« Previous | Contents | Next »
Listen
CHAPTER FIVE WHAT HAS FUTUREBUILDERS ACHIEVED?
Introduction
5.1 This section examines the achievements and outcomes arising from the activities supported by Futurebuilders. The following discussion covers a number of areas of impact, reflecting the diverse objectives of the Funding Programme and the broad range of benefits arising from it.
Promoting Social Enterprise Start-ups
5.2 Although not its main objective, an important rationale for Futurebuilders was to create a sustainable longer-term flow of new suppliers within the social economy sector.
5.3 Futurebuilders has had a positive influence on the formation of new social enterprises in a number of ways.
5.4 The Support Programme has laid the groundwork that will encourage new entrants to the sector. This occurred in two main ways:
- the work undertaken by the Social Enterprise Coalition and others has raised awareness of social enterprise as a way of doing business; and
- the Exchange has offered a supported route into social enterprise for a small number of new entrants.
5.5 The Social Entrepreneurs Fund has had a more direct and immediate impact on social enterprise formation. It was a catalyst for the development of 220 start-up projects, most of which have experienced subsequent growth. The final EKOS survey (July 2007) found that:
- 89% of the social entrepreneurs supported continue to develop, test or implement their start-up venture 12 months after the Fund closed;
- in 38% of cases fledging social enterprises are now in operation, half of which have been established as a constituted group or company;
- just over half of entrepreneurs in the above cases (53%) anticipate that their social enterprise will eventually become self-sustaining through trading.
5.6 Social entrepreneurs themselves have benefited from the support. Just over one-third now take some form of income from the social enterprise. They are also: more confident in progressing their idea; more ambitious to grow their venture; and better connected with available support mechanisms and organisations.
5.7 Difficulties and constraints have inevitably occurred. The feedback points to two key challenges in getting ventures off the ground: the personal commitments and changed circumstances facing the entrepreneur; and difficulties in securing funding and premises during the start-up phase.
The Skinny (Social Entrepreneurs Fund) |
|---|
The Skinny is a quality arts, culture and listing magazine established by social entrepreneur Sophie Kyle. The magazine is distributed free through over 500 cafes, bars, theatres, and live music venues across Edinburgh and Glasgow. It provides work experience, training, and freelance opportunities for young writers and photographers. It is sustained through advertising revenue. |
5.8 There is also tentative evidence emerging that learning offered by the Social Enterprise Academy has had a beneficial impact on start-ups. The results of an earlier Social Return on Investment study suggests that as a result of start-up training, seven in ten social enterprises have been formed and are generating positive impacts within a year of participation 35.
5.9 The direct project investment through the Seedcorn and Investment Funds has also established new activity - new organisations, services and facilities. The Final Surveys suggest that the main impact of these Funds has been on established organisations although, in one-in-eight cases, new trading subsidiaries have been developed with support.
The E-bility Trust (Seedcorn Fund) |
|---|
The E-bility Trust is a social enterprise start-up developed and managed by social entrepreneur Paul Cassidy. As a result of start-up grant from the Seedcorn Fund, the organisation has developed into a leading supplier of IT support services to the voluntary sector in Scotland and an accredited Microsoft Software reseller. The turnover in its first full year in operation reached almost £100K, over 60% of which came from sales and contracts. It has developed into a robust organisation with three staff and is well on its way to becoming financially self-sustaining. |
5.10 Key start-up support activity initiated through Futurebuilders is now being consolidated through a new intermediary organisation, First Port. A parallel scoping study is now also examining the potential for a more strategic and coherent approach to social enterprise start-up support in Scotland 36.
Improving Sector Skills and Learning
5.11 Through its Learning Fund, Futurebuilders was intended to promote access to, and participation in, learning in the social economy sector, and to develop the skills needed for it to expand its role and influence.
5.12 The Programme has achieved tangible results in stimulating the supply of learning available to the sector. The main impact has been through the establishment of the Social Enterprise Academy, where an overall investment of £435,667 (from core grant and bursaries) has resulted in:
- the delivery of learning to 575 people over three years, at a cost of £758 per learner; and
- a unique and additional supply of learning programmes designed around the needs of the social economy and which are perceived as high quality.
5.13 From the research undertaken, however, it seems that the impact of this supply-side investment has been limited in two main respects:
- demand for leadership, management and business skills on the part of the social economy remains limited, evidenced by the slow take up of full-price learning places at the Academy; and
- there has, as yet, been no attempt to promote or influence the supply of learning from the many other providers that have the potential to offer relevant or tailored learning provision to the sector.
5.14 The Programme has also achieved impacts in promoting participation in learning by the social economy. The Learning Fund subsidised access to learning for representatives from 121 social economy organisations, three-quarters (76%) of which reported in the Final Evaluation that this experience encouraged further or more regular investment in learning.
