The Social Economy in
Northern Ireland
A Policy Review
in association with
Dr. Brendan Murtagh
Queen’s University Belfast
&
Professor Mike Campbell
Leeds Metropolitan University
June 2001
Table of Contents
Table of Contents ............................................................................................................... i
1.
Introduction ........................................................................................................... 1
1.1
Terms of Reference, Timing of Review & Approach ..................................... 3
1.2
Nature & Structure of Report............................................................................ 4
2.
The Scope & Scale of the Social Economy in Northern Ireland .......................... 6
2.1
Definitions of the Social Economy ................................................................... 6
2.2
Components of the Social Economy................................................................. 8
2.3
What Do Social Economy Organisations Do? .................................................. 9
2.4
The Social Economy & Social Capital ........................................................... 11
2.5
The Scale of the Social Economy ................................................................... 14
2.5.1
The Scale of the Social Economy Elsewhere ............................................. 15
2.5.2
The Scale of the Social Economy in Northern Ireland ............................... 16
2.6
Factors Influencing Social Economy Growth & Development ...................... 18
2.7
Social Economy Impacts & Sustainability ..................................................... 20
2.7.1
The Sustainable Livelihoods Approach ...................................................... 20
2.7.2
Sustainability of the Northern Ireland Social Economy ............................. 21
3.
Current Policies & Programmes for the Social Economy . Error! Bookmark not
defined.
3.1
Departmental Review ......................................Error! Bookmark not defined.
3.1.1
The International Fund for Ireland...............Error! Bookmark not defined.
3.2
The EU & The Social Economy ..................Error! Bookmark not defined.
3.3
Developments at the UK Level ........................Error! Bookmark not defined.
3.4.1
Community Investment Tax Credit .............Error! Bookmark not defined.
3.5
Assessment of the Overall Social Economy Support System.................. Error!
Bookmark not defined.
3.6
Gaps & Shortcomings ......................................Error! Bookmark not defined.
4.
Recommended Process for Social Economy Development ...... Error! Bookmark
not defined.
4.1
Principles of Good Practice .............................Error! Bookmark not defined.
4.2
Overview of Recommended Processes & Actions ........ Error! Bookmark not
defined.
4.2.1
Action by the Public Sector .........................Error! Bookmark not defined.
4.2.2
Action by the Social Economy Sector .........Error! Bookmark not defined.
4.2.3
Joint Actions ................................................Error! Bookmark not defined.
4.3
Action by the Public Sector .............................Error! Bookmark not defined.
4.3.1
Locus for Social Economy Policy ...............Error! Bookmark not defined.
4.3.2
Action by All Departments ..........................Error! Bookmark not defined.
4.3.3
Actions by Specific Departments ................Error! Bookmark not defined.
4.3.3
Agenda for EU Support to the Social Economy at the Local Level in
Northern Ireland ...........................................Error! Bookmark not defined.
4.4
Actions by the Social Economy Sector............Error! Bookmark not defined.
4.4.1
Developing a Coherent Vision.....................Error! Bookmark not defined.
4.4.2
Role of the Social Economy Agency ...........Error! Bookmark not defined.
4.5
Joint Actions .................................................... Error! Bookmark not defined.
4.6
Resource Implications ..................................... Error! Bookmark not defined.
4.7
Monitoring & Evaluation ................................ Error! Bookmark not defined.
4.7.1
Monitoring & Evaluating the Development Process ..Error! Bookmark not
defined.
4.7.2
Monitoring & Evaluating the Social Economy ..........Error! Bookmark not
defined.
Appendix 1:
Resource Papers ...................................... Error! Bookmark not defined.
Appendix 2: Current Policies & Programmes for the Social Economy Error! Bookmark
not defined.
Error! Bookmark not defined.
© Colin Stutt Consulting, 2001
ii
1. Introduction
The social economy is large and diverse and it has a long history. In many
areas Northern Ireland already represents best practice in social economy
development, but there is scope for a fuller and more integrated approach
particularly in the context of the new arrangements for government in
Northern Ireland.
Much of the social economy has developed independently of government
support and policies. Other social economy organisations are important
delivery agents for government policies and programmes.
Government policies and programmes are one important element in
maximising the potential of the social economy in Northern Ireland. On the
one hand, government sets the fiscal, regulatory, legal and economic
environments in which social economy organisations operate. On the other
hand, government schemes and programmes provide a market, important
sources of revenue and a focus of activity for many social economy
organisations.
Viewed from a government perspective, social economy organisations are
important providers of goods and services. Many social economy
organisations compete successfully with the private sector in meeting
public sector needs. In such cases the main concern is to ensure that there
is a level playing field for such social economy organisations.
The review was
undertaken by

Colin Stutt, of Colin
Stutt Consulting

Dr Brendan Murtagh
of the School of
Environmental
Planning, Queen’s
University Belfast, &

