What’s going on in UK social investment? – part two

In my previous post last month, I suggested that at least two blogs posts that would be needed to (even usefully begin to) answer the question post by the headline.

The first of these was a post: “Looking at developments in the market for small, unsecured loans for charities and social enterprises since 2012 to see whether there’s more of these deals happening and what basis they’re happening on (size of loan, interest rates etc.)

The context for this is the potential disconnect between (a) the significant growth of the social investment market overall (both in terms of the value of total outstanding investments and in the value of investments per year) and (b) the offer to most charities and social enterprise from the social investment market.

Turning up the volume

The first half of my previous blog looked at possible growth in the specific part(s) of the market described as ‘risk’ investment and the different perspectives on what that means.

In this case, it’s useful to begin by zooming out and looking at the shift in the market as a whole over the past four years.

Big Society Capital (BSC)’s recently published impact report claims that the total value of deals in the social investment market in 2016 was £595 million*, up from £213 million in 2011/12. The 2011/12 figures are primarily based on the City of London-backed report, Growing the Social Investment Market, however BSC’s data team have made some adjustments to the figures to reflect some changes in how we understand the market since then.

Supporting a 179% increase in deal flow in less than five years doesn’t seem like bad going. On the other hand, social investment leaders expected far more. As the title suggests, the BSC-commissioned report The First Billion, published by Boston Consulting Group in 2012, predicted that deal flow would reach £1billion by 2016.

The figures for deal flow – the amount of money invested in a particular year – should not be confused with the figure for the overall value of investments in the market (which includes the value of outstanding loans and equity investments made in previous years). The total outstanding investment figure for 2016 on BSC’s market size dashboard is £1.64 billion (of an overall total of £1.98 billion) excluding ‘Profit with Purpose’ investments**.

Half measures

So, the less charitable assessment of BSC’s achievement in terms of deal flow is that they had a target to increase the size of the market by £787 million between 2012 and 2016,  and have only managed to increase it by £382 million.

The assessment, while legitimate, may reflect more on the over-optimism of 2012’s predictions than on BSC’s performance. This blog post, written by NPC’s Dan Corry at the time, makes clear that these the predictions were based on several questionable assumptions – particularly around growth in charity and social enterprise income from public service markets – and these subsequently proved to be incorrect.

The reality, as shown by NCVO’s Civil Society Almanac, is that (with minor fluctuations) charity and social income from government has remained essentially the same over the past five years. It peaked at £15.7 billion in 2009/10 and the latest available figures (2014/15) have it slightly lower at £15.3 billion.

Growing the volume of investment in the social investment market by 179% in this context represents a significant achievement (of something).

Deal or no deal

What’s less clear is the extent to which the increase in the volume of social investment has made it easier for most charities and social enterprises seeking investment to get the investment they need.

One way to look at this is to look at the number of deals taking place in the market. When we look at the number of (meaningfully comparable***) investment deals, this figure has grown from 765 in 2011/12 to 923 in 2016.

So, while the amount of money being invested into charities and social enterprises has increased by 189% since 2012, the number of charities and social enterprises taking on social investment has increased by just over 20%.

This doesn’t invalidate the big increase in investment but it hints at why (as discussed in the previous blog) some sector leaders are concerned that most charities and social enterprises have not benefitted.

Small comfort 

There’s no way of getting a clear picture of how the average charity or social enterprise’s experiences of the social investment market have changed in recent years but one way to get a broad indication is by looking at Social Enterprise UK‘s bi-annual state of social enterprise surveys.

Unfortunately, the 2017 survey is not yet available but the figures below give a snapshot of what was happening in 2011, 2013 and 2015.

In the 2011 survey, Fightback Britain: 

  • 45% of social enterprises said ‘Lack of, poor access to, finance or funding’ was the major barrier to Starting Up
  • 44% said said ‘Lack of, poor access to, finance or funding’ was the major barrier to Sustainability and Growth
  • 25% of social enterprises sought loans
  • 56% got some of all of the loan finance they applied for
  • the median loan applied for was £250,000
  • the median amount received was £200,000.

By 2013’s report The People’s Business:

  • 40% of social enterprises said ‘Lack of, poor access to, finance or funding’ was the major barrier to Starting Up
  • 39% said said ‘Lack of, poor access to, finance or funding’ was the major barrier to Sustainability and Growth
  • 20% of social enterprises sought loans
  • 60% got some of all of the loan finance they applied for
  • the median loan applied for was £150,000
  • the median amount received was £70,000.

