The leader of Social Enterprise UK (SEUK) has expressed concern over the way the “impact economy” has been defined in a recent think tank report.
In November, the government announced it would create the Office for the Impact Economy to partner with investors, philanthropists and businesses to “unlock billions of impact capital”.
The office, housed in the Cabinet Office, was hailed by sector organisations including the Charities Aid Foundation and New Philanthropy Capital (NPC), which had both lobbied for its creation as part of the Social Impact Investment Advisory Group.
NPC published a report earlier this year, defining the impact economy and estimating that it generates £428bn in the UK every year, around 15% of GDP, most of which (£323bn) is attributed to “self-regulated” impact-led businesses.
Charities generate nearly £50bn of the “regulated” impact economy, NPC’s report said, with £13bn coming from housing associations and £5bn from community interest companies (CICs).
This week, SEUK group chief executive Peter Holbrook wrote in an article that the £428bn headline sum was useful in attracting the attention of policymakers and markets but urged caution over how the impact economy had been defined in the report.
‘Ownership structures need to be central’
In his piece, Holbrook drew a distinction between organisations such as community benefit societies, part of the “regulated” impact economy under NPC’s definition, and those in the “self-regulated” part under private ownership.
He said NPC’s overall definition of the impact economy “risks privileging investor-compatible models over democratic ownership structures”.
“When profit and purpose collide, shareholder primacy still frames the decision,” he wrote.
“Many B Corps are excellent businesses, but structurally they remain oriented toward private gain, not public benefit.
“By contrast, worker co-operatives and employee-owned businesses are legally structured to share surplus among workers, not extract it to external shareholders.
“Community benefit societies anchor assets for public benefit. Community interest companies have asset locks preventing private extraction. These structures embody ‘public benefit over private gain’ by design, not aspiration.
“So why must democratic ownership models prove their impact credentials while investor-owned models are accepted on stated intent? This double standard matters because it shapes the entire policy architecture being built around the impact economy.”
Holbrook urged NPC to add further measures of the impact economy’s effectiveness in future reports besides economic activity.
He also called for a “democratic ownership window” to be created within the Office for the Impact Economy to ensure “ownership structures designed for public benefit” can access capital.
“If the impact economy is truly about prioritising public benefit over private gain, ownership structures need to be central,” he wrote.
“Not as an afterthought, but as a core dimension of impact itself. This means counting – and backing – the enterprises that are legally designed to serve public benefit, not just those that aspire to it.”
NPC plans update
A spokesperson for NPC clarified that it had taken into account the ownership structures and distribution of profits of impact-led businesses in determining whether they fit into the impact economy.
The think tank said it planned to “improve and update the content and clarity” of its report including to make clear that many co-operatives were included in its definition of the impact economy.
However, it said there was an area of discussion over the inclusion of co-operatives that mainly serves their “member’s private benefits”.
Civil Society has asked the Cabinet Office to comment.