Professor Mike
Campbell, Policy
Research Institute,
Leeds Metropolitan
University
with inputs from a very
wide range of people &
organisations in the social
economy and the public
sector in Northern
Ireland. We would like to
acknowledge and thank
all those people who
helped us in our work.
In very many cases, however, the services provided by social economy
organisations are distinctive; they cannot easily be supplied by private or
public sector organisations. In these cases the very fact that the service is
being supplied by a social economy organisation changes the nature of that
service, for example by involving local people in a disadvantaged area in
determining priorities for that area through structures which they can
control.
For all these reasons there is a mutual interest in the social economy and
in government in ensuring the full and successful development of the
Northern Ireland social economy.
This policy review was undertaken as a step towards fulfilling the
commitment in the Programme for Government to complete a review of
the social economy in Northern Ireland by July 2001 – that commitment
was in itself a recognition of the mutual interest of the social economy and
of government in providing an appropriate regime for social economy
development in Northern Ireland.
The Social Economy in Northern Ireland
The following exhibit provides an overview of our findings.
Overview
The Social Economy is a distinctive sector in
Northern Ireland which
n
n
n
n
n
Has a scale which has not been measured
But which we have reason to believe is at least 30,000 jobs
or 5% of employment (& may be considerably more)
Operates largely on a cross-community basis
Creates employment & incomes particularly in
disadvantaged areas
But for which there exists
w No public policies
w No support mechanism, &
w No forum for discussing its development & challenges
The social economy is distinctive – it has characteristics and faces
challenges and opportunities which are unlike other sectors. However,
its scale is unknown. Based on in-depth research which has been
undertaken in other regions, we believe that at a minimum it accounts
for 5% of employment in Northern Ireland – 30,000 jobs. This would
make the scale of the social economy comparable to that of the
construction industry or the tourism sector in Northern Ireland, or
twice the scale of the textiles and clothing, food, drink and tobacco or
agriculture, forestry and fisheries sectors. Despite this scale there are
no public policies for the social economy, no coherent support
mechanisms and no forum exists for discussing the development of the
sector and the challenges it faces. This is all the more remarkable
because the social economy operates largely on a cross-community
basis and creates employment and income, particularly in
disadvantaged and often divided communities. Our policy
recommendations are directed to remedying these gaps.
2
A Policy Review
1.1 Terms of Reference, Timing of Review &
Approach
The Terms of Reference for our work are set out in the exhibit below.
Terms of Reference
1.
2.
3.
4.
5.
Agree a working definition of
the social economy
Review scope & main
components of social
economy
Profile existing measures &
instruments, inputs & outputs
Highlight policies & measures
which can be developed
Identify best practice in
Northern Ireland and
elsewhere
6.
Identify gaps in the approach
& programmes in Northern
Ireland
7. Advise on the most
appropriate means of
managing & administering
social economy policy in
Northern Ireland
8. Report on the present role &
potential of the SEA
9. Recommend a range of
actions & programmes which
are particularly suited to
implementation at local level
10. Develop a monitoring &
evaluation framework
The review is timely because of the recognition which has been given to
the social economy in the new round of Structural Funds support to
Northern Ireland covering the period to 2006. In addition, at UK level,
there have been important developments in fiscal, regulatory and other
policies which affect the social economy in Northern Ireland as well in the
rest of the UK. There is a need to integrate those national developments
into thinking and actions relating to the social economy in Northern
Ireland.
The review was also timely because it enables the issue of the
sustainability of the Northern Ireland social economy to be addressed.
Given that much of the support for the social economy has been from EU
Programmes, there is a need to take a view on how far the existing
Northern Ireland social economy can be sustained when the current round
of EU programmes end in 5 years time and a need to consider how far such
support can and should be mainstreamed into Northern Ireland mainstream
public expenditure programmes.
3
The Social Economy in Northern Ireland
At the same time, many voluntary and community organisations are now
seeing the development of social economy operations as offering them a
route to longer term sustainability – there is a need to ensure that the
environment for such organisations is appropriate.
Our terms of reference required the review to be