Isle of Eigg Craft Workshop (Learning Fund) |
|---|
Camille Dressler was one of the first graduates of the Starting Your Social Business course at the Social Enterprise Academy. The skills developed through the course have helped her to set up a craft workshop, which she now hopes to expand. The practical and action-based learning on offer was regarded as critical in this. Having attended the initial course Camille has gone on to undertake training as an Associate Tutor at the Academy; the skills from which she plans to apply to provide training and support to others in the rural area in which she lives. |
5.15 Further progress in increasing/widening participation in learning, however, is likely to require further public subsidy. The final survey shows that:
- 94% of assisted organisations would not have gone ahead with the learning in the absence of the Learning Fund grant; and
- 86% of organisations' future investment in learning will be dependent on further financial support.
5.16 Finally, the Programme has achieved impacts in building the skills base in the social economy. The Interim survey found that in almost all cases (96%), there was an improvement in knowledge and skills as a result of learning. In addition, in almost two-thirds of cases (65%) learning activities have been reported to lead directly to formal qualifications. This has ranged from SVQ Level One to post-graduate qualifications.
5.17 The fact that further recognised skills are being embedded in the sector is positive. However, it is possible that this impact could be even greater if:
- the learning needs of organisations were assessed formally or independently against business objectives (this did not tend to occur); and
- investment in learning was considered in relation to some form of Skills Framework, that would clarify the skills required by the sector, where skills gaps exist, and where further investment is needed.
Building Organisational Capacity in the Sector
5.18 Futurebuilders set out to create more 'businesslike' organisations with the track record, skill set, and capacity for growth.
5.19 Taken together, the Learning, Seedcorn, and Investment Funds have directly invested in some 362 pre-existing organisations.
5.20 The Investment and Seedcorn Funds have had a marked capacity building effect. The Survey results provided in Table 5.1 point to a spread of reported impacts; in particular, the confidence and capability to introduce new or improved services and to deliver these in a more enterprising way.
Edinburgh Cyrenians (Seedcorn Fund) |
|---|
Edinburgh Cyrenians is an organisation that supports people who are homeless or at risk of homelessness. It received Seedcorn funding to employ a Business Development Manager. This post has proven instrumental in introducing new business processes, developing new trading opportunities, and encouraging an entrepreneurial spirit and business skills among the senior management team. This has meant a profound change in the outlook and prospects for the organisation. Plans are now in place to build on the cultural change introduced. |
Table 5.1: Influence on Organisational Capacity of Organisations assisted by the Investment Fund and Seedcorn Fund
Impact | % reporting some or major influence |
|---|
Better able to develop new products and services | 80% |
|---|
More entrepreneurial in approach | 74% |
|---|
More efficient in delivering services/products | 71% |
|---|
More focused on contracts and sales | 69% |
|---|
Better at business/strategic planning | 68% |
|---|
More aware of market opportunities | 67% |
|---|
Better informed of client/customer needs | 66% |
|---|
More able to access grant funding elsewhere | 65% |
|---|
Better equipped with staff/skills | 64% |
|---|
Better at marketing, promotion, and sales | 64% |
|---|
Better at working in partnership with others | 63% |
|---|
More effective in managing activities/operations | 62% |
|---|
Better equipped with internal systems/processes | 59% |
|---|
More willing to invest in organisational development | 59% |
|---|
More willing to use outside specialist advice/support | 58% |
|---|
More able to cost and price services | 53% |
|---|
Better able to tender for and win public contracts | 53% |
|---|
Source: Final EKOS Investment Fund and Seedcorn Fund Surveys
5.21 It is important to note that, from the set list of areas provided, respondents reported least impact in strengthening organisational capacity to cost/price services and to tender for and win public contracts. These areas of improvement will be critical to increasing the sector's share of the public procurement market in Scotland.
5.22 Survey feedback suggests that Futurebuilders has built organisational capacity in two main ways. It has:
- created the time and provided support to take stock, plan, and develop new income generating services; and
- bolstered the organisational infrastructure ( e.g. staff, equipment, building, etc.) required to deliver more or better services.
5.23 The key for many organisations has been in securing additional staff to develop and deliver services. Encouragingly, at this early stage, the majority (68%) of these posts have been retained after Futurebuilders project funding has come to an end.
5.24 Learning Fund grants have in some cases been used to back up other investments by Futurebuilders in the capacity of the sector. However, this occurred to a limited extent and often by chance rather than design. In all, 24% of the 121 organisations that received a Learning Fund grant also received direct investment from the Seedcorn or Investment Fund.
