Pioneers post: BREXIT and social entrepreneurs

Pioneers post: BREXIT and social entrepreneurs

It is estimated that one in 12 British social enterprises receives income in the form of grants or investment from the EU, worth about 60 million pounds
By Sarah Shearman

LONDON, March 22 (Thomson Reuters Foundation) - Waved on marches, draped from railings or daubed on faces, flags are fluttering across Britain - a standoff between Union Jacks and European stars that shows a nation torn in two by its vote to leave the European Union 1,000 days ago.

It also means good business for flagmakers.

Welsh social enterprise Red Dragon Flagmakers has reported a 20 percent increase in orders of EU and Union flags since December, ahead of Britain's planned departure date, which has just been extended to either April 12, May 22 or possibly June.

Leavers who want to break ties with Brussels have outbought remainers, with 20 Union flags sold to every EU one.

Demand is up, and the firm said there has been no disruption in its supply chain as other business leaders had feared.

"We haven't even had a hiccup. It's not affected our supply chain, it's not affected our sales, we're selling more than we ever have before," Jo Ashburner Farr, chief executive of Red Dragon Flagmakers, told the Thomson Reuters Foundation.

Given the diverse range of social enterprises in Britain, tackling a plethora of social and environmental issues, the sector is divided on the potential impact leaving the EU, with or without a deal, will have on business.

Counter Culture

Almost half of Britain's social entrepreneurs - who aim to do good as well as make profit - said leaving the EU without a deal will have no impact on their businesses, according to a survey in February by Social Enterprise UK, the trade body that represents the sector.

Red Dragon Flagmakers trains and employs people who struggle to find work, hand-making specialist flags and coats for homeless people out of military-grade fabric made in Britain.

Up to 40 percent of its clients are overseas, but as a debt-free, specialist business with a reputation for quality products, it is shielded from the potential economic headwinds that Brexit could bring, said Ashburner Farr.

"I don't think anyone is going to stop doing business with us," she said. "We've been through a lot worse, we just have to work harder and smarter."

Deal or no deal

Many prominent business leaders have warned about the economic damage that uncertainty over Brexit has already caused.

Whatever deal finally emerges, after labyrinthine negotiations and political manoeuvres, business fears possible trade tariffs, damage to supply chains, delays and restrictions on migration.

There are more than 100,000 social enterprises in Britain, contributing 60 billion pounds ($78 billion) to the economy and employing 2 million people, according to Social Enterprise UK.

In the past few months, Belu Water, a social enterprise that makes water bottles in Britain, has felt pressure on its supply chain, as bigger businesses put contingency plans in place.

For other social entrepreneurs, the ripple effect is yet to be felt, said Edward Siegel, the chief executive of Charity Bank, which lends capital to charities and social enterprises.

"Social enterprises that have been through past economic cycles will know the shock to the economy doesn't typically hit the social sector right away," he said. "The ramifications for Brexit will take some time to come through."

Funding Cuts

The problems many social enterprises are set up to fix, such as homelessness or unemployment, will still exist after Brexit.

And if these problems worsen, as many analysts predict, there could be a greater demand for social enterprises.

"If there is social need, there will be social entrepreneurs seeking ways to solve those problems. The challenge in difficult economic times is, who is going to pay for that?" said Siegel.

PM Training, a social enterprise in the central English city of Stoke-on-Trent that provides training and apprenticeship schemes, has already grappled with funding cuts.

The business, which was founded in 1982, has received 2 million pounds from the European Social Fund (ESF), which aims to improve job prospects for Europeans, since 2016.

Some of this funding has already ended and the rest – about 300,000 pounds – will continue to 2020.

While PM Training does not rely solely on EU funding, the business will support fewer people without it and might need to cut its 120 headcount, said Managing Director Will Nixon.

"We are holding tight, as much as anything," he said. "My honest opinion is that we won't find replacement funding."

British social enterprises have also won funding from the European Investment Fund, the Youth Employment Initiative and the EU Fund for the Most Deprived.
One in 12 British social enterprises receives income in the form of grants or investment from the EU, worth about 60 million pounds, estimates Social Enterprise UK.

Whether Britain will be able to continue to access these funds once the allocated time period comes to an end depends on negotiations with the EU.

The British government said it will guarantee all projects from the ESF until 2020, even in the event of a no-deal Brexit, according to a spokeswoman for the government's business department.

Cliff Prior, chief executive of Big Society Capital, an institution that finances social investors, said the loss of EU funding "will have serious consequences for some social enterprises, especially if this outcome is combined with an economic recession."

Survival of the fittest?

Established social enterprises have experience of operating in challenging economic times, including a decade of major public spending cuts, following the global recession.

"We are used to an environment that is quite volatile, and certainly from our perspective, we won't cower in a corner and hope it all washes over," said Nixon of PM Training.

However, even the most resilient social enterprises that made it through this period of austerity might find their growth hampered if Britain left the EU without a deal, said Peter Holbrook, chief executive of Social Enterprise UK.

"That's not to say this is some Darwinian evolution where only the fittest survive. You see great social enterprises, because of very significant changes to market conditions lost, and that is a tragedy," he said.

(Reporting by Sarah Shearman @Shearmans. Editing by Lyndsay Griffiths. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's and LGBT+ rights, human trafficking and slavery, property rights, social innovation, resilience and climate change. Visit http://news.trust.org to see more stories)

Our Standards: The Thomson Reuters Trust Principles.

Jo Ashburner-Farr

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