open

inclusive, and

pragmatic.
Open and inclusive in the sense that all or any relevant organisations were
invited to participate in our work and contribute to the debate and that
our work should be available to those who wished to scrutinise it,
challenge it and add to it. At the same time, a limited period was allowed
for our work and we had to be pragmatic in our overall approach; it was
not always possible to pursue each subject to its definitive conclusion.
To achieve an open, inclusive and yet pragmatic approach a website was
developed1 to set out our terms of reference and our work programme and
to provide access to key documents, presentations etc. During the course
of our work this website was receiving up to 1500 visits per month and a
considerable number of those who visited the website contributed
comments, case study material or other information either by email or
phone call or by contributing to the social economy discussion forum which
formed part of the overall social economy website.
In addition, NICVA hosted a major conference on the social economy in
Northern Ireland during the course of our work. That conference provided
us with the opportunity to test our thinking with a wide cross-section of
social economy organisations.
1.2 Nature & Structure of Report
This report is policy – and action-oriented. It does not pretend to provide a
definitive study of each and every aspect of the social economy in
Northern Ireland – that would be a life’s work. Instead we concentrate on
the issues essential for moving ahead with the development of the social
economy in Northern Ireland.
1
www.colinstutt.com/social_economy.htm
4
A Policy Review
Our central recommendation is that a rolling process of social economy
development should be put in place on an agreed basis between the social
economy sector and government. During that process many of the
complex, longer term issues which we have identified can be tackled and
resolved. However, if that process is not put in place the best that can be
achieved by the review of the social economy is a once-off fix of particular
issues.
Our Resource Papers are
available from
www.colinstutt.com/social_eco
nomy.htm.
The Resource Papers cover the
following topics
The report is also intended to be, itself, open, inclusive and approachable.
There is an extensive and, at times, obscure academic literature on the
overall social economy, its development at national and international
levels and its various component parts. We have not included any
significant analysis of these issues in our report. Instead, we have made
available a series of Resource Papers which provide a summary of some of
the key issues arising in the academic reviews and of national and
international best practice in social economy development, together with
a number of case studies of Northern Ireland social economy organisations.
The Resource Papers are listed in Appendix 1 and are available from the
social economy website www.colinstutt.com/social_economy.htm.
The rest of this report is structured as follows
1.
Defining the Sector
2.
Comparative Practice
3.
Key Strategy Issues
4.
Case Studies
5.
Developing the Social
Economy at a Local
Level in Northern
Ireland

Section 2 deals with issues relating to the definition, scope, scale and
activities of the social economy. It also distinguishes social economy
actions from other activities in terms of their contribution to social
capital and discusses the impact of the social economy and the
sustainability of the sector

Section 3 describes existing social economy policies and programmes
in Northern Ireland. This Section identifies the strengths of the
Northern Ireland social economy but also certain gaps & deficiencies in
current arrangements

Section 4 contains our recommendations for bringing Northern Ireland
arrangements for the social economy into line with principles of
national and international good practice. In many ways Northern
Ireland already represents best practice in many dimensions but there
is considerable scope for further development and integration of the
sector in a wider policy framework.
5
The Social Economy in Northern Ireland
2.
The Scope & Scale of the Social Economy
in Northern Ireland
This Section of the Report gets to grips with a number of important
questions relating to the social economy in Northern Ireland, including

What is the social economy?

What is it made up of?

What does the social economy do?

How big is it?

What are the factors affecting its scale and impact?, &

What are the impacts which the social economy has and how do these
relate to the debate about the sustainability of the social economy in
Northern Ireland?
2.1 Definitions of the Social Economy
There is an extensive literature on the definition of the social economy.
This Report is not the place for a full discussion of the issues. Our Resource
Papers provide a wide-ranging analysis of these issues, in particular

Resource Paper 1 – Defining the Social Economy – examines issues
relating to the definition of the social economy and identifies key
components of the social economy

Resource Paper 2 – Comparative Practice – provides a national and
international perspective

Resource Paper 3 – Key Strategy Issues – identifies barriers to a
successful social economy and policies which might be used to
overcome those barriers.
The terms ‘social economy’, third sector, and ‘third system’ are often
used interchangeably but this does not recognise the very considerable
institutional and other differences between arrangements in different
countries. There are, for example, distinct institutional and evolutionary
differences between the meaning applied to the social economy in
Southern European, Scandinavian and UK contexts.
6
A Policy Review
The Partnership 2000
Social Economy Working
Group led directly to the
creation of an overall
Social Economy
Framework for Ireland
and to the announcement
by the Tanaiste in 2000 of
a national Social
Economy Programme
with the objective of
creating 2,500 additional
jobs, mostly focused on
those excluded from the
labour market
In the Republic of Ireland a July 1998 report by the Partnership 2000 Social
Economy Working Group defined the social economy as
"that part of the economy between the private and public sectors,
which engages in economic activity in order to meet social
objectives".
More generally, the social economy is often seen, in the words of the EU
White Paper on Growth, Competitiveness and Employment as
“the continuum of possibilities ranging from supply totally protected
by public subsidies to totally competitive supply”.
But the social economy is more than just the space between the private
sector and the public sector; it is a distinct sector in its own right with
distinctive development needs and opportunities.
It is perhaps more helpful to focus on the distinctive characteristics of the
social economy, rather than focusing on the details of alternative
definitions.
Abstracting from the detailed debate about the social economy, it is clear
that there are certain key characteristics or features which distinguish,
and thereby define, social economy organisations. Those essential
characteristics are shown in the following exhibit.
Essential Characteristics
Purpose
Social objective
Activity
Provide goods or services
Business
model
Principle of exchange
Form
Stakeholder ownership
7
The Social Economy in Northern Ireland
Many social economy
organisations go
beyond the legal
requirements and
enshrine principles of
democratic and
participative
management in their
constitutions.
Social economy organisations have a distinctive and clear purpose. They
exist as a means of serving a social, community or ethical end, not for the
sake of private profit. They also have a distinct activity, the provision of
goods or service in a market place using an explicit business model based
around the principle of exchange. Finally, social economy organisations
have distinctive legal form, stakeholder ownership of a legal form which
protects the organisation’s not-for-personal-profit status.
Hence, a social economy organisation will have each of the following
features