In the 2015 survey, Leading the World in Social Enterprise:

  • 58%**** of social enterprises said ‘Lack of, poor access to, finance or funding’ was the major barrier to Starting Up
  • 39%**** said said ‘Lack of, poor access to, finance or funding’ was the major barrier to Sustainability and Growth
  • 23% of social enterprises sought loans
  • 74% got some of all of the loan finance they applied for
  • the median loan applied for was £87,500
  • the median amount received was £80,000.

The messages from this data are unclear. Some themes that seem to emerging are:

  • (With the exception of a big increase amongst ‘Start-ups’ in 2015 that may be explained by changed methodology), the % of social enterprises citing poor access to finance as a major barrier did not change significantly between 2011 and 2015
  • the % of social enterprises applying for loan finance did not change significantly between 2011 and 2015
  • the % of social enterprises successfully applying for loan finance increased steadily and notably between 2011 and 2015
  • the average size of loans applied for (and received) dropped significantly between 2011 and 2013 before increasing slightly in 2015

There’s lots we don’t know. In particular, we don’t know how significant the social investment market was in these changes and non-changes. As discussed here, most investment taken on by charities and social enterprise is not social investment.

In terms of a tentative hypothesis, though, it seems plausible that the fact that the social investment market is growing may have contributed to the growing % of those social enterprises that are seeking finance actually managing to get it.

More or fewer 

It’s much trickier to work out what has happened in terms of ‘risk capital’. As discussed in the previous blog, the ‘risk capital’ bucket includes any social motivated investment not made a bank.

My third blog will look at what some of the specific categories in this bucket – charity bonds, community shares, profit-with-purpose, SITR, social impact bonds and social property – do refer to but for now the point is that they are (with possibly a handful of exceptions) not small amounts of unsecured finance for charities and social enterprises  provided by intermediary social investors (such as CAF Venturesome, Big Issue Invest or SASC).

In 2011/12, when ‘social investors’ where known as SIFIs, the combination of ‘Large SIFIs’ and ‘Small SIFIs’ made 536 investments with a total value of £35 million – an average investment size of £65,000. Not all deals included this figures were either small or unsecured but it’s the area of the market where that finance was primarily located.

The most directly comparable activities on BSC’s 2016 ‘Market Sizing Dashboard’ are ‘Non-bank Lending’ and ‘Equity-Like Products’*****. These categories combined in account for a significant increase in investment value (to £71.4 million) but a decrease in number of deals to 477, with the average investment size up to £150,000.

Without looking at the data in greater depth, it’s not possible to know exactly what this tells us. The wider re-categorisation of different parts of the social investment market mean that it’s not possible to be sure that the number of small, unsecured investments into charities and social enterprises has decreased since 2012 but it seems highly unlikely that it has increased.

But what does this all mean? 

My working hypothesis is that:

  • the current social investment market may be meeting the needs of ‘investment ready’ charities and social enterprises – those already inclined and in a position to take on investment – better now than it was in 2012
  • that (while there some investors + Access attempting to tackle this) those who hoped that the launch of Big Society Capital in 2012 would prompt a significant increase in availability of small, unsecured investments from SIFIs/social investors are understandably disappointed
  • that our understandings both of what’s happening in the newer sub-sections of the social investment market and of the interaction between social investment with the wider markets for finance remains significantly under-developed

I’ll aim to look at the pros and cons some of those new areas in the next post.

In terms of overall conclusions, the analysis in this blog doesn’t answer the big questions about the market for small amounts of unsecured finance for charities and social enterprises but it (hopefully) helps us to understand some of those questions better – while showing that an increase the volume of social investment does not necessarily mean that the social investment market is helping significantly more organisations.

Many charity and social enterprise leaders may be unhappy with this situation but they are not axiomatically correct – the goal of Big Society Capital and the social investment market should not necessarily be to increase the numbers of organisations taking on social investment.

It may be that significantly increasing the volume of investment into those organisations best placed to take it on is a better way of increasing social impact. That’s a debate worth having but not a decision that should be taken by default.



*The overall market size figure is bigger than this at £630 million but the £595 million figure is based on the sections of the market that are directly comparable with those captured in the 2011/12 data.

**This is not a reference to the validity (or otherwise) of investments into Profit with Purpose organisations as ‘social investment’ but a reflection of the fact that these investments are likely to have been taking place in 2011/12 but there is no way of capturing information about them.

***Of the total 1147 deals, 230 are investments into profit-with-purpose organisations which were not captured by the 2011/12 research. It is also likely as that the 765 deals in 2011/12 is an under-estimate as it does not include Community Shares and additional Equity-Like investment that is included in BSC’s revised volume calculation for 2011/12.

