Reality lags behind the rhetoric of creating the 'largest social enterprise sector in the world', finds The King's Fund report

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The prospect of a more competitive marketplace for health care providers including short-term contracts for fledgling social enterprises presents significant risks for their survival, according to a new report on social enterprise in health care published by The King's Fund. Legal, financial and other support is needed to develop and grow the social enterprise sector and some start-ups will need to develop more robust business models.

Crucially, the report recommends that NHS commissioners need to offer longer-term contracts to enable social enterprise providers to establish themselves in a more competitive environment.

The report found early evidence to suggest that health care providers that have adopted the social enterprise model have benefited by reducing bureaucracy, speeding up decision-making and by allowing the reinvestment of surpluses, an effective motivator for staff. Another perceived benefit of social enterprises is increased staff engagement, but simply moving to a new operating model was not found to be sufficient. Senior managers needed to make specific efforts to engage staff from the outset.

The government's recent open public services White Paper restated its commitment to encouraging public service mutuals as part of its agenda for diversifying the provision of public services. However, despite the government's hopes for 'the largest and most vibrant social enterprise sector in the world', the numbers of staff leaving the NHS to form new social enterprises has not kept pace with this vision.

Health care providers face challenges in establishing themselves as social enterprises. Some providers report that they are lacking the right support to manage staff concerns about changes to their terms and conditions, particularly pensions. Staff anxieties were reportedly added to by conflicting communications about the government's health reforms.

Dr Rachael Addicott, Senior Research Fellow at The King's Fund and author of the report said:

'Even at this early stage in the development of the social enterprise sector, it's apparent that patients and taxpayers could really benefit. However, there is still a lot of work to be done by NHS commissioners, the government, and aspiring social enterprises to turn the vision of a thriving social enterprise sector into reality.'

Notes to editors

  • For further information, or to request an interview, please contact the Press and Public Affairs team on 020 7307 2632 (if calling out of hours, please ring 07584 146 035).
  • The report ‘Social enterprise in health care: promoting organisational autonomy and staff engagement’ is published on Thursday 4 August at 00.01.
  • There are around 62,000 social enterprises in the UK, which contribute more the £24 billion to the economy, employing approximately 800,000 people. It is estimated that around 9 per cent of them operate in the health and social care sectors. (Social Enterprise Coalition 2009; Williams and Cowing 2009)
  • ‘Social enterprise’, ‘employee-owned organisation’, ‘mutual’ and ‘co-operative’ are used interchangeably but can take different forms. Many, but not all, are owned by staff or by the wider community to some degree. A key factor is that businesses are guided by social objectives, with surpluses reinvested into the organisation rather than taken as profits by investors. However some of them remove a proportion of profit as dividends or bonuses for staff. For the purposes of this report, social enterprises were defined as organisations with some elements of employee ownership or mutual and co-operative design, and with an overarching objective to reinvest in organisational and staff development.
  • The government White Paper ‘Equity and Excellence: Liberating the NHS’, stated in ‘Our strategy for the NHS: an executive summary’,  at point 6 (r): ‘We aim to create the largest social enterprise sector in the world by increasing the freedoms of foundation trusts and giving NHS staff the opportunity to have a greater say in the future of their organisations, including as employee-led social enterprises.’
  • The government’s recent open public services White Paper was published in July 2011.