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Briefing Paper No 1
General background to Social Economy

Social economy, community enterprise, not-for-profit company, the third sector, ethical investment, fair trade, not-for-profits…

Although there is not any clear definition of the term social economy, it is generally accepted to cover the range of organisations, which are neither part of the public or private for-profit sectors. It is a 'middle way'; relying often on innovative partnerships and creative management techniques to enable social economy organisations to operate within a wide range of state legislative and fiscal structures.

Predominantly the social economy:

  • aims to find solutions rather than to place themselves in a new market sector
  • refers to factors such as social solidarity, democracy or the primacy of the individual or small group over capital
  • is often the result of public/private partnerships and have a close relationship with their local communities
  • may not see the market as its sole source of income. Organisations may secure funding from public subsidies, donations or loans. This mixed income tends to focus their attention on disadvantaged people.
  • has a small scale structure often with larger numbers of non-active associates or unpaid volunteers

In terms of their contribution to employment, recent analyses indicate that the whole social economy group represents some 6 to 6.5% of private enterprises with a share of employment from 4.5 to 5.3%.

The picture varies widely across European States, with, for example, the employment contribution of the Third Sector amounting to 29% in France, 23% in Germany and 25% in Italy.


Perhaps more importantly, recent analyses have shown that during the last decade, employment in the social economy grew more than in the economy as a whole; 11% as against 3.7% for total employment in Germany, 15.8% as against 4.2% in France and 39% as against 7.4% in Italy.

However, due to the challenges of statistical identification and definition, what is clear is that these figures cover only part of the picture.

In Greater Manchester around 1 million adults are involved in voluntary work of some kind. Somewhere in the region of 11,000 full-time employees work in the sector in Greater Manchester, plus an additional 8,500 part-time and 2,000 casual staff.

The third sector in Greater Manchester will have contributed around £200M to GDP in 1997. Greater Manchester Council for Voluntary Organisations Briefing Paper, 2000.

Despite such achievements within the social economy many barriers remain. The New Economics Foundation for the Social Investment Taskforce identified the following barriers to the growth of social enterprises:

  • Individuals may lack the skills to put together credible business propositions
  • Organisations lack skills and expertise on how to use commercial capital effectively
Technical assistance for enhancing enterprise skills within the sector is currently limited.

The Government's Social Exclusion Unit (Policy Action Team 3) report for the National Strategy for Neighbourhood Renewal highlighted the fact that many agencies are working within the social economy. Too often, public or local authority services are seen as inaccessible or unapproachable by people in deprived communities; provider agencies are often seen as part of the social mainstream, with little relevance to those who feel excluded; this is particularly true of Business Links.
Business Links are the Government's primary mechanism for supporting business on the ground. They have strengths in terms of their relative expertise and links to the wider business community. Though some already work closely with regeneration agencies, their focus is very much on businesses with high growth potential. People in deprived communities often find it difficult to find capital to start or grow businesses. External finance therefore becomes all the more important. The problems generally faced by small firms are exacerbated in these communities by: a scarcity of collateral; a more fragile local economy, increasing the risk of business failure; and problems of cultural separation, which mean that the banks can be seen as unapproachable and uninterested…

Finally, the most important factor which justifies the growing interest in this type of initiative naturally concerns their close relationship to the development of new types of jobs, mainly linked to satisfying new personal and collective needs which neither the public authorities or the market can currently meet.

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a network of community enterprises, workers co-op & not-for-profits working in progressive ways to make our city greener, healthier and more equitable

Network Co-ordinator : Andy Wynne MPEN, Bridge 5 Mill, 22a Beswick Street, Manchester, M4 7HR
mpen@bridge-5.org tel - 0161 273 1736

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