****Survey  questions were amended in 2015 to make poor access grant funding and loan/equity finance separate barriers. My figures here include the combined totals which may be overstated compared to previous years if some organisations chose both options.

*****Social impact bonds may have been included in the ‘Large SIFI’/’Small SIFI’ figures but both volume and deal number were insignificant in both 2011/12 and 2016.






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11 responses to “What’s going on in UK social investment? – part two

  1. David, A recent report from Carnegie UK trust suggests the use of credit unions in affordable lending, In our research for funding social enterprise in Crimea we’d suggested the combination of profit-for-purpose business with a credit union to make unsecured lending more affordable. This was the strategy proposed when we introduced profit-for-purpose business to the UK. As we’ve argued in the past, all business has some for of social benefit in that creates wealth for more than one person, hence all conventional business can be considered profit-with-purpose.



  2. Hi David – thanks for piling through the data. Might be worth pointing people to the additional report I did for Access based on the access to finance data from the State of Social Enterprise (https://www.socialenterprise.org.uk/prospecting-the-future-social-enterprise-and-finance-data-from-2011-2015 // https://access-socialinvestment.org.uk/wp-content/uploads/2017/06/SEUK_ProspectingtheFuturereport2016_V5.pdf). This looks a bit at how the data changes depending on geography, type, rural/urban, legal structure and so forth – as well as how the questions / quality have evolved over time. It’s worth people noting that the sample has grown with each report, so it is getting more credible and representative in what it shows each time.

    You can start to see in that data not only the median amounts by year (raised / applied) but also that the success rate tends to be higher in older, more established organisations & those with an asset (leisure trust, housing association). There is some emerging evidence that smaller orgs may be getting more successful, but it is little more than emerging.
    The other main change over that period was one which relates to the external climate – working capital has risen up in terms of usage, to be the same as ‘development capital’ and larger than ‘property purchase’, a trend I’d anticipate continuing in the 2017 report. Cash flow pressures have also increased as a barrier. These are both clear signs of the challenging operating environment, smaller reserves, tighter margins, etc

    Another soft indicator is where we ask social enterprises their plans for growth in the next 12 months: around 40% say ‘attracting investment’. And when we ask them what they actually achieved / did in the last 12 months to achieve growth, the figure is around 20% for ‘attracted investment’.

    The main impact, in terms of the social investment landscape, has arguably been the constant and consistent median figure of amount wished-for (£70k on average, but always between £50k and £100k) which has not changed – this figure has played a significant role informing where Access should position its work, in order to meet the needs that BSC money rarely can.

    Finally, I’d totally agree on the data front; our figures above are one section of a much wider survey. We’ve improved them, but they are still limited and they are still survey-based rather than going through company accounts / financial records. As researchers always say, the answer is almost certainly more research; or as I put it in the recommendations to the Access report:

    “• Data talking to data:
    this analysis should be viewed as the
    start of a programme of work to better use and mine the data the
    sector has. Natural next steps might include:
    – comparison with the data in the NCVO Almanac for the
    registered charities in the sample
    – greater integration and comparative working on cross-UK
    surveys with Scotland, Northern Ireland and Wales
    – further analysis of finance data through analysis of enterprise
    accounts (building a picture of the sector’s balance sheet)”

    To which I’d add collaborative working between SIFIs to better understand and make understandable their data on investments – which will help make better products, better decisions and greater positive impact for the charities and social enterprises taking the finance.

    2017 report is being launched in September.


  3. So, after 15 years of government support we’re still struggling to find funding as payday lenders and food banks proliferate.

    With a focus on poverty, which SEUK had said was beyond their current focus, we reasoned:

    “Dealing with poverty is nothing new. The question became ‘how does poverty still exist in a world with sufficient resources for a decent quality of life for everyone?’ The answer was that we have yet to develop any economic system capable redistributing finite resources in a way that everyone has at minimum enough for a decent life: food, decent housing, transportation, clothing, health care, and education. The problem has not been lack of resources, but adequate distribution of resources. Capitalism is the most powerful economic engine ever devised, yet it came up short with its classical, inherent profit-motive as being presumed to be the driving force. Under that presumption, all is good in the name of profit became the prevailing winds of international economies — thereby giving carte blanche to the notion that greed is good because it is what has driven capitalism. The 1996 paper merely took exception with the assumption that personal profit, greed, and the desire to amass as much money and property on a personal level as possible are inherent and therefore necessary aspects of any capitalist endeavour. While it is in fact very normal for that to be the case, it simply does not follow that it must be the case.”

    It was Pamela Hartigan just two years ago who said that social entrepreneurship was a distraction, that it was mainstream capitalisdm that needed to change. Strange considering her position at Skoll.