5.25 Learning Fund grants have made a strong contribution to organisational capacity. The Final Survey suggested that in 86% of cases they brought 'direct and noticeable' benefits for organisations (in other cases it was too soon to say). The feedback indicates that learning provided:
- the confidence and motivation to enable business development;
- a fuller sense of purpose and direction for management teams;
- the capabilities to plan and develop new ventures;
- staff skills/accreditation required to deliver new/expanded services to a set standard; and
- improved organisational processes ( e.g. financial system) and more efficient operations.
Ankur Arts (Learning Fund) |
|---|
With support from the Learning Fund, the manager of Ankur Arts was able to undertake training designed to build project management, strategic planning, leadership, and influencing and negotiating skills. Since undertaking the training she has reported significant improvement in her management style. She is also now better able to identify others' learning needs and plans to develop a package of training for key staff. Income to the organisation has now trebled and three additional staff have been recruited - outcomes that are attributed to the contract negotiation and other skills developed. |
5.26 Taken together the Futurebuilders Funds have had a positive impact in building the confidence, capacity, and investment readiness of organisations.
Creating More and Better Public Services
5.27 A central aim of Futurebuilders was to strengthen the role of the social economy in improving the range and quality of public service delivery. It was not made explicit as to which public service areas would require further investment and input from the social economy.
The Clean Close Company (Investment Fund) |
|---|
The Clean Close Company was established to provide cleaning, maintenance and environmental services to people living in tenements in Stobswell, Dundee. The Investment Fund was used to purchase premises and a van which enabled the organisation to diversify its services to include close cleaning, carpets/furniture cleaning, voids, graffiti removal, and grounds maintenance. The organisation has secured contracts with local Housing Associations, the local council, private landlords, and building companies. |
5.28 The findings from the Final Surveys show that Funds have been invested in organisations selling directly to a mix of consumers, businesses, public bodies, and other third sector organisations.
Table 5.2: Percentage of Organisations Deriving Income From Given Markets
Earned income from: | % of Investment Fund beneficiaries | % of Seedcorn Fund beneficiaries | % of Social Entrepreneurs Fund beneficiaries |
|---|
Consumer markets | 54% | 51% | 31% |
|---|
Business markets | 38% | 21% | 19% |
|---|
Public sector markets | 71% | 47% | 22% |
|---|
Social business markets | 40% | 35% | 23% |
|---|
Source: EKOS Final Surveys (August 2007)
5.29 Organisations assisted by the Investment Fund have focused largely on generating income from public procurement markets. This has not been the case in relation to the other Funds.
5.30 The Investment and Seedcorn Funds have supported the development of services in areas of interest to the public sector. The key point to note from the figures provided in Table 5.3 is that assisted organisations are operating in multiple public service areas, most prominently community development, learning and employment, youth, and children and family services.
Table 5.3: Assisted Organisations Working in Key Public Service Areas
Service Area | % of operating in given area |
|---|
Seedcorn Fund* | Investment Fund |
|---|
Arts and sports | 29% | 24% |
|---|
Children and families | 48% | 49% |
|---|
Community development | 67% | 49% |
|---|
Environment | 30% | 31% |
|---|
Equality and diversity | 27% | 33% |
|---|
Health | 32% | 51% |
|---|
Housing | 15% | 29% |
|---|
Learning and employment services | 45% | 65% |
|---|
Older people | 20% | 19% |
|---|
Social care | 16% | 48% |
|---|
Youth | 49% | 47% |
|---|
Source: Social Economy Unit
* Based on data from 103 cases
5.31 Organisations assisted by the Investment and Seedcorn Fund have been making determined efforts to secure public contracts. At the point of the Interim Survey, as a result of the funding:
- 15% had begun negotiating to deliver a public contract for the service developed with support from Futurebuilders; and
- 23% had secured a new contract or service level agreement relating to the service developed.
The Shirlie Project (Investment Fund) |
|---|
The main aim of Shirlie Project is to represent clients who have support needs and are seeking employment. With a package of Futurebuilders financial support (new staff and premises), the organisation has developed the capacity and track record to deliver new and expanded services via public contract. It has delivered successful services to young and disabled people on behalf of Jobcentre Plus and Highlands and Islands Enterprise. Since the investment, new services have been piloted, client numbers have risen from 200 to 500 annually, and it has developed a clearer and more confident stance in contract negotiation. |
5.32 As mentioned above, more work could be done to strengthen capacity to bid for and win public contracts. In this, tools such as the Guide to Tendering for Public Contracts and supporting training have proven effective, but need to be taken to organisations on a wider and more concerted way.
