Agenda

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Nearly £50m went out to small and medium sized charities and social enterprises in the shape of grants and loans. But with the Growth Fund closed, is the finance gap back? We look at the legacy of this pioneering fund and what has followed it. For years, social enterprises complained that there was a missing middle when it came to getting investment. Lots of startup grants or loans at the beginning of their journey were available, and plenty of finance was on offer for organisations that had grown to a certain size with a healthy turnover. But for those beyond startup with proven social impact and more modest revenue that were looking for investment to grow? Not so much. As long ago as 2017, SEUK’s ‘State of Social Enterprise’ report identified that ‘social enterprises remain ‘finance-hungry’ and ‘access to the right type of finance at the right time is still a key barrier (or enabler) of success.’ The report recommended that social investors and the wholesalers that build the market, should focus on smaller, unsecured and more patient finance, but also on products that meet the needs of social enterprises – for working capital, cash flow pressures and income diversification. The news that a final evaluation of the Growth Fund - which offered blended finance (a mix of grant and loan) of up to £150K to smaller organisations - showed that it had helped to fill a crucial gap in the social investment market is therefore very good news. The Growth Fund £50m was up for grabs, with £22.5m coming courtesy of National Lottery players. The remainder came from Better Society Capital, who contributed £27.5m from dormant assets it had received: unclaimed amounts in accounts that banks were unable to reunite with owners. The programmme was delivered by Access, which worked with 15 social investors to manage deployment. Between 2016 and 2023, 780 investments were made in 580 voluntary, community and social enterprise organisations (VCSEs), around half of which had never applied for investment outside of grants before. As the finance on offer was blended (some grant, some loan), the evaluation report concludes that it was the free money on offer (the grant) that was ‘a key motivator’. The Growth Fund was successful in plugging the ‘missing middle’ gap of finance available to small and medium sized VCSEs. The average investment was £67K, and the median annual income of funded organisations was approximately £177K, with 54% of funded VCSEs having fewer than five full-time employees. Only 12% of those funded had more than 25 full-time staff. The money was typically used for growth: scaling up existing activities, asset acquisition, diversifying income and staff development, but also for reducing reliance on grants and boosting reserves. Recipients of the money were surveyed, with 29% responding. Of those surveyed, 50% of VCSEs reported significant improvements in financial resilience. Over 70% of VCSE survey respondents indicated the social investment increased their overall social impact and the number of beneficiaries they supported. Aside from helping to grow VCSEs, the Growth Fund was also successful in growing the social investment market: 70% of those surveyed applied for further investment after their Growth Fund loan and 80% would recommend social investment to other VCSEs. Access distributed funds to various regional social investors and although experienced social investors delivered seven of the resulting social investment funds, 10 were delivered by organisations with no prior loan book management experience. Half of those are continuing with blended finance, and half are no longer active. The legacy The Growth Fund set in motion a range of further blended finance programmes, including Access’s £50m Enterprise Growth for Communities programme (the successor to the Growth Fund, backed by £20m in grants from dormant assets money), which continues to offer simple blended finance products that are largely unsecured. More recently, Access has also been allocated a further £87.5m of dormant assets money, £41m of which is intended for blended finance funds. “The Growth Fund was instrumental in establishing the role that blended finance can play in supporting smaller charities and social enterprises to access the finance they need,” said Neil Berry, Director of Programmes at Access. “Crucially, the Growth Fund was not a one‑off intervention but the starting point of a deliberate pipeline of support, ensuring there was no drop‑off or gap in the availability of appropriate finance. It has been the springboard for much of our subsequent work - at least half of the finance we support charities and social enterprises with is in the form of small-scale unsecured debt.” Please note Access funds social investors and intermediaries, not charities or social enterprises directly. If you are a charity or social enterprise looking for social investment, visit Good Finance.

