Community business: Power to Change

Businesses are at the heart of our communities. From the shops where we buy food to survive, to the pubs and cafes where we meet and thrive, communities across the UK are centred on their local businesses. But some of these businesses are in decline, with pubs struggling to remain profitable and high street shops closing down as buying habits change.

Communities, and especially their most vulnerable members, suffer as a result of these trends. The loss of local services can mean expensive, time-consuming travel, often in areas with limited public transport options. And as communities lose their connecting features, they lose their sense of cohesion – the very essence of what makes them communities – along with the wellbeing benefits of being closely knit and empowered.

That’s where community businesses come in. Unlike private enterprise, which stays or goes depending on how profitable an area is, community businesses are run by and for the benefit of local people. They work to make life better for the communities they serve, and reinvest income into their local areas. They provide shops and meeting places, and so much more besides, including community housing, energy stations, libraries and sports facilities.

Power to Change is a funding and research body dedicated to supporting community business in England. It was established in 2015 through a £149 million endowment from The National Lottery Community Fund, and has since supported over 1,200 unique community businesses with support from National Lottery funding. This has contributed to a community business sector that now owns assets worth £870 million and comprises 11,300 businesses across England, employing 37,800 people.

This case study explores the difference Power to Change has made by addressing local needs, providing jobs and boosting local economies. We look at the impact this has had on community business as a whole, in specific sectors like community pubs and housing, and in specific communities through place-based funding.

Power to Change was launched to provide funding for community businesses. “We started off in the vein of a traditional foundation with a range of grant programmes,” says Stephen Miller, Director of Impact and Learning. And, true to that goal, the organisation invested £86 million into community businesses between 2015 and 2020, with two-thirds of the funding going to the 30% most deprived areas in England.

To frame the difference Power to Change has made around funding alone, however, wouldn’t tell the full story. The organisation takes a blended approach, combining grant funding with other forms of support. This includes work to develop the community business market and build an ecosystem of support for community businesses.

“Part of it is making the case for community business to other funders, local authorities and central government, and part of it is skills and capacity building support in the form of training and peer mentoring,” Stephen explains. “While grant programmes remain a key part of our work, we are more than a funder.”

A key aspect of this is learning from earlier and ongoing work, using insights to share best practice with the sector and inform future funding. “We’ve always tried to focus on evidence and data,” says Tim Davies-Pugh, Director of Strategy and Programmes. “So not just throwing money at community businesses and hoping it sticks, but really building an understanding of why some things work and some things don’t.”

The Trade Up Programme, which Power to Change offers to help early-stage community businesses to grow their trading income, is a good example of this approach. “We ran the programme with a control group and tested different approaches between the intervention group and the control group – whether there was an increase in trading or not,” explains Stephen.

“We gave one group standard support, and the other group a matched grant on top of support – we told them ‘we’ll give you £10,000, but only if you raise £10,000 yourselves too’. We found that the latter approach incentivised community businesses and contributed to a greater increase in trading income. So we really learned that incentivised financial support contributes to greater financial gain than just support alone.”

This learning-led approach has defined Power to Change’s journey, right from the organisation’s first funding programme. “We started out with open grant programmes and broad eligibility, because we were trying to understand and establish the community business sector,” explains Ailbhe McNabola, Director of Policy and Communications.

“And then, over the first few years, our funding became more specific, and it became more focused. We developed targeted programmes in sectors where we thought there was a growth opportunity or where funding could really accelerate what was happening.”

As an early example of this approach in action, Power to Change’s first grants programme identified the sector’s need for capital support to buy or improve physical assets. “We found that community businesses typically look to take over buildings,” says Stephen. “Those buildings aren’t always in the best state of repair, and – because the need is greatest in areas of deprivation – they tend to be located in communities where there isn’t much disposable income moving around either.”

This was reflected in the analysis of the programme, which found that over 80% of applications included some planned capital spend, and the most common purpose for funding (featuring in 66% of applications) was the purchase, expansion, development or refurbishment of premises or land.