The Guide to Tendering For Public Sector Contracts |
|---|
The Procurement Guide has proved to be a user-friendly and beneficial reference document. It is in widespread use and becoming more widely available (88% of users recommend it to others). It has complemented direct Futurebuilders funding ( e.g. 42% of Investment Fund beneficiaries have used the Guide, and of these 60% have derived benefit). It has helped to introduce or better understand the procurement process, and in 56% of cases, has influenced the 'approach to securing or delivering public contracts'. It has been complemented to good effect by training in making the transition from grant funding to contracts. Source: EKOS Review, Futurebuilders Interim Evaluation, November 2006 |
5.33 For the small number of public sector representatives interviewed, who had commissioned/purchased services from Futurebuilders beneficiaries, there was satisfaction with the quality and relevance of the services brought forward. Purchasers acknowledged the influence of Futurebuilders in:
- raising the profile of the social economy organisations assisted;
- giving organisations the time and space to take stock and plan for service development;
- helping to introduce a more 'businesslike' approach to organisations;
- putting organisations on a more stable financial footing; and
- helping to expand services and make the service offering more attractive to public authorities.
5.34 It is worth noting, however, that it will take time for the benefits of Futurebuilders investment in public services to become fully evident and realised. In some cases this is because capital building projects will only give rise to services once completed. In other cases it will take time for organisations to test and demonstrate the value of new services to public purchasers.
Changing the Public Sector Commissioning Environment
5.35 To help bring about a step-change in the role of the social economy in public service delivery, the public sector commissioning environment was recognised as a crucial factor to address.
5.36 The Support Programme initiated a small number of actions designed to inform the public procurement agenda. While some useful guidance was issued, engagement and dialogue with purchasers is only now beginning.
5.37 Seedcorn/Investment Fund beneficiaries have portrayed the public sector commissioning environment as an ongoing constraint. Responses to the Final Survey revealed as a barrier to growth, the:
- complexity of public procurement processes (59% of respondents);
- inability to recover full costs from purchasers (53%); and
- negative attitudes towards the social economy sector on the part of public purchasers/funders (45%).
5.38 This is consistent with other research that has highlighted the challenges for the social economy in building productive relationships with public purchasers 37 and in adopting the principles of Full Cost Recovery in dealings with them 38.
5.39 Among the 24 public commissioners/purchasers consulted by EKOS, there was very low awareness or understanding of Futurebuilders Scotland. This was limited to a handful of individuals that had been actively involved with organisations assisted through the Programme.
5.40 The public sector staff that input their views acknowledged the many but small changes in policy and regulation that have built up over time. These were said to have added considerably to the complexity of public procurement.
5.41 Some experimentation and good practice was also described. This has included: awareness raising events for commissioning staff; small scale pilot projects; 'meet the buyer' events. All of these were designed to build understanding and engagement with the social economy.
Public Procurement and the Social Economy in North Lanarkshire |
|---|
North Lanarkshire Council has systematically attempted to deepen its purchasing relationship with the social economy. With support from the EQUAL Programme, a baseline study was conducted by EKOS which quantified the level of purchasing from the sector by each Council department, and which identified key barriers to this. An Action Plan was developed to build productive purchasing relationships, and practical actions have resulted, including Tender for Trade Events, briefing papers to raise the awareness of commissioning staff, and a Public Social Partnership Project that has devised new contracting opportunities in the recycling field. |
5.42 From the interviews, however, a number of main demand-side challenges were highlighted in enabling social economy organisations to play a greater role in public service delivery:
- the limited understanding of the social economy on the part of purchasers, which can exclude potential suppliers from consideration or lead to a lack of trust/confidence in their ability to deliver;
- the increasingly complex tendering processes that have built up over time to respond to policy directives, but which may put off organisations that are small or new to public service delivery;
- commissioning criteria and decisions that are overly concerned with price, rather than wider considerations of the social and community benefits that the social economy might bring;
- contracts that are often bundled together to achieve economies of scale, but are typically of a size that is beyond the capacity of small social economy organisations to deliver; and
- multiple buying points across and between departments which, when combined with limited collaboration between purchasers, can lead to a lack of transparency or confusion on the part of potential suppliers.
5.43 Despite acknowledged difficulties, almost every commissioner/purchaser consulted conveyed a willingness and ability to extend buying relationships with the social economy. The flexibility for creative commissioning within existing procurement directives was acknowledged, for example, through the use of community benefits clauses in contracts.
5.44 Overall, the feedback from both social economy suppliers and public sector purchasers implies that further demand-side influence will be vital to open up public procurement markets to the social economy. These findings and concerns mirror the experience of Futurebuilders England 39.
