The North West is a hotbed of social enterprise innovation. There are a significant number of social enterprises tackling the big social issues of the day at ground level, complementing the work done in the public sector.
These social enterprises operate across the region, across a range of sectors, all focused on the common goal of improving the lives of people in their community. We increasingly see one recurring common challenge that faces many social enterprises; their ability to grow sufficiently to reach their potential, and meet the demand for impact that their community is in need of.
Social enterprises can experience various barriers to meet their ambitions, but one of the most common relate to access to affordable finance to enable them to expand further. This may be due to lack of finance, or finance that is available to them is just too expensive, inflexible or not designed for working specifically with social enterprises.
This is where something called Social Impact Investing can help. In essence, Social Impact Investments are those made by investors into social enterprises with the intention of generating a positive, measurable social and environmental impact, alongside a financial return.
One of the social impact investment innovations that we have developed at Resonance, a leading pioneer of social impact investing in the UK, are regionally based Social Investment Tax Relief Funds (SITR) that can overcome this barrier to growth. These funds generate investments from high net worth individuals and then invest in our geographically placed funds for investment into high impact social enterprises. Individual investors obtain tax relief which enables the funds to provide affordable, patient loans to enterprises to help them grow their business.
We have just launched a new fund focussing specifically on the North West. The Resonance North West SITR Fund will support the regions social enterprises who have stated aims of helping to dismantle poverty and disadvantage; this could be from those supporting individuals with homelessness, through to providing training to help people get back into the workplace. The fund will enable social enterprises to access affordable and flexible growth capital that they can then use to develop their infrastructure or capability to help more and more people.
The North West Fund follows two other regional SITR funds that have been successfully developed by Resonance – The West Midlands and Bristol SITR Funds, use individuals’ investments and then pool them together to create a fund, the fund then invests in high impact social enterprises who are helping to dismantle poverty in these regions.
One of the investments from the Bristol SITR fund was into Street Impact Bristol, who are a consortium formed by three charities (St.Mungo’s, Second Step and Bristol Drug Project). The initiative supports 125 people with complex needs out of rough sleeping, by providing accommodation as well as supporting services specifically tailored for each individual’s needs. The Bristol SITR Fund has invested £112,500 in the initiative to help with initial working capital.
The West Midlands Fund was launched last year and won The Social Impact Academy Fund New Product Launch (Direct) recognising the impact that the funds are making to society and the impact Investing sector. Our first investment was The Jericho Foundation, which benefited from £100,000.
Jericho offers support, training and employment opportunities to those experiencing significant barriers to employment and social inclusion, ranging from ex-offenders to survivors in human trafficking. The investment is being used to facilitate the growth of one of Jericho’s most successful social enterprises ReUsers, where upcycled items are sold through Jericho’s retail outlets. The investment will provide the initial working capital required to take on additional staff and retail space, as well as investing in refurbishment work and an updated sales system. This will increase retail space by 25% enabling an increase in product ranges available, and ensure that the stores are working as efficiently as possible – significantly increasing the income generating potential of the business as well as unlocking additional training and employment opportunities.
When asked about taking on social investment, Richard Beard, CEO of Jericho, told us “This is our second experience of an SITR investment and both times it has given us access to vital funding that can be paid back at a much smaller rate of interest than we have been able to access previously.
“The investment from the Resonance Fund will increase our footprint at ReUsers by 25%. This means we should be able to grow the business and build on the fact that we have so far saved 650 tonnes of unwanted items going to landfill and supported 70 people with apprenticeships or voluntary positions – this simply would not be possible without SITR investment.
“It represents a significant growth in our impact and it’s great to work with an investor that is so aligned with our social mission.”
Resonance has chosen the North West as its next regional focus, as it has identified that it has high areas of deprivation contrasting with areas of significant wealth. There is a significant need to provide support for the growing number of innovative social enterprises in the region. Anne Woolhouse, Investment Manager at Resonance said “The North West has always been a hotbed of social enterprise, it is the home to a strong social enterprise sector committed to supporting deprived communities through innovative business models, as well as containing one of the UK’s first Social Enterprise Cities in Salford.”
“According to SEUK’s State of Social Enterprise Survey 2017, 59% of social enterprises in the North West anticipate an increase in turnover over the next twelve months but, as with many other regions, the report says that access to appropriate finance remains the biggest barrier to growth.
“In addition the ONS Index of Multiple Deprivation shows that Knowsley, Liverpool and Manchester are all in the top five local authority districts with the largest proportions of highly deprived neighbourhoods in England. Blackpool, Salford and Rochdale, are also in the top twenty. In the same report, Knowsley itself was ranked one for both the highest proportion of the population suffering from both income and employment deprivation of any Local Authority in the UK.
“Therefore, the North West presents an exciting opportunity to build a strong, diverse portfolio of investments in social enterprise, with significant potential for generating social impact at scale.”
The fund will not only benefit social enterprises, and those they help, it also represents a great opportunity for eligible investors, as it provides a unique tax benefit called Social Investment Tax Relief, which was introduced by Government in 2014, to encourage individuals to make investment into social enterprises and offers significant tax benefits to eligible investors who can claim back 30% of the amount invested into a qualifying social enterprise against their income tax bill, either in the year the investment is made, or carried back against the previous tax year.
So, as you can see, social impact investing coming to the North West should prove to be a win/win for both social enterprises and investors alike. For more information, please visit www.resonance.ltd.uk