“We started to learn that, for communities on the ground, ‘community business’ often meant ‘community asset’,” adds Ailbhe. “And it wasn’t just applications either – the ongoing data showed us that those businesses with physical assets were more financially sustainable and survived shocks better. We always knew those assets would be an aspect of what we funded, but it became clear over the first couple of years that they’re absolutely key.”

We’ve always tried to focus on evidence and data...really building an understanding of why some things work and some things don’t

Tim Davies-Pugh, Director of Strategy and Programmes, Power to Change

That approach has seen the organisation’s funding support community centres, shops, cafes and a range of other businesses. Perhaps the most visible example of Power to Change’s capital funding, though, is the More Than a Pub programme, which ran from 2014 to 2021.

“There was a political interest in pubs at the time,” explains Ailbhe. “Especially in rural locations, as a way to stop communities from becoming entirely hollowed out – the pub was often the last thing left.” Power to Change saw the opportunity to build on this interest, and partnered with the Plunkett Foundation and what was then the Ministry of Housing, Communities and Local Government.

The programme supported communities to identify local pubs at risk of closure, and to buy and run them as community businesses. “Pubs are a good example of the difference we’ve made. For years, they were stumbling along with roughly the same number of community businesses, but then, with an injection of money and support, they’ve grown rapidly,” says Stephen.

In 2014, the Plunkett Foundation estimated there were 33 community-owned pubs in England; by 2019 this had risen to 95, of which over half were supported through More Than a Pub. Since then, further growth has meant the number has more than tripled in Power to Change’s lifetime.

“That’s largely because of our involvement,” Stephen explains. “And it’s not just more pubs – we’ve supported all the community engagement, job creation, volunteering opportunities, and social infrastructure renewal that goes with them.

“Linked to this is the difference we’ve been able to make for the businesses involved, in terms of developing professional skills, financial management, project management – support they wouldn’t have received elsewhere. I guess the counterfactual is that, in an age of austerity, some of those things simply wouldn’t have happened without Power to Change.”

It’s easy, in hindsight, to see this as an obvious move, given recent awareness of the benefits of community ownership. At the time, however, funding old buildings, often in a poor state of repair, was not a conventional approach.

“Funders had largely stopped funding community buildings, because they just became white elephants,” says Tim. “Power to Change stepping into that space was quite a radical move, but the key was that the assets in question – pubs – had an inherent sustainability and income generation potential.

“And it was a different approach because the pubs we support haven’t gone into community ownership just to keep on selling beer; they’ve become real community assets, way beyond the initial concept.”

A 2021 report from the Plunkett Foundation supports this, finding that: 68% of community pubs provide community meeting spaces, 33% raise funds for local charities or good causes, 35% are a base for physical activities such as walking or cycling, 58% source local food, 21% have a community garden, and 23% run affordable meal clubs.

The report also found that community pubs across the UK employed an average of 13 staff each; a significant impact given that many are in small rural communities. “Community businesses are usually small or medium-sized, so they’re not large-scale employers,” says Stephen.

“But the jobs they do create tend to be very good quality – well paid, offering good conditions, and typically aimed at engaging people who are further away from the mainstream jobs market.” The Gardeners’ Rest in Sheffield, for example, offers employment and training opportunities for people with mental health issues and learning disabilities.

The overall impact of funding community pubs is a revitalisation of community life around them. Power to Change’s data shows that the majority of community pub customers come from less than 10 miles away, and many have become true community hubs. The Chequer Inn in Kent runs ‘meet-up Monday’ events, bringing together isolated people who live alone, newcomers to the area, and locals who want to meet new people, helping the community to expand and grow closer together.

During COVID-19 lockdown restrictions, while conventional pubs simply closed, many community pubs offered innovative ways to support their local areas and stay relevant. The Globe in Newcastle, for example, used Power to Change funding to relaunch as a community music venue, supporting local artists. The pub live-streamed over 100 gigs, raising more than £40,000 for performers whose incomes were hit. In recognition, it was named Co-operatives UK’s Small Community Co-op of the Year 2021.

