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London business professor warns UK’s Big Society is ‘at risk’

2 October 2012

One of the UK’s top business professors has warned that charities and social entrepreneurs are treated as ‘poor cousins’ to the rest of the small business sector.

Professor Cathy Pharoah of Cass Business School said that the finances of charities and social enterprises had to be considered as the government responded to the beleaguered small and medium-enterprise sector.

‘Charities and individual social entrepreneurs are often treated as the poor cousins of the SME sector,’ Pharoah said. ‘So any new finance facility targeted at SMEs, such as a new state bank, needs to ensure that it also has the relevant expertise to assess the business cases of the non-profit sector, and provide loan finance to social enterprises or charities which want relatively simple accessible finance to expand a range of operations.’

Pharoah added: ‘If it is difficult for SMEs to access finance, it is likely to be even harder for the voluntary organisations. Without equal access to finance it will be difficult for the charity sector to compete for public welfare provision contracts, and expand its role. This is not a gap which Big Society Capital can necessarily fulfil, because BSC is a specialised facility, not in competition with mainstream finance providers, and aimed at stimulating growth in relatively new social ventures which aim at both social and financial returns.’

Pharoah’s comments follow an article in London’s Financial Times in which Sir Stephen Bubb, CEO of civil society sector leaders body Acevo, complained that the sector was being ‘ignored and sidelined’.

The newspaper reported that, in a letter to Francis Maude, Cabinet Office minister, and Nick Hurd, minister for civil society, Sir Stephen Bubb, drews a comparison with the plans announced by the government for a new state bank with an emphasis on stimulating small and medium-sized enterprises in particular, to encourage economic growth.

Sir Stephen told the FT that despite ministerial pronouncements that the third sector should play a big role in ‘growing and reforming public services’, it was being held back by its inability to raise capital to expand.