    10 years ago, few knew we were on the eve of an economic crisis, though in the US the B Corporation movement had launched. Fewer still considered that capitalism could be redirected, toward the disenfranchised:

    View at Medium.com


    • Tad mean that. The guy’s an analyst. His take on the stats. Puts us all in a better place. But you got a point – depends who pays his bills, I suppose.


      • In Tony Blair’s case, it’s Viktor Pinchuk who donated $500k to his Faith Foundation. That’s why he can be seen in the video chairing the Davos discussion. Politicians in the pockets of oligarchs. I’ll tell you about the nonprofit industrial complex elsewhere.


  4. Robbie

    David – after reading you past few blogs I feel compelled to ask what exactly are you trying to tell us?
    Once upon a time you had something meaningful to say about the nature and direction of social finance, now what you offer is a meander through all the ‘stuff’ published by others as if its news – dressing it up as if there is ongoing progress or even something worth commenting on.
    Lets be abundantly clear, there has been no change whatsoever in the impact or anything else attached to the self-serving industry that is social finance. The claims off more money (billions we now read) are a complete fallacy promoted by those who are double-counting and have a vested interest in doing so in order to stay in the game – A game, I would suggest you are also trying to stay in, as you produce your stagnant blogs that contain a lot but say absolutely nothing at all.
    You have done well to hang around all of the noise and traffic that is social finance, coming across quite radical and becoming the go-to for commentary and advice for the likes of magazines and websites. So here is my problem with you being that go-to, that font of all knowledge, the advisor to the masses etc. You do not understand the technical detail of the area (finance) you are commenting on and in almost everything you write that stands out (and its dangerous). Moreover, in each blog or piece you do, you are jumping about commenting on this and that, regurgitating new ideas without ever stepping up to the plate with something defined that you could truly put your name to and say that works. Then more importantly coming out and say much of the rest is absolutely no-fit-for-purpose. But thats not you is it? Because if you did step up and say what you mean then how else would you make your money as you hedge-your-bets from one commission to another and seek to retain the mantle of ‘social finance guru’ – which I have not doubt you like.
    Its time you and others stopped your snake-oil trading; pretending to sometimes be critical but all the timer being paid to keep the social finance wagon on the road – it’s embarrassing and as I have said there are big gaps in your technical knowledge so you are dangerous to those who will choose to listen and want to be advised.
    I hope next time you produce something it has some bite and significance to real social enterprise and those who trade on the frontline of need because the playground you currently sit in is mostly elsewhere dealing with shameful stuff like Profit-for Purpose or grant/debt models there to try and make sure there is somewhere for the money to go – and I am pretty sure you know that too…


    • Beanbags admin

      Hi Robbie,

      On the technical knowledge, can you give some examples of technical points that I’m making in this blog that are not correct?




  5. Robbie

    As a quick response you always and I mean always espouse about debt and its various incarnations whether it be a part of small or bigger deals but you have absolutely no idea how debt plays out once debt is accepted (in any meaningful amount = lets say over a £100k) and how it plays havoc with the ongoing sustainability of organisations in the longer term – but you act as if you do. There are also other examples from previous blogs and papers you have written but lets just use this as key example for you and others to consider


    • Beanbags admin

      Hi Robbie,

      Unfortunately, this is a running disagreement between us based on you reading opinions and claims into my writing which are not there.

      This blog is not an analysis of the effect of debt finance on charities and social enterprises who take it on.

      (Amongst others) the main point of this blog is that the amount of money invested annually in the social investment market has increased significantly since 2011/12 but the number of deals has not increased significantly.

      Fair enough if you don’t think that’s important or interesting but I’m not misunderstanding the effect of loan finance on charities and social enterprises, I’m not writing about it.

      If I understand it correctly, your position is that most charities and social enterprises seeking unsecured investment to grow their business won’t benefit from taking on a £100,000+ conventional loan, particularly at the rates offered by most social investors. I agree with that.

      The work I’m involved in within the social investment market on new products and funds is reflects the fact that I agree with that – and many other people working in social investment agree, too.

      In a general sense, we have very limited data on the medium/long effect of taking on social investment on the organisations that take it on. Some of the other work I’m currently is about finding more about that.

      Happy to discuss further if useful.




      • Seems reasonable to me.

        In other news, London as the financial capital epicentre is clearly goosed. Leave it to us in the north to fill the gap.

        Social capital is the engine of the new economy David. Better move to Kirby, sharphish. Or Beswick (Manchester).



  6. Beanbags admin

    Hope you’re right about social capital being the engine of the new economy. I think the finance is off to Dublin!


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