Beyond emergency grant funding: Trading for a post-covid sustainable social sector
In response to the Covid-19 crisis, the School for Social Entrepreneurs (SSE) has created Trade Back: a new type of grant that incentivises social organisations to trade, while supporting them to recover and rebuild. SSE aims to support the drive to ‘build back better’ and bolster quality jobs as part of the government’s levelling-up agenda.
Trade Back draws on the learning from Match Trading® grants, which SSE launched in 2017. Match Trading has successfully supported 500+ social impact organisations to grow, with support from The National Lottery Community Fund, the Scottish Government, Lloyds Banking Group, Power to Change, Access – The Foundation for Social Investment, Esmeé Fairbairn Foundation, The Rank Foundation and Guy’s and St Thomas’ Charity.
What is Trade Back?
Trade Back grants match ‘pound-for-pound’ an increase in income from trading above Covid period levels. The Trade Back grant is made up of two elements: a small traditional grant to kick-start recovery efforts; plus, an incentivised grant to accelerate growth by rewarding an increase in income from trading.
This hybrid approach provides financial support in a difficult economic environment, while maintaining the ethos and challenge of an incentivised grant.
From October 2020, 100 social-sector businesses will benefit from Trade Back grants up to £7,000 as part of SSE’s biggest UK programme: the Lloyds Bank and Bank of Scotland Social Entrepreneurs Programme, run by the School for Social Entrepreneurs, jointly funded by The National Lottery Community Fund and the Scottish Government.
A Task Force of 20+ social sector funders and support organisations that developed Match Trading is now championing and developing Trade Back.
Carol Mack, CEO of the Association of Charitable Foundations, and chair of the Task Force says:
“Our aim is to help support stronger and more viable voluntary, community and social enterprise organisations, capable of achieving truly sustained impact. With our learnings from Match Trading, Trade Back grants could be a turning point in getting social impact organisations through this crisis and future proofing their businesses at the same time.”
Alastair Wilson, CEO of the School for Social Entrepreneurs, says:
“SSE continues to believe in the power of trading to support and grow a sustainable social enterprise sector. But the Covid-19 crisis has shown how even the strongest social impact organisations can become vulnerable to the unexpected. We’re excited to launch Trade Back which will help social enterprise to rebuild and reacquire customers lost during the crisis.”
“With an uncertain economic future, social enterprises and trade-dependent social organisations must be supported to get back on track with trading to succeed in the longer term.”
Fiona Cannon, Group Sustainable Business Director at Lloyds Banking Group, says:
“We are pleased to be able to support SSE as they continue to innovate for the benefit of the social sector in these challenging times. Through our Lloyds Bank and Bank of Scotland Social Entrepreneurs programme, our support will help social entrepreneurs deliver for their community and the wider economy, protecting and creating jobs – further demonstrating our commitment to help Britain recover.”
Why is Trade Back needed?
Social enterprises, community businesses and charities are at the forefront of solutions to the crisis, on the health and social care front line and providing crucial community support to the most vulnerable. But many are struggling, falling through the cracks in government support and leaving their communities, beneficiaries and staff exposed.
If social enterprises and other trade-dependent social organisations fail in significant numbers, the negative impact could be huge – socially and economically. The social enterprise sector alone contributes £60 billion to the economy (3% of the economy), employing 5% of the UK workforce. It expects to see a 50% decrease in turnover – an estimated economic cost of £2.5 billion for each month since lockdown began. (Source: Social Enterprise UK)
Social organisations that rely on income from trading are particularly at risk in the short term. For example, over three-quarters of social enterprises earn more than 75% of their income from trading (Source: SE UK). In the long term, there could be a switch (similar to after the 2008/9 recession) where social enterprises dependent on grant funding may fail; and social enterprises that trade with the public and private sector improve and thrive.
How Trade Back builds on learning from Match Trading grants
Research shows Match Trading grant recipients increased their income from trading by 64% on average over a year – 2.5 times the rate compared to those receiving traditional grants. (Source: Match Trading evaluation Jan 2020)
The Trade Back incentive works in a similar way to a Match Trading grant as it matches pound-for-pound an increase in income from trading. By rewarding sales growth, social organisations are incentivised to develop their trading base, become less grant dependent, and so help build a stronger sustainable social sector.
But for many organisations, Covid-19 has significantly reduced income. Unlike a Match Trading grant, Trade Back considers the effects of the crisis on trading income. With Trade Back grants, income from trading will be matched with grant when it represents an increase over the Covid-19 period.
Next steps for Trade Back in the social sector
- The Trade Back grant is available immediately for funders to develop as part of social sector support programmes.
- SSE is working with the funding community to explore new collaborative opportunities to make Trade Back grants more widely available.