Thousands of social enterprises at risk of closure as cost hikes take toll

Thousands of social enterprises are at risk of going bust over the winter amid soaring energy and operating costs and concerns over accessing contracts and funding, a new report has warned.

There are an estimated 131,000 social enterprises across the UK, employing some two million people and providing services and selling goods to the public sector, mainstream businesses and the public. Many social enterprises sit at the heart of their communities and provide access to employment for disadvantaged people.

A study by membership body Social Enterprise UK highlights signs of strain over the last quarter, with cashflow and reserves positions worsening, turnover and growth expectations down and a decline in staff numbers. Some 3 per cent of respondents said they expected to close in the next few months, which if applied to the 131,000 social enterprises the UK government estimates there to be in the UK, would mean around 4,000 could be at risk of closure this winter.

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Many social enterprises - businesses with a social or an environmental purpose that reinvest any profits in good causes - are uncertain about their growth expectations, with nearly a third (30 per cent) saying that growth is dependent on pending funding applications, income or contracts. In response to the cost-of-living crisis, nearly two-thirds of respondents (61 per cent) said they are seeking new grant funding, half are reducing spend on non-essential inputs and services, more than a third (36 per cent) said they have had to increase prices, and about a third (30 per cent) are reducing their profit margin.

The main concerns identified by social enterprises within the next three to six months are accessing funding and finance (57 per cent of respondents), costs related to staff (40 per cent) and energy prices (35 per cent). Over a third of respondents (35 per cent) are concerned about reduced demand for their products/services and just over a quarter (27 per cent) are concerned about capacity to meet increased demand.

Peter Holbrook, chief executive of Social Enterprise UK, said: “It’s clear from this report that the combined crises surrounding energy, inflation and recession have many social enterprises concerned for their future.”

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Rising energy bills were cited as one of the cost burdens for social enterprises.