Closing the Opportunity Gap
5.45 Futurebuilders set out to focus investment in those areas where the delivery of former Scottish Executive priorities for Closing the Opportunity Gap ( CtOG) would be enhanced by greater involvement from the social economy. These represented broad areas for investment not directly linked to specific public procurement markets.
5.46 Based on a review of the project activity, and the survey feedback obtained, it is possible to say that most, if not all, project activity is well placed to contribute to the CtOG objectives. The fit of projects with these objectives was a key factor in the appraisal of project applications.
5.47 The findings presented in Table 5.4 show that the organisations delivering Futurebuilders funded projects are able to articulate a contribution across one or more of the policy areas; more so in relation to employability and services for children and young people, but less so in relation to financial inclusion.
Table 5.4: Alignment of Seedcorn/Investment Fund Projects to Closing the Opportunity Gap Objectives
CtOG Objective | % reporting some or major influence |
|---|
Seedcorn Fund | Investment Fund | Both |
|---|
Objective 1: Employability | 68% | 90% | 74% |
|---|
Objective 2: Children and Young People | 74% | 67% | 72% |
|---|
Objective 3: Financial Exclusion | 40% | 58% | 45% |
|---|
Objective 4: Neighbourhood Regeneration | 60% | 71% | 63% |
|---|
Objective 5: Health | 56% | 67% | 59% |
|---|
Objective 6: Rural Services | 65% | 63% | 64% |
|---|
Source: Final EKOS Investment Fund and Seedcorn Fund Surveys
Note:
CtOG1: Increase the chances of sustained employment for vulnerable/disadvantaged groups.
CtOG2: Improve the confidence and skills of the most disadvantaged children and young people.
CtOG3: Reduce the vulnerability of low income families to financial exclusion and multiple debts
CtOG4: Regenerate the most disadvantaged neighbourhoods
CtOG5: Increase the rate of improvement of the health status in the most deprived areas
CtOG6: Improve access to high quality services for the most disadvantaged in rural areas
Edinburgh Cyrenians (Seedcorn Fund) |
|---|
Edinburgh Cyrenians supports homeless people in a number of ways that help to close the opportunity gap. It provides an integrated employability service that provides pathways into secure employment. It provides mediation and support for homeless young people and their families. It promotes health and well-being by providing a drugs outreach service and offering four distinct food and health services. It also provides support for particular client groups including asylum seekers and refugees. |
5.48 The case study research conducted has highlighted a number of main ways that projects are working to address the needs of disadvantaged groups and areas. They are:
- making services more widely available to and accessible to disadvantaged communities;
- testing new services and new ways of delivering services to disadvantaged communities;
- engaging with client groups at particular risk of social exclusion;
- creating opportunities for people from disadvantaged backgrounds to get involved in designing and delivering services; and
- joining up different services around individual client needs.
5.49 Overall, the occurrence and consistency of this policy contribution is encouraging. However, the CtOG objectives are so broad and ill-defined as to make it difficult to pin down the desired impact or influence of Futurebuilders on particular public service areas.
5.50 Sector intermediaries have also noted concern that the close alignment of Futurebuilders to the CtOG objectives potentially excluded as ineligible for support much social enterprise activity. Such activity operates in commercial markets and addresses disadvantage in an indirect way through cross-subsidising services to disadvantaged groups and areas.
Opening Up Earned Income Streams
5.51 Futurebuilders sought to assist organisations to increase earned income from fees and contracts and to find additional and alternative income streams.
5.52 The main impact on earned income and trading has been through the Seedcorn and Investment Funds. Even at the point of interim survey, 57% of assisted organisations reported an influence of the Funds in generating earned income.
5.53 The survey feedback and case studies have shown that the Futurebuilders project Funds have helped to increase trading income by:
- introducing a new income generating asset e.g. a building that can generate rental income;
- enabling the development and testing of a new service in the marketplace e.g. a recycling service; and
- creating more income generation capacity within established services e.g. additional fee-generating childcare places.
COPE (Seedcorn Fund) |
|---|
To meet its objective of providing supported employment to people with disabilities on the Shetland Islands, COPE operates a number of businesses, including the Shetland Soap Company, Cope Pet Supplies, the Shetland Coffee Company, Cope Catering, and a Fair Trade shop Karibuni. The Seedcorn Fund provided COPE with the working capital required to source new product lines that are being trial traded through existing and new trading outlets. It has also helped to build relationships with trading partners in eastern Europe as a base for exporting locally produced products. |
5.54 The earned income prospects of most assisted organisations now seem more promising. The Funds have supported organisations that are trading in growth markets. Ninety one percent of respondents across the Investment, Seedcorn, and Social Enterpreneurs Fund have indicated that demand for their goods and services is growing or growing strongly.