Community businesses are not large-scale employers, but the jobs they do create tend to be well paid, offering good conditions, and aimed at people further away from the mainstream jobs market

Stephen Miller, Director of Impact and Learning, Power to Change

Building on the learning from funding customer-facing community businesses like pubs, Power to Change has also supported more complex projects, including community housing. “We took a market development approach with community housing,” says Ailbhe. “We undertook a lot of consultation to try and understand the barriers and where we could make a difference.”

This insight-led process helped to clarify Power to Change’s role in the sector. “We worked out that there was a point in the life cycle of housing projects where things kept failing, because there wasn’t support and funding available to keep momentum going,” Ailbhe explains.

“Projects were finding it fairly easy to get very small amounts of funding, but there was a real gap – around the £50,000 mark – between that and when the business case was well enough established to get planning permission and further funding.”

To address this, Power to Change, in partnership with specialist sector organisations, launched Homes in Community Hands – an enabler programme to help projects get past the critical phase between ideation and practical action. “The programme taught us the importance of patience,” says Tim.

“Housing projects take time – getting the land is one hurdle, then getting planning permission is another, and then actually going ahead with construction is another. Funders are reluctant to support projects until planning permission is in place, but you can’t get planning permission until you get the land. So there wasn’t just a gap in the funding, there was also a gap in the process.”

In line with this observation, an interim evaluation of the programme noted that housing projects typically take seven years from pre-planning to completion, plus extra time for land acquisition and negotiation. As a result, the paper notes: “we can expect grantee projects to still be developing homes to 2028, with the impacts on residents arising after this point.”

Even though they take a long time, these projects are important. Community housing benefits – and is needed by – those in the most vulnerable positions. Two-thirds of Homes in Community Hands grant holders work in the 20% most deprived parts of the country, and the interim evaluation noted that the majority of the planned homes under the programme would be offered at an affordable rate (in most cases 80% of market price or less).

Power to Change’s role as an enabler in the early and middle stages of projects is key to making this a reality, even if it means waiting longer for shareable impact statistics than most funders are used to. This can perhaps best be seen in a practical example from the programme.

Southmead Development Trust is working to convert an old school site in Bristol into a housing project, as much of the current local housing stock is three-bedroom houses which are either too big for older residents looking to downsize, or too expensive for younger residents looking to get on the property ladder.

The project will mainly comprise one-bed and two-bed apartments – 120 homes in total, 85% of which will be affordable. Beginning in 2015, the trust worked with the local community to ensure the project’s plans met their requirements, including shared community spaces between the new homes. This requirement, however, made it much more difficult to get planning permission due to increasing the scale and complexity of the project. In many cases, this would have resulted in the project either being abandoned or reduced in ambition.

However, this is the type of difficulty Homes in Community Hands helps developers to overcome. Funding from Power to Change and Homes England gave the trust the time and resources it needed to get specialist advice by convening a number of partner organisations, ultimately securing planning permission from Bristol City Council in 2020. The project was also ‘highly commended’ at the National Planning Awards in the same year, in the community-led placemaking category.

For communities on the ground, ‘community business’ often means ‘community asset’ – our data shows that businesses with physical assets are more financially sustainable and survive shocks better

Ailbhe McNabola, Director of Policy and Communications, Power to Change

Funding thematic programmes for such areas as community pubs and community housing is an effective way for Power to Change to spur social action in specific sectors. To spark a mainstream movement, however, it’s important to also approach community business funding in the way communities and individuals really experience it – as part of a place.

“We’re currently working on a place-based programme,” says Ailbhe. “Looking at specific places, and trying to grow the sector in those places while figuring out what we can learn from it. One approach to that is at a neighbourhood level, developing community organisations from the bottom up and helping them grow. The other is more strategic, building the social economy at city-region level.”

This latter approach has seen Power to Change set up Kindred, a social investment body that supports and provides a community for socially trading organisations (of which community businesses are one type) in Liverpool. From an initial 20 members, Kindred has grown to include over 150 organisations from across all six boroughs of the Liverpool City Region, with Power to Change and the local combined authority investing a joint £6.5 million over seven years.

The group facilitates peer-to-peer support so that members can learn from and help one another, and invests directly in businesses to help them