a social, community or ethical purpose

an explicit, market-based, business model, &

a legal form appropriate to its not-for-personal-profit status.
It should be noted that there are many organisations which have a social,
community or ethical purpose and a not-for-personal-profit status. These,
however, are not social economy organisations because they do not an
explicit, market-based, business model.
The essence of the social economy, therefore, lies in the application of an
explicit business model to not-for-personal-profit organisations with a
social, community or ethical purpose.
2.2 Components of the Social Economy
The legal forms which social economy organisations adopt are very varied.
This is a reflection of particular legal and regulatory circumstances and can
change as those circumstances change. Common forms of organisation
include companies limited by guarantee, co-operatives and industrial and
provident societies.
Equally, social economy enterprises can concentrate on a wide range of
‘sectoral’ activities, such as urban or rural regeneration, tackling
unemployment, environmental improvement, the arts and culture,
business growth or working with defined disadvantaged groups in society.
Some of the forms of social economy organisations which meet the
essential criteria set out above include

Employee Owned Businesses ~ creating jobs, maintaining and rescuing
jobs as part of local economic development activity

Credit Unions ~ providing access to community finance
8
A Policy Review
This categorisation of social
economy organisations draws
on a paper prepared for this
review by the Social Economy
Agency.
The paper ‘Understanding
Social Economy Definitions
2001’ is available from
www.colinstutt.com/social_
economy.htm

Housing Associations ~ providing social housing

Local Enterprise Agencies ~ stimulating business and economic growth
across Northern Ireland

Co-operatives ~ associations of persons united to meet common
economic and social needs through jointly owned enterprises

Urban or Rural Regeneration Groups ~ key community structure in
community-based renewal and revival, sometimes established as
development trusts for particular areas

Social Firms ~ providing employment and training to people with
disabilities and other disadvantaged groups

Intermediate Labour Market Companies ~ providing training and work
experience for the long-term unemployed

Community Businesses ~ enterprises which have a strong geographical
definition and focus on local markets and local services

Social Investment Funds ~ such as Ulster Community Investment Trust
and Aspire which use investment funds to achieve social economy
objectives

Charities’ Trading Arms ~ enabling charities to meet their objectives in
innovative ways, as trade companies.
These examples illustrate the diversity and flexibility of the social
economy.
2.3
What Do Social Economy Organisations Do?
The diversity of the social economy means that different social economy
organisations do very different things. However, it is possible to abstract
from the particulars of individual organisations and identify certain generic
activities which social economy organisations can and do undertake.
Most social economy organisations will do most of the things which private
companies do. They will develop new products, undertake production of
existing products, undertake sales and marketing, implement human
resource strategies, hold board meetings etc. However, some of the
activities which social economy organisations undertake are highly
distinctive and arise from the distinctive social, community or ethical
purposes which social economy organisations have.
9
The Social Economy in Northern Ireland
Some of the distinctive activities of social economy organisations are
summarised in the following exhibit.
These activities are clearly very different from those undertaken by
private companies and many of them have clear relationships with key
government policies and priorities. It is for this reason that in many policy
areas there is a symbiotic relationship between government, its agencies
and the social economy.
Yet the social economy also remains distinct from government and the
public sector and should not be seen as a sector dependent on public
funds. The social economy is a distinct sector and many of its major
components remain independent of public funds. However, the social
economy provides an appropriate ‘partner’ to the public sector in many
policy areas, offering the benefits of
Resource Paper 3 – Key
Strategy Issues –
provides a fuller
treatment of these
issues
10

Significant externalities in programme delivery, for example
through the use of participative delivery mechanisms, being close
to local communities, employment of disadvantaged people etc.,
which enable social economy organisations to tackle market failure
in distinctive ways

An ability to innovate, be creative and flexible in response to
needs and opportunities, which is much more difficult to achieve in
centrally directed public sector organisations
A Policy Review
2.4

An ability to draw on volunteers, donations and private funds to
advance public policy, which are not available to public sector
organisations, and