Community Food Initiative North East ( CFINE) (Seedcorn Fund) |
|---|
CFINE promotes access to healthy and affordable food through supporting community food outlets and providing a Fast Fruit service to workplaces and community facilities. Futurebuilders contributed to a funding package that enabled CFINE to put in place a new business plan, increase its staff capacity, lease equipment, and adapt premises. As a result, it has increased the number of contracts it delivers from 1 to 15, with these ranging in value from £1,000 to £7,000 per month. Trading income has risen steadily, and now accounts for an estimated 20% of income to the organisation. Trading is set to increase substantially over coming years. |
5.55 The survey feedback has, however, highlighted some key challenges in cultivating earned income streams. These include:
- difficulties and delays in building a sufficient customer base and trading income within often very competitive markets;
- particular challenges in securing contracts from public bodies, or establishing a more structured or stable funding relationship; and
- limitations on the time, resources, and business acumen at the disposal of organisations to progress their business objectives.
5.56 Despite early confidence regarding earned income prospects, this suggests that there is still a long way to go to achieve a significant impact on income levels. In this, further business development support will be important.
Introducing an Investment Culture
5.57 Although not a main or explicit objective of Futurebuilders Scotland, it was hoped that the Programme would help to extend access to loan finance and develop an investment culture in the sector.
5.58 As discussed earlier, direct funding from the Seedcorn and Investment Funds formed part of a package of investment in the sector that included some £12.6m of borrowing from mainstream and specialist lenders.
5.59 It was the first time that most organisations had borrowed. Responses to the final survey indicate that this was the case for 64% of Investment Fund awardees and 85% of Seedcorn Fund awardees that borrowed.
5.60 However, the impact of Futurebuilders in bringing about this £12.6m of borrowing appears to have been modest. In the final survey, 4% of Seedcorn Fund awardees and 25% of Investment Fund awardees reported that they had taken a loan out as a result of the Futurebuilders grant. In practice much of the borrowing attributed Futurebuilders was existing debt, and not generated as a result of grant funding.
5.61 Where Futurebuilders has had an impact, assisted organisations reported that the:
- willingness of Futurebuilders to invest provided confidence and demonstrated the viability of proposals;
- grant funding reduced the borrowing required and made this a more realistic possibility; and
- asset/service paid for by the grant provided a means to generate sufficient income to service the debt.
Crisis (Investment Fund) |
|---|
Crisis provides counseling and support to people in need, including children, adolescents, and adults. The Futurebuilders Investment Fund provided the grant subsidy required to secure a viable and affordable package of financing to purchase new premises. Loan Funding as part of this funding package was secured from Social Investment Scotland. The enhanced premises has provided a base for new services and training programmes that will generate sufficient contract income to repay the debt. |
5.62 It seems that even more could have been done to fully assimilate lending into the Futurebuilders funding package. Discussions with the Social Economy Unit have highlighted that: there was no requirement for private finance as part of approvals (although this was encouraged for Investment Fund applications); the SIS Futurebuilders Plus Loan Fund was not fully integrated into funding arrangements; and direct engagement with lenders to the sector (other than SIS) was limited.
5.63 Some sector intermediaries have suggested that Futurebuilders did not go far enough in introducing a new investment relationship with the sector. Some argue that it should have made use of new ways of investing (other than grants) designed to bridge the gap between the sector's dependence on grants and the availability of loans.
5.64 The Support Programme in conjunction with EQUAL funding did enable some initial experimentation by SIS in the use of equity-like and patient capital investments in the sector. This has not yet generated significant demand, but has served to confirm the cultural aversion to risk and debt in the sector. The lending operations and future potential of Social Investment Scotland is now itself the subject of a parallel independent evaluation 40.
5.65 Further work will therefore be required to educate and enthuse the social economy in the use of new financial products. Whether this forms part of the work of SIS, another sector intermediary, or a successor funding programme to Futurebuilders, is a moot point.
Promoting Financial Sustainability
5.66 A key aim of Futurebuilders was to strengthen the 'financial sustainability' of the sector - we define this as the ability of organisations to develop a more stable, reliable income base that enables them to meet social and financial needs now and into the foreseeable future.
5.67 An important starting point is to ask, is the project activity started with the help of Futurebuilders in itself financially sustainable? While not all activity will have set out to be continued after the term of Futurebuilders funding, it is hoped that any activity with longer-term potential could be sustained and built upon.
5.68 At this early stage, the prospects for continuing or building on the activity started through the main project Funds are promising. The final survey shows that where Seedcorn revenue funding has come to an end, only 11% of projects have ended completely, 13% are being reviewed and follow-on action being agreed, and 74% are continuing in some form (most commonly sustained through income from fees and contracts).
