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Do plural ownership policies matter for local economies?

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plural ownership blog

Last week, we published our new evidence briefing on assessing local economic impacts of plural and local ownership policies. This complements our existing evidence reviews on business advice and access to finance programmes. Our new briefing provides guidance for local policymakers on how to think through some of the local economic impacts and available policy options for supporting plurally- and locally-owned businesses. The briefing is accompanied by a rapid evidence review.

Why is it important to consider the effects of plural ownership in local economies?

During the last few years both the Labour Party and the Conservative Party have expressed some support for plural ownership (in particular cooperatives and social enterprises). Last year, the UK government launched the Social Enterprise Boost Fund to support social enterprise activity (i.e. businesses which primarily support social or environmental missions) in six disadvantaged areas of England (County Durham, Sandwell, South Tyneside, Sunderland, Thanet, and Wolverhampton). Through support to local authorities and the local voluntary and community sector, capacity building (e.g. business support, training, networking, one-to-one support, and peer learning) and grants it aims to support the creation of new social enterprises and help them grow.

One reason for this political support is the hope that the profits of plurally-owned businesses are more likely to go to local residents and have a positive effect in the community – something which may be particularly important in deprived areas. Plurally-owned businesses may also behave differently to other businesses (e.g. they may be more likely to build local supply chains or offer employment and training opportunities to local residents or disadvantaged groups).

Plurally- owned businesses could be supported through common or specialist programmes. Thinking through the effects of plural ownership businesses in local economies can help policymakers make better decisions when prioritising policies, targeting specific types of organisations, and defining outcomes.

What does the evidence on plural ownership suggest?

Sadly, there is not much evidence on the effects of plural-ownership (we only found six impact evaluations that met our evidence standards of SMS 2 or above on the Maryland Scale). This can make it hard for policymakers looking at whether and how to support plurally-owned businesses.

There is some, albeit limited, evidence that plurally-owned businesses do behave differently to other businesses. For example, employment within plurally-owned businesses might be more stable in response to economic shocks (i.e. they might be less likely to reduce headcount during a recession). Plurally-owned businesses may also behave differently because they tend to be small and in non-tradeable sectors. This means that the overall effects of support are likely to be small, especially if business serve local markets so the risk of displacement is high. Small businesses also tend to be less productive that larger businesses.

Because there is so little robust evidence, it is unclear if policies focused on supporting plurally-owned businesses have different or additional effects relative to traditional programmes offering business advice and access to finance.

As is often the case, more evidence on all aspects of plural ownership is needed, including on whether outcomes (including employment, productivity, and wages) are different in plurally-owned businesses, whether the proportion of plural ownership affect local economic outcomes, and on what interventions are most effective in supporting plural ownership.

Do policies to support plurally-owned businesses matter?

While our evidence review focused on economic outcomes, we recognise that plurally-owned businesses often have other benefits (e.g. community cohesion, more focus on social or environmental outcomes) that may matter to local decisionmakers.

In terms of the local economy, it is important for policymakers to think through the likely impact – how the benefits are distributed (e.g. how co-operative profits are distributed or reinvested for the benefit of members), who profits from them (e.g. whether they live or spend in the local area) and how the money is spent (e.g. buying local goods or donating to community projects).

Our briefing and rapid evidence review highlight other elements to consider around productivity, employment, and wages. The full documents are available here.