A high degree of commitment to the organisation’s mission,
evidenced both in the voluntary directors of social economy
organisations and their paid employees.
The Social Economy & Social Capital
Social capital can be described as the glue which holds societies and
communities together and help them to cope with change, realise
opportunities and to handle adversity.
More formally, the Cabinet Office describes the concept of social capital in
the following terms
‘the interdependence between economic efficiency and distributional
equity is one element of what is referred to as ‘social capital’ – a
growing area of theory building on the work of Robert Putnam and
others.
Social capital consists of all those institutional arrangements,
networks and relationships which promote understanding, trust and
mutual respect; allow communities to pursue shared goals more
effectively; improve information flows; and generally improve the
quality of life.’2
Robert Putnam, a Professor at the Kennedy School of Government at
Harvard University defines social capital as
‘social networks & the norms of reciprocity & trustworthiness which
arise from them’.
Putnam’s major work is
‘Bowling Alone’, a major
study of the social capital
endowment of the USA.
He argues that building social capital contributes to better integrated,
more active, capable and cohesive communities and proposes four
principles of public policy in relation to social capital, which are
summarised in the following exhibit.
An accessible form of his
arguments is made in the
Bettertogether report,
available from
www.bettertogether.org
2
Cabinet Office Performance and Innovation Unit, Report on Rural Economies, 1999, Annex 3.
11
The Social Economy in Northern Ireland
In the first place, Putnam argues that policies should be assessed to
establish whether they build up or deplete social capital. Those which
deplete social capital should be avoided, this might occur, for example, as
a result of a reduction in local involvement in decision-making and control
through the introduction of a new policy. Those which build up social
capital should be favoured
Secondly, Putnam notes that social capital is a recyclable resource. The
more social capital is used in a community the stronger it becomes and the
more capable that community becomes in realising opportunities and
handling adversity.
Thirdly, Putnam argues that the best form of social capital is ‘bridging’
social capital which is outward looking and inclusive by contrast with
‘bonding’ social capital which is inward looking and exclusive. The
Northern Ireland Economic Council has described the difference between
these forms of social capital and commented on the role of the social
economy in building up social capital as follows
‘Bridging social capital is outward looking and encompasses people
across diverse cleavages while bonding social capital is inward
looking and tends to reinforce exclusive identities and homogenous
groups.
12
A Policy Review
One area which invests heavily in social capital is the social economy.
The social economy . . . is seen increasingly as a major source of jobs
and an effective means of addressing issues such as long term
unemployment and social deprivation. It offers an important vehicle
by which government can invest in building up social capital,
particularly bridging social capital 3’.
One of the remarkable features of the social economy in Northern Ireland
is that it is very largely organised on a cross-community basis, i.e., on the
basis of bridging rather than bonding social capital. As the social economy
works to a large extent in the most deprived, marginalized and divided
communities in Northern Ireland, this is a remarkable achievement in a
divided society.
Finally, Putnam argues that there is a need for horizontal communication
between social economy organisations instead of a largely vertical
communication between government agencies and their experts and
individual social economy organisations on a one-by-one basis.
The social capital building benefits of the social economy are, in general,
additional to the specific action or initiative being undertaken by a social
economy organisation – these benefits arise not from the specific activity
or initiative but from the distinctive characteristics of social economic
organisations.
Our conclusion from this is that the ability of the social economy to
build up social capital and to operate largely on a cross-community (or
bridging social capital) basis are strong grounds for making it a crossDepartmental policy of the Northern Ireland Executive that, where
feasible,
3

social economy delivery mechanisms are to be preferred to
direct drive delivery by the public sector or contract based
delivery by the private sector,