5.69 Building a sustainable trading venture is, of course, an uncertain process. Where grants have come to an end, 36% of Investment Fund beneficiaries and 56% of Seedcorn Fund beneficiaries have reported difficulties in ensuring continuing financial viability.
5.70 Following on from this, one must ask, is project activity impacting on the financial sustainability of the organisation as a whole? This recognises that a failing organisation cannot be saved by funding a project, and a capable organisation can be wrecked by a loss-making project or negative asset development.
5.71 At this early stage, the final survey evidence suggests a positive influence from Futurebuilders. According to 81% of Seedcorn Fund beneficiaries and 88% of Investment Fund beneficiaries, funding is 'impacting positively on the financial position' of their organisations.
5.72 This influence from Futurebuilders has manifested itself in a number of ways. From a set list of factors, the survey responses set out in Table 5.5 show that grant assistance has been particularly helpful in: increasing earned income; diversifying income streams; and building an asset base.
Table 5.5: Influence on Financial Sustainability
Area of Influence | % reporting some or major influence |
|---|
Seedcorn Fund | Investment Fund | Both Funds |
|---|
Increase its income from trading/contracts | 71% | 77% | 73% |
|---|
Diversify its income sources | 64% | 77% | 68% |
|---|
Strengthen financial assets | 60% | 71% | 63% |
|---|
Become more cost-effective | 57% | 65% | 59% |
|---|
Reduce its dependence on grant funding | 51% | 71% | 56% |
|---|
Generate a surplus from activities | 52% | 63% | 55% |
|---|
Secure/stabilise its core funding | 50% | 52% | 50% |
|---|
Replace declining project grant funding | 37% | 25% | 34% |
|---|
Transform an existing grant into a contract | 10% | 23% | 14% |
|---|
Make use of loan financing for the first time | 4% | 25% | 10% |
|---|
Source: Final EKOS Investment Fund and Seedcorn Fund Surveys (July 2007)
5.73 The role of Futurebuilders in growing the sector's assets was an important aim of the Programme, and of the Investment Fund in particular. In this, it seems that the Funds have helped purchase a mix of:
- assets likely to introduce new income streams, enable borrowing, and strengthen the balance sheets of organisations over the long-term ( e.g. purchase of land and buildings); and
- assets with a short useful life ( e.g. vehicles, equipment) that, while helping increase short-term trading income, are subject to rapid depreciation and unlikely to impact positively on balance sheets.
5.74 Drawing on the lessons from the Futurebuilders Scotland experience, further consideration might now be given to the portfolio of assets that any future public investment might seek to bring to the sector and the intended outcomes of this.
Cothrom (Investment Fund) |
|---|
Cothrom is a social enterprise based on South Uist that provides training to people in remote or rural communities. With support from the Investment Fund, Cothrom secured a funding package of £1.1m to build a new community learning and development centre on the island. This has provided the opportunity to: consolidate provision in one central base from three thereby reducing overheads; increase learners by over one-third in year one, with an associated increase in contractual income; and generate additional income from a new childcare service, letting fees, and training services. As a result, it is anticipated that earned income will rise from 20% of overall income (pre-Futurebuilders) to 50% by 2009. |
5.75 Overall, the survey and case study evidence indicates that Futurebuilders funding is beginning to put organisations on an improved financial footing. However, feedback has also served to highlight some key challenges:
- overcoming a traditional reliance on uncertain and short-term grant funding, or managing a change in income streams;
- stimulating the willingness/ability of the sector to access loans at competitive rates and to service these loans;
- introducing new services/products into a competitive marketplace;
- making the internal transition to a more commercial mindset and approach; and
- generating sufficient and stable income streams from trading.
5.76 The message is that, particularly for smaller organisations with limited trading experience, this transition takes time, is uncertain, and requires ongoing support.
5.77 On the issue of financial sustainability then, the jury is still out. Financial sustainability can only be fully judged through proven financial viability over an extended period of time.
Strengthening the Support Infrastructure
5.78 Futurebuilders also set out through its Support Programme to improve the effectiveness of the infrastructure of services that would underpin the growth of the social economy.
5.79 The Support Programme has been instrumental in informing, influencing, and progressing support for social enterprises. In doing so, it has taken a long-term perspective and established new support structures that will themselves bring about influence and change over time.
The Scottish Social Enterprise Coalition |
|---|
With support from Futurebuilders Scotland, the Coalition has become established as an effective voice for the social enterprise sector. It has provided support for a number of high profile events, gained notable media coverage for the sector, provided a collective view from the sector to relevant policy debates, and engaged the interest of senior civil servants and MSPs from all parties, leading to the introduction of a national social enterprise strategy. |
5.80 It has also provided encouragement and support that has led to the establishment of LSEPs covering all areas of Scotland. These Partnerships were conceived as a way of joining up, and improving, support to the sector.
