around 8,300 Cooperative and Community Benefit Societies.

Now, by definition, every CIC and Registered Society is a social enterprise. This means that, if the proportions found by “the largest, most credible, most comprehensive and most representative survey of social enterprises in the UK” are to hold, the true number of social enterprises overall must be somewhere between:

• 83,600 (≈ 20,066 ÷ 0.24), based on the number of CICs, and,
• 52,000 (≈ 8,300 ÷ 0.16), based on the number of Cooperative and Community Benefit Societies.

Neither figure comes anywhere near 100,000 (let alone the Government’s estimate of 471,000). More intriguingly, the average of the two turns out to be remarkably close to the “various estimates over many years” of 70,000. Now there is an important but separate debate to be had about the use and reliability of survey data versus administrative data. For the time being, however, it seems that when it comes to the number of social enterprises in the United Kingdom, the rule should be: plus ça change, plus c’est la même chose…