that policies and policies and programmes should be
systematically examined to ensure that they
-
contribute to building social capital, do not erode
existing social capital and
-
use social economy delivery mechanisms wherever it is
feasible to do so.
Northern Ireland Economic Council, Occasional Paper 13, ‘Local Development: A Turning
Point’, December 2000
13
The Social Economy in Northern Ireland
Implementation of this conclusion will pose challenges to both the public
sector and the social economy. Later in this report we identify mechanisms
for identifying those challenges and responding to them.
2.5
Studies of the social
economy across the EU
and internationally have
noted the difficulty of
measuring the scale and
impact of the sector using
conventional statistical
techniques. They have
also commented on the
‘low visibility’ of the social
economy, which has often
meant that the sector has
not received the public
policy attention it
deserves on the basis of
its scale and its impact on
disadvantage and social
exclusion
In a survey undertaken in
2000 the value of
voluntary directors’
inputs to 31 local
enterprise agencies was
estimated at £600,000 per
annum. Social economy
organisations are
uniquely placed to draw
upon these voluntary
inputs.
The Scale of the Social Economy
The social economy eludes conventional statistical definition for example
based on Standard Industrial Classification codes. As a result, it is not
possible to turn to an existing statistical source and determine the scale of
the social economy in Northern Ireland. Instead, it is necessary to piece
together information from a variety of sources to produce a broad estimate
of the scale of the social economy.
This situation is unsatisfactory because it makes it difficult to grasp the
size of the social economy. In Section 4 we recommend research to
address this and other information gaps relating to the social economy.
For the purposes of this Report we have reviewed estimates of the scale of
the social economy elsewhere in the UK and internationally and have
examined a number of sources of information about the size of components
of the social economy in Northern Ireland. However, this information is
based on a variety of information sources which do not always relate to the
same time period or use the same definitions and is incomplete. As a result
we have not been able to provide more than an illustration of the likely
scale and impact of the social economy in Northern Ireland.
In addition, it is not clear how the social economy should be measured. Its
economic value-added is different from that of a private company and, by
definition, is not fully captured by market valuation of activities. In this
situation we have tried to build up a grid of different dimensions of scale
including number of organisations, number of volunteers, number of
employees, turnover, assets etc. However, in most cases the information
available is patchy and incomplete.
The difficulty which we have experienced in measuring the scale of the
social economy in Northern Ireland is one indication of the ‘low visibility’
of the sector in public policy terms – a characteristic of the social economy
which has been noted in other regions and across the EU. In Section 4 we
recommend actions by which this issue might be addressed.
14
A Policy Review
2.5.1
The Scale of the Social Economy Elsewhere
Resource Papers 1 and 2 describe a number of studies estimating the scale
and impact of the social economy in other regions. Professor Mike
Campbell analysed the impact of the social economy in 8 member states
of the European Union and found that it employed around 7.2 million
people, accounting for 6.6% of total employment and 7.7% of employees in
employment. Employment is equivalent to 39% of the total numbers of the
unemployed in the EU, more than the total of people employed in
agriculture in the EU and one third of the numbers of people who are selfemployed in the EU.
The social economy is well developed and researched in Scotland and there
are important parallels with conditions in Northern Ireland. As peripheral
economies that have both experienced the worst effects of deindustrialisation and are open to the possibilities offered by devolution the
social economy will have a distinctive role to play in developing new and
innovate approaches to economic, spatial and community renewal.
ERM reviewed the scale of the social economy in the Highlands and Islands
of Scotland and showed that 5,866 people were employed, that it
generated £50.5m of income per annum and paid total wages of £4.35m
every year.
In their report Valuing the Social Economy, McGregor and Clark surveyed
around 800 social economy organisations in lowland Scotland. Their results
indicate that the social economy in lowland Scotland employs around
42,000 people and involves around 60,000 volunteers. They also showed
that 79% of organisations spent at least half their income in disadvantaged
areas and that 82% spent at least half their income on disadvantaged
groups. In total, McGregor and Clark estimated that some £400m is spent
on disadvantaged areas with a further £600m being spent on disadvantaged
groups by social economy organisations.
Sinclair, Grimes and Robb estimated that the total turnover of the social
economy in Scotland was £1.6 billion from a combination of grants and
revenue. Some 43% of social economy organisations generate revenue with
housing associations and credit unions generate more than 70% of their
revenue this way. In some areas the social economy can be particularly
significant and the authors noted that in Drumchapel social economy
organisations employ 410 people, in Craigmillar 390 people, in Motherwell
1,100 and in Greenock it employs 300 people (compared with the 350 jobs
left in Shipbuilding).
An audit of Leicester’s social economy showed that it employed 4,040
people representing 8.6% of jobs and its turnover was valued at £209m.
15
The Social Economy in Northern Ireland
2.5.2
The Scale of the Social Economy in
Northern Ireland
As we noted earlier, it is not easy to measure the social economy. We tried
to compile an estimate of its scale in Northern Ireland by assembling
material from a wide range of sources. That material is summarised in the
table on the following page.
It is important to recall that the information in the table is compiled from
a variety of sources of varying degrees of accuracy and relates to different
time periods and different definitions. It is also the case that the
estimated totals for the social economy are considerable underestimates
because data on substantial parts of the social economy is just not
available.
The figures in the table suggest a social economy with over 500
organisations, 2200 voluntary directors or other volunteers, under 5000
employees with a turnover of £50 million per annum and assets of £180
million. However, these figures are clearly incomplete and should not be
regarded as a sensible estimate of the scale of the social economy in
Northern Ireland.
In the absence of other information the best guide to the scale of the
social economy in Northern Ireland lies in the existing information about
the scale of the social economy in comparable regions. Where researchers
have had the resources to undertake detailed, in-depth reviews of the
scale of social economies they have found, typically, that it accounts for
employment equivalent to about 6% of total employment. In several EU
countries employment in the social economy has been found to be larger.
In addition, there is substantial anecdotal evidence that the social
economy in Northern Ireland is larger and more important than in other
regions of the UK.
On this basis, our best estimate of the scale of employment in the social
economy in Northern Ireland is based on

a conservative, lower range estimate of 5% of total employment
(equivalent to 30,000 jobs), and

