Magazine article The Spectator

An Idea Whose Time Has Come

Magazine article The Spectator

An Idea Whose Time Has Come

Article excerpt

On my walk from Charing Cross station each morning I see Steven outside Boots, rain or shine, his outstretched arm holding the latest Big Issue at eye level for passing commuters. He's part vendor, part performance artist. Many, like me, stop to buy; others look down and hurry on.

Though passers-by might pretend he's invisible, the company that helps to get him and other homeless people back on track by selling magazines is part of a quiet revolution whose impact is only just beginning to be felt.

The social enterprise sector -- run for social or environmental purposes (or both) rather than for shareholders' profit -- is a tiny part of business in Britain. Its 55,000 companies have a combined turnover of £27 billion a year and employ 5 per cent of the workforce. With its green tinge, its social conscience, and its ability to make consumers feel virtuous, this sector would seem an unlikely candidate for success in a recession.

Yet parts of the sector have shown resilience thus far. People Tree, a 'Fair Trade' fashion company, has racked up 10 per cent growth against plummeting high-street sales.

Research from YouGov shows the majority of people believe that social and environmental issues are more important than ever before; 42 per cent say having more social enterprises would help ensure a sustainable economy, ahead of government institutions and traditional businesses.

And now the sector has received a welcome fillip. Tucked in amongst all the bad financial news comes the launch of the Bridges Social Entrepreneurs Fund, backed by city stars including Harvey McGrath, former chairman of the Man hedge fund group, and Nigel Doughty, co-founder of the private equity firm Doughty Hanson. Other investors include 3i, Deutsche Bank and former US vice-president Al Gore's Generation Foundation.

Also backed by NESTA -- the National Endowment for Science, Technology and the Arts -- and Bridges Ventures, a social entrepreneurs' fund launched in 2002, the new scheme has raised £4.25 million to provide long-term funding for ventures like Cafédirect, the Fair Trade coffee producer; Women Like Us, which gets women back to work after bringing up their children; and Fifteen, the restaurant chain founded by Liam Black with Jamie Oliver, which offers disadvantaged youngsters the chance to train as chefs.

The fund will be the first to invest in businesses whose principal goal is to have a social or environmental impact, rather than to generate commercial returns. It will make up to ten investments ranging between £500,000 and £1 million. Profits will be ploughed back into the fund to bankroll other ventures.

'As we enter a serious recession, it is crucial that the social sector is put in a position to play a major role in helping those who will suffer most, ' says Sir Ronald Cohen, founder of Europe's largest private equity firm, Apax Partners, chairman of Bridges Ventures and himself an investor in the fund.

For Fifteen co-founder Liam Black it's a welcome development. The new fund, he says, addresses a particular problem faced by these businesses -- the need for long-term funding in order to expand. 'The way to get the big money is through equity investment, which isn't available to most social entrepreneurs. So this new funding has taken some of the characteristics of traditional private sector equity investment, but brings in people who understand the particular challenges of social enterprises.' Yes, but isn't the timing a bit off? He disagrees. 'Unemployment's going to increase, social problems are likely to increase, so those who have ideas for generating ways of doing business that address social issues are probably more needed now than ever. …

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