A £142m government-backed social investment fund increased charities and social enterprises’ financial growth and resilience, according to new research.
An analysis of the impact of the Futurebuilders England fund, the first of its kind in the UK, showed that the programme significantly reduced deprivation levels and boosted economic output and productivity in communities.
The scheme saw £142m of loans, grants and blended finance distributed to 406 charities and social enterprises in England between 2004 and 2010 to help them bid for, win and deliver public service contracts.
The analysis was carried out by the Department for Culture, Media and Sport (DCMS) and Social Investment Business.
Stronger financial performances
They found that charities and social enterprises that received funding performed better financially, with key metrics such as income, net assets and cash all increasing for three to four years post-investment.
“Charities and social enterprises have been shown to be sustainable, with profit cycles positive on balance,” they said.
Overall, recipients of the fund employed 16% more people three years after receiving funding, or the equivalent of 1,500 new jobs created where data was available.
Less deprivation, better economic output
The analysis shows “stronger reductions” in deprivation levels in areas receiving funding compared with surrounding areas that did not receive any.
The average difference between these areas was 12% when investment exceeded £3m and over 17% when it exceeded £4m, when comparing changes in deprivation levels between 2010 and 2019.
The analysis also finds increased economic output and productivity in areas that benefited from the funding.
Using gross value added (GVA), which measures the value of goods and services that have been produced minus the costs incurred in the production process, it shows a 14% difference where areas received at least £500,000 of social investment.
The percentage figure rose to 42% and 106% where social investments totalled more than £3m and £4m respectively.
The research paper says: “In summary, the analysis indicates that social investment is strongly associated with both improvements in deprivation levels and better economic productivity. The findings don’t claim any causality. Instead, the research suggests meaningful correlations, by demonstrating that social investment is linked with positive changes in deprivation and economic productivity levels.”
Minister: Social investment is crucial
Civil society minister Stuart Andrew said: “Social investment is hugely important in reducing deprivation and is a key part of our levelling up agenda.
“Research such as this helps us to better understand and reach out to the most disadvantaged communities, particularly when informing future funding decisions.”
Nick Temple, chief executive of Social Investment Business, added: “Our purpose at Social Investment Business is to use finance to build a more equal society. What is hugely exciting about this research is that it provides compelling evidence that social investment does exactly that – not only increasing economic output and productivity, but also decreasing deprivation at a hyper-local level.
“Policymakers and investors across the spectrum must take note of these findings – which should ensure social investment is a key part of any approaches to place-based regeneration.”
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