an upper range estimate of 8% of total employment (equivalent
to 48,000 jobs).
Further, in-depth research will be required to refine these very broad
estimates.
16
A Policy Review
Sector
No. of Organisations
No. of Voluntary
Directors & Other
Volunteers
No. of
Employees
?
?
?
?
?
Credit Unions
183
4000
700
?
?
Housing Associations
41
500
1500
42
118
Local Enterprise
Agencies
31
300
200
8
55
Co-operatives
31*
?
1350
?
?
Urban Regeneration
?
?
?
?
?
Rural Regeneration
54
?
?
?
?
Social Firms
5
40
30
?
?
196
939
1089
?
?
Intermediate Labour
Market Organisations
-
-
-
-
-
Social Investment
Funds
2
28
6
?
7
Trading Arms of
Charities
?
?
?
?
?
533
2199
4875
50
180
Employee Owned
Businesses
Community Businesses
Incomplete Totals
* Retail Co-ops Only
17
Turnover
£m
Assets
£m
The Social Economy in Northern Ireland
According to the Quarterly Employment Survey in June 2000 there were
626,000 employee jobs in Northern Ireland. The following table sets out
the absolute and percentage of employment in some key sectors, to
provide a point of comparison with the estimate of social economy
employment.
Sector
2.6
Employment
June 2000
% of Total
Agriculture, Forestry & Fishing
15,400
2.5
Food Drink & Tobacco Manufacturing
18,710
3.0
Textiles & Apparel
16,500
2.6
Manufacture of Vehicles & Other Transport
Equipment
13,030
2.1
Construction
31,840
5.1
Retail Trade
64,210
10.3
Hotels & Restaurants
35,050
5.6
Public Administration & Defence
59,090
9.4
Education
65,940
10.5
Health & Social Work
94,260
15.1
Recreation, Culture & Sport
13,580
2.2
Social Economy Minimum Estimate
30,000
5.0
Social Economy Upper Estimate
48,000
8.0
Factors Influencing Social Economy Growth &
Development
It is helpful to think of social economy organisations as being akin to small
businesses.
Like small businesses, social economy organisations vary. Some are highly
ambitious and innovative, others are modest in their anticipated scale and
merely replicate at local level what has been done elsewhere. Some
exceed expectations and others fall short, some survive but never really
prosper and others fail and close down. This is a normal, healthy and
efficient feature of the market economy in which social economy
organisations operate.
However, there are specific factors which affect social economy
organisations going beyond the broad factors which affect small
businesses.
18
A Policy Review
Several
commentators have
noted that
managing social
economy
organisations is
more complex and
demanding than
managing
comparable private
businesses because
social economy
organisations
typically have
multiple objectives
and management
processes which are
more open and
participative than
in typical private
businesses.
In the first place, social economy organisations are seldom, if ever, started
with a strong equity investment. Indeed, the legal form of most social
economy organisations rules out the existence of a share capital. As a
result, social economy organisations generally start with a balance sheet
which shows loans, rather than equity, as the main source of finance. This
makes the organisation more vulnerable to unexpected fluctuations, it also
makes it more difficult for social economy organisations to gain
commercial funding from banks.
The only way in which a new social economy organisation can, in effect,
develop equity is by way of a grant from government or from a
philanthropic organisation. Specialist social lenders, such as Ulster
Community Investment Trust, can provide an alternative method of
development for some social economy organisations but this does not
compensate for the absence of equity in the balance sheet and not all
social economy organisations will have a cash flow or balance sheet which
will sustain borrowings. In such situations a grant may be the only way in
which a social economy organisation can become established.
Social economy organisations are also less likely than typical small
businesses to have high scores on key success factors. Small businesses that
grow are likely to be based on specific expertise of an individual or group
of individuals in a particular sector and with a strong business network.
Other success factors include a distinctive product or service addressing a
market sector in which the product or service can establish a niche
position and the existence of sufficient equity finance for both fixed and
working capital requirements. In broad terms, social economy
organisations are likely to find it more difficult to put in place these
success factors than would a typical small business.
Small business policies are now well established. There is a broad
consensus that a stable and favourable business environment is
fundamental but that specific targeted assistance can be justified in areas
such as small business finance and training and in functional areas such as
marketing and product innovation. These initiatives complement the
favourable and stable environment to produce, overall, a successful and
growing small business economy. In addition, there is a recognition of the
importance of entrepreneurship not only in small business development
but more generally in the functioning of the overall economy and
government supports entrepreneurship awareness and development
because of the wider economic benefits which it generates for the
economy.
19
The Social Economy in Northern Ireland
The principles of
policies for SME
development can be
applied to the social
economy, but policies
and programmes need
to be adapted to take
into account the
distinctive role and
ethos of social
economy
organisations and the
differences between
social economy
organisations
2.7
By analogy, if we are seeking to develop a successful and effective social
economy we might expect to have to make similar interventions in support
of social economy organisation development by providing training,
appropriate financial support where it is justified and stimulation of social
entrepreneurship. In addition, such support and intervention must
recognise the distinctive characteristics of individual components of the
social economy, for example the development needs of an early stage
community business are likely to be very different from those of a social
firm, which often has access to the managerial and other resources of a
parent charitable organisation. As with small business, interventions to
stimulate the social economy can well be justified but they must be
appropriately targeted at the needs of particular social economy
organisation types and not provided on a ‘one size fits all’ basis.
Social Economy Impacts & Sustainability
In Northern Ireland the term ‘sustainability’ is used in relation to the
social economy mainly to refer to the need for social economy
organisations to replace the grant funding which they have received from
EU and other programmes with market-based incomes.
DFID defines livelihoods as
sustainable when they
Are resilient in the
face of external
shocks and stresses
Are not dependent
on external support
(or, if they are, that
support itself
should be
economically and
institutionally
sustainable)
Maintain the long
term productivity of
natural resources, &
- do not undermine
the livelihoods of
others.
The sustainability debate, however, has wider dimensions. The Department
for International Development (DFID) has developed a methodology for
thinking about the objectives, scope and priorities for international
development and for assessing its effectiveness called the sustainable
livelihoods approach.
2.7.1
The Sustainable Livelihoods Approach
This approach sees sustainable systems as those which accumulate a stock
of assets , they increase the capital base over time. By contrast,
unsustainable systems deplete or run down capital, spending assets as if
they were income and so leaving less for future generations. The
sustainable livelihoods approach specifically looks at the impact of
development on the following aspects of capital endowment

