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October 25, 2019

Key role for community enterprise

It’s a well-known principle of local economic development that every pound spent in local businesses is more likely to be spent again within that local economy than a pound spent in a non-local business. It’s called the multiplier effect. These simple ideas (such as local currencies)  for retaining wealth within an area have been gradually ratcheted up in scale and ambition by think tank CLES, who now tour the country laying out a compelling argument for Community Wealth Building (sign up here). Their latest report highlights the vital role that community owned enterprises have to play in the overall mix.

Jonty Leibowitz

If you want to see community wealth building in action, come to Liverpool 8.

There you will find The Florence Institute – known to all around as The Florrie – a vibrant community hub housed in an imposing Grade II listed Victorian building. Since being restored by local activists in 2012, The Florrie has been a space of empowerment for local residents – building wealth by offering jobs and projects to support those most in need.

It was therefore a fitting venue for last week’s launch of CLES’ latest research on behalf of the Power to Change Research Institute – Building an inclusive economy: the role of social capital and agency in community business in deprived communities. The report looked at how community businesses can support the development of more inclusive economies in deprived areas. Using three case studies (north Hull, west Smethwick, and south Liverpool), CLES has spent the last year seeking to understand how varying forms of social capital are needed to help seed a vibrant local community business scene.

Community businesses play a crucial role in community wealth building by enabling a more plural ownership of the economy. In this context, plural ownership refers to a broadening of the different types of enterprises that serve our local economies, so that there are more community embedded forms of business ownership which are more likely to generate wealth for local residents and communities. This is in contrast to some enterprises which opposed to serving local people and communities extract wealth out of these communities to distant shareholders.

Our research has showcased the clear role community businesses have to play in pluralising forms of ownership in our local economies. Take, for example, Homebaked, a café next to the Anfield home of Liverpool FC. Homebaked has built a viable commercial business that generates wealth for local residents by employing locals, attracting visitors to stay and spend money with local businesses, and by ensuring that any surplus generated is poured back into the business. In doing so, Homebaked has transcended being simply a place to buy delicious scouse pies (and they are delicious!), and instead become a vibrant pillar in what has historically been a deprived community. This is community wealth building in practice – dedicated local actors being empowered to not just take a bigger slice of the wealth (or pie), but to take ownership of their local economies through socially virtuous forms of business, one slice at a time.

There is still much work to do. As participants at our launch discussed, community businesses are still disproportionately run by individuals who are not able to represent their service users’ experience of privilege (or the lack thereof), and there are racial and class barriers to overcome throughout the sector. Our research has shown the correlation between forms of social capital and community business formation, and there is now an urgent imperative to ensure that community businesses are run by and for the most marginalised in every locality.  To scale and amplify, community businesses must not be the preserve of those communities which are time and resource rich or be the product of exceptionally dogged individuals.  Change is needed, whether it be a huge injection of funding in start-up capital, or even something as easy as simplifying the application forms of grants.

One thing is for sure – community businesses are a powerful force for building wealth for their local communities, and now is the time to scale them up and out across the UK. If you want to know what they can achieve, come down to The Florrie and see.