The Labour government’s 2024 election manifesto contained a commitment to ‘double the size’ of the co-operatives and mutuals sector. Following on from this, in November of 2025, the Department for Business and Trade launched a call for evidence on business support for co-operatives and non-financial mutuals. This was an opportunity for us to feed directly into government thinking around diverse business models, and to ensure gaps in support provision, finance, and understanding are presented to and acknowledged by the Department. Our consultation response focuses on the immense impact made by social enterprises, many of which are co-operatives, mutuals and employee-owned - the way they are driving economic growth, reducing inequalities, and creating better working environments. Particular attention is given to the vital role these types of organisations play within the NHS and the transformative impact they are having on patient care and staff wellbeing while retaining financial responsibility. We also look in depth at the challenges faced by these businesses when it comes to accessing finance and support and the gaps in understanding which are holding them back. Here are some of the key points mentioned in our response: Economic and social impact Sector Scale: Mission-led businesses (co-ops, mutuals, and social enterprises) make up 5% of UK businesses, accounting for 10% of GDP and creating around 4 million jobs. Growth Potential: If the proportion of social enterprises and co-ops within the UK economy grew from 3% to 12% of GDP, it would increase UK investment by £14 billion. If all businesses were mission-led, UK GDP could be 7% larger. Job creation: Consumer co-operatives create more jobs by turnover than average enterprises in the UK. Labour productivity in worker co-operatives is around 8-12% higher than comparable traditional firms. Resilience: 82% of co-operative start-ups are trading after 5 years, compared with just 40% of UK companies overall. Public services and healthcare NHS contribution: The 60 largest healthcare social enterprises, most of which are classified as public service mutuals, deliver £2.4 billion in services annually, covering a third of community health services and providing urgent care for two-thirds of the population. Quality: These organisations are more likely to receive "Good" or "Outstanding" CQC ratings than traditional NHS trusts. Efficiency: Research shows that social enterprises are leaner and more efficient than NHS Community Trusts, with lower staff sickness rates, lower spend on bank and agency staff, and lower overheads. Diversity and inclusion Leadership: 24% of the top 100 co-ops are led by women, compared to just 9% of the FTSE 100. Pay equity: The gender pay gap in co-ops is 7.5%, significantly lower than the UK average of 12%. Workforce: Around 65% of the social enterprise workforce is female, and 22% are from minoritised ethnicity backgrounds. Barriers to entry and growth Awareness gap: There is a lack of understanding of co-operative and mutual models among business advisors, investors, and the general public. This translates into poor, unsuitable advice for those wishing to start or scale co-operative business models. Financial hurdles: 68% of social enterprises struggle to access grant funding; many find traditional bank finance (like overdrafts) difficult to secure because banks don't understand their risk profiles. Lack of awareness in government: Public service mutuals are often "forgotten" in government decisions around funding and support, creating unnecessary strains on finances, capacity, and services. For example, they were initially excluded from pandemic bonuses and National Insurance relief granted to public sector counterparts. This creates perverse incentives, discouraging the type of organisations that consistently deliver the kind of care the NHS 10-year plan is seeking to deliver. Recommendations Joined-up government working: Despite considerable cross-party support and the ongoing growth of diverse businesses themselves, government action has been slow and in need of joined-up strategy across key departments. The Government has committed to doubling the size of the co-operative and mutual economy, and there is now also an Office for the Impact Economy. The Government must recognise that these terms overlap, and that policy decisions must take into account co-operative, social enterprise, and mutual models of ownership, and how these can coexist. Legal and fiscal frameworks: Ensure legal and fiscal frameworks do not, even unintentionally, discriminate against diverse businesses. Bolster the capacity of regulators like Companies House to remove barriers for co-operatives wanting to start or scale Routes to market and the public purse: The Procurement Act consultation should lead to joined-up integration of support for VCSEs in public procurement, and strengthening the Social Value Act can expand public/social partnerships and secure greater value for money from existing public budgets. Access to finance: DBT and DCMS, through ensuring their existing programmes are open to diverse businesses, can expand support for start-ups, growth, and replication, and enterprise development. Sector leads and champions: Diverse business model sector leads and champions need to be better embedded across government departments to strengthen awareness and coordination in order to highlight and build upon best practice. CLICK HERE TO READ OUR FULL RESPONSE TO THE CONSULTATION