20
human capital

natural capital (natural resources etc.)

financial capital (financial assets)

social capital, &

physical capital (physical assets).
A Policy Review
2.7.2
Sustainability of the Northern Ireland Social
Economy
In this perspective the sustainability of the Northern Ireland social
economy can be seen in wider terms. In particular

the social economy is resilient in the face of external shocks and
stresses and has contributed greatly to making Northern Ireland
itself more resilient

much of the social economy is not dependent on external support
(for example credit unions)

in other cases withdrawal of external support would require social
economy organisations to restructure and downsize their
operations but the organisation would continue to be able to trade
(for example local enterprise agencies derive ½ of their income
from the rental of property)

in other cases, the organisations are not sustainable but the
support they receive should be institutionally and economically
sustainable (for example housing associations are the preferred
method of provision of social housing in Northern Ireland)

in yet other cases the social economy organisations are not
themselves sustainable and there is uncertainty about whether the
support they receive can itself be sustained.
It is in relation to this, fifth, category that the greatest uncertainty
exists.
The question which needs to be answered is whether the overall
contribution to the regional capital stock in Northern Ireland is positive
or negative. The overall contribution to the capital stock can be
positive even if the economic or financial impact is negative. This
would occur when a social economy organisation is making a strong
contribution to human or social capital but is not financially
sustainable without continued external support.
The ending of mainstream EU funding for Northern Ireland after 2005
will make existing spending patterns economically unsustainable.
There will have to be changes. The difficulty lies in establishing
whether particular social economy actions will continue to be
supported by mainstream funds after that date. Such support is likely
to be institutionally sustainable only if the social economy activities
concerned can demonstrate that they make an effective and
economical contribution to social and governmental aims.
21
The Social Economy in Northern Ireland
Adapting the DFID approach, the social economy contributes
principally to

human capital (by the experience and knowledge gained by those
involved in social economy organisations)

social capital (by the establishment of the networks and
relationships of trust referred to by Robert Putnam), &

economic or financial capital (as a result of the economic activities
of social economy organisations).
However, different types of social economy organisations are likely to
contribute to the these different forms of capital in different ways, as
the following table illustrates.
Illustrative Degree of Contribution to Building Capital
Type of Social
Economy Organisation
Employee Owned
Businesses
Credit Unions
Housing Associations
Local Enterprise
Agencies
Co-operatives
Urban Regeneration
Rural Regeneration
Social Firms
Community Businesses
Intermediate Labour
Market Organisations
Social Investment
Funds
Trading Arms of
Charities
Human
Capital
High
Social
Capital
Economic Capital
Low
High
Low
Medium
Medium
High
Medium
Medium
High
High
High
High
Medium
Medium
Medium
Medium
High
High
High
Medium
High
High
Low
High
High
High
Medium
Low
Low
Low
Medium
High
Medium
High
Low
In this table an illustrative view has been taken of whether the
contribution which the different forms of social economy organisations
to human, economic and social capital is high, medium or low. Clearly,
the descriptions in the table are impressionistic and could well be
challenged, however, the point to be drawn from the table is that
different types of social economy organisations make different
contributions to the regional stock of capital.
In general terms, present government support and other schemes
really only consider the economic dimension of the work of social
economy organisations. Other aspects are sometimes acknowledged
but seldom given substantial weight in determining support priorities.
22
A Policy Review
As a result, a social firm, for example, may well be highly effective in
developing the individuals who work in it but will be assessed for
support as if it were a community-business against essentially
economic criteria. This creates confusion for the organisation, its
funders and those who work in and for the organisation.
An active debate about the sustainability of the social economy in
Northern Ireland needs to be clear about the different impacts which
different forms of social economy organisations can have. It will then
be possible for particular forms of social economy organisations to
argue their ground for continued support from mainstream funding on
the basis of contributions to economic development, New Targeting
Social Need, local needs, the equality agenda, human resource
development or the provision of social, community, cultural or
environmental services.
Only when there is clarity about the anticipated benefits or outcomes
of support to specific types of social economy organisations can the
sustainability of support to those organisations be addressed
realistically and the added value which social economy approaches can
bring to particular policy areas properly be valued. Unlike a private
business, the full value of a social economy organisations cannot be
captured fully by the market value of its outputs; nor can its
sustainability be properly assessed only by consideration of the
financial returns. The DFID Sustainable Livelihoods Approach provides a
wider perspective of the sustainability of the social economy in
Northern Ireland.
23