Health service can be the “big opportunity” for social investment

Social investment has appeared poised for rapid expansion for some time now, but if it is to fully realise sustained long term growth, it must find a way of tapping into the vast reserves of capital sitting with institutional investors.

That is easier said than done as our report last year into investor perspectives on social enterprise financing illustrated (written by Katie Hill). It revealed that they would be more likely to become involved with social investment if it could offer larger sized opportunities. However, developments in the health sector suggest it might be about to provide the kind of opportunity they are looking for.

This Government seems intent on seeing more services taken on by social, mutual, cooperative and community-owned enterprises. As well as existing organisations it is encouraging that front line staff are beginning to form themselves into new social enterprises. Prime examples include Central Surrey Health, one of the first and most celebrated of the spinouts, and City Health Care Partnership, based in Hull, which became an employee-owned mutual in 2010. We’re also seeing new social businesses supplying innovative services, such as Patients Know Best which provides an advanced software system which gives patients control of their own data.

These organisations, and others like them, offer an innovative way to answer the seemingly unsolvable conundrum of retaining key services while delivering the cost savings the Government feels are necessary. However, they face a daunting challenge in competing in the corporate environment and proving their worth to commissioners. Last year Central Surrey Health failed in its first competitive tender – outbid by the much better funded Assure Medical medical. While it was just one example, it illustrates the anxiety we see among many new spin outs as to the long term future.

If they are to thrive they will need two things: capital and also new skills. The challenge of pioneering a new social enterprise is a world removed from working with the NHS. At ClearlySo, therefore, we’re helping with seminars outlining some of the main obstacles – such as VAT and accounting considerations or how they do make that leap beyond that initial contract and compete with the private sector.

We see this area as being crucial in the social investment sphere. Not only is there undeniable need both for the capital and expertise individual investors can offer, there is also a real potential for growth with the Government eager to encourage those organisations which offer social value – rather than just the best price – to take on these services. If we can support the growth of these new spinouts this really could be the big opportunity potential social investors have been looking for.

First Published in Third Sector in February 2012.

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