5.81 The feedback from LSEP members as part of the EKOS review (mid-2006) highlighted that the foundation of partnership working has been put in place, leading to the improved co-ordination of the support services of partners.
5.82 The review, however, also highlighted ongoing challenges for most partnerships, giving rise to the need for:
- clarification of role of LSEPs;
- further efforts to involve the social economy sector itself in the work of Partnerships;
- additional emphasis on making the connections between LSEPs and other inter-agency structures such as Local Economic Forums;
- a shift in the focus of LSEPs from supply-side issues (the social economy) to the demand-side (market opportunities);
- a sustained focus on joining up, and filling gaps in, the social economy support infrastructure; and
- consideration of ways to channel additional resources to drive forward the work of the LSEPs and to deliver on agreed Action Plans.
5.83 Most of the achievements initiated through the Support Programme have been built on, and sustained, through resources made available in 2007/08 to progress actions under the then Social Enterprise Strategy for Scotland.
Impacting on the Wider Economy
5.84 Finally, the Futurebuilders programme has also generated an impact on the wider economy. We have been able to assess this in relation to the two main grant Funds (Investment and Seedcorn).
5.85 The Futurebuilders Funds have given rise to (gross) economic impacts where earned income has been generated (from fees, sales, and contracts) and where jobs have been created (with associated wage/salary incomes). We have gauged this through survey-based estimates of the impacts arising now and expected in the near future.
5.86 It has then been possible to establish the net impact on the economy through a case-by-case assessment that reflected:
- additionality 41 - the proportion of gross direct impacts that have occurred as a result Futurebuilders grant support;
- displacement 42 - any negative effects of support on competing, non-supported organisations within the same local/national economy; and
- multiplier effects 43 - the wider effects on the economy through:
- Supplier linkages (indirect) effect: the 'knock-on' benefits for other suppliers from the increased spending on goods and services by Futurebuilders-assisted organisations
- Income multiplier (induced) effect: the additional spending by those employed directly in Futurebuilders-assisted organisations or through supplier linkages
5.87 Based on the economic impact analysis conducted, Table 5.6 provides estimates of gross and net impacts arising in the most recent financial year and expected in 2009/10. Given the small sample of organisations that were able to assess future impacts, the results in this area should be treated with caution, providing only an indication of likely outcomes.
5.88 The figures reflect a substantial overall impact to the Scottish economy in relation to earned income and employment.
Table 5.6: Gross and Net Impacts (Seedcorn and Investment Fund)
| Current (2006/07) | Future (2009/10) |
|---|
Gross | Net | Gross | Net |
|---|
Jobs created ( FTE**) | 604 | 196 | 987 | 397 |
|---|
Earned income | £24,845,797 | £4,320,314 | £23,182,342* | £7,898,685* |
|---|
Cost per job | £26,408 | £70,170 | £11,960 | £27,170 |
|---|
Earned income per £ of grant | £1.43 | £0.25 | £1.40* | £0.46* |
|---|
Income:jobs ratio | £41,142:1 | £22,042:1 | £23,492:1 | £19,886:1 |
|---|
*These figures are subject to error due to the small size of the sample
** Full time equivalent jobs
5.89 Breaking this down further and examining the net impact to the economy:
- Seedcorn Fund -
- Income - an estimated current net impact on earned income of £1,109,457, rising to £5,438,267 in 2009/10
- Employment - an estimated current net impact of 88 FTE jobs, rising to 228 FTEs in 2009/10; and
- Investment Fund -
- Income - an estimated current net impact on earned income of £3,210,857, tailing off to £2,460,418 44 in 2009/10
- Employment - an estimated current net impact of 108 FTE jobs, tailing off to 170 FTEs in 2009/1044.
Key Points
5.90 The key points arising from this section are as follows:
- the investment from Futurebuilders has been used to bring about a diversity of objectives and intentions;
- the Programme has:
- had a direct and immediate effect in stimulating an array of promising social enterprise start-up activity
- improved access to learning and began to build a base of business and leadership skills in the sector
- led to marked improvements in the organisational capacity, investment readiness, and financial sustainability of organisations
- brought forward a diversity of services in areas that are broadly in keeping with public policy objectives;
- helped to bring about an improved support infrastructure for the social economy
- led to wider employment and income impacts for the Scottish economy; and
- as might have been expected, given its short timeframe and modest resources, the Programme has made less progress in:
- bringing about a cultural shift in attitudes on the part of the sector to risk/debt and in relation to investment in learning;
- bringing about changes in the public sector commissioning environment.
« Previous | Contents | Next »