Ed Mayo, secretary general of Co-operatives UK, has written to the government warning that some of the country’s social enterprises are “in serious trouble” because they will miss out on grant support in the Covid-19 rescue package.
A week ago, chancellor Rishi Sunak announced business and support measures worth more than £400bn, followed days a later by measures to support the self-employed.
There are still doubts over how comprehensive the support for freelancers will be, and now Mr Mayo, who heads the representative body for the UK’s co-op sector, says some players in the social economy might also suffer.
Writing to Baroness Barran, a minister in the Department for Digital, Culture, Media and Sport, Mr Mayo said there are still issues for the government to address.
“Early evidence suggests that at least 30% of co-operative social enterprises are currently experiencing a significant loss of income and a cashflow crisis,” he warned. “This number will rise.”
He said community businesses operate on a complex set of models run on multiple income streams, which will cause problems for lenders administrating The Coronavirus Business Interruption Loan Scheme (CBLIS), which offers loans of up to £5m in value, with the first 12 months interest free. Lenders often have poor understanding of co-ops and community benefit societies, he says. “We are concerned that this will obstruct co-operatives’ access to support they are eligible for.
“Furthermore, there is growing concern that the products and terms being offered through CBILS are unsuitable for most small/micro enterprises.”
Mr Mayo added that non-rate paying social enterprises “are in serious trouble”. Because they do not trade from rateable premises they will not receive grant support to get through the next few weeks. Co-operatives UK has heard from co-ops in the cultural, educational, food, sports and leisure industries that are facing losses of more than 80% of their business.
And he is concerned that co-op and mutuals in the wellbeing and care sectors are “torn between the financial necessity to furlough key staff to secure medium term survival, and the human necessity to increase their activities now are part of the community response to Covid-19.
“They are experiencing immediate operational and financial crises, yet have not yet been targeted for emergency financial support.”
Mr Mayo thanked “everyone in government” for “working flat out in extremely difficult circumstances” but said there is an urgent need for a package to support charities, community businesses and co-ops “to aid recovery in the months and years ahead”.