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Social enterprises critical to solving UK public sector productivity crisis

A new report reveals that staff-owned social enterprises, also called “public service mutuals”, hold the key to solving the UK public sector’s productivity crisis. The research, based on in-depth interviews with leading public sector mutuals, showed that these independent social enterprises which have ‘spun out’ of the public sector are also more financially sustainability and delivering a more engaged workforce.

Although the government has promised to spend more money on public services, without increases in productivity, this money will not be enough to unwind the impact of previous cuts and deliver better services. The findings in the report highlight that the government needs to go further in reforming public services and developing new models of public service delivery in order to maximise the impact of limited financial resources.

Social enterprise models not only ensure that the focus is on better services, not profits, but they are also more innovative and responsive to local needs. This leads to more engaged workforces and higher levels of productivity, ensuring that any money spent leads to better outcomes. The majority of social enterprises operating as mutuals work within the health and social care sector and their success is striking at a time when the majority of NHS trusts are running a deficit.

Headline findings from the report are:

  • 96% of public service mutuals generated a surplus, meaning that more money can be invested back into service delivery and prevention.

  • Social enterprises saw their productivity increase by 3.7% compared with just 0.3% across the wider public sector and over three times faster than the NHS’s target of 1% productivity growth.

  • 88% of social enterprises reported that their model resulted in more responsive services.

  • 69% of social enterprise respondents said that the quality of the services they provide had improved.

  • 68% of social enterprise respondents developed new products and services in the last year.

  • 61% of social enterprises reported having a more engaged and happier workforce since spinning out of the public sector.

Speaking about the need for reform, Peter Holbrook Chief Executive of Social Enterprise UK said:

“After years of austerity public services may be due to receive more funding but that won’t lead to better outcomes unless we use that funding wisely. What this report has shown is that public service reform needs to accompany any increase in spending so that we give people the best possible services.”

“Social enterprises are showing that independent organisations, which share the public sector’s ethos but that are independent and free to innovate, are the solution to balancing the books and delivering high quality services. This report shows that all sides of the political debate must not ignore the potential of social enterprise.”


The report ‘Public Service Mutuals: The State of the Sector’ can be downloaded here –

The report is the second of three annual reports commissioned by the Department for Digital, Culture, Media & Sport (DCMS) and conducted by Social Enterprise UK (SEUK). It provides up to date, comprehensive evidence on the experiences of the public service mutuals (mutuals) sector over the last 12 months. It also makes some recommendations as to how government could further support the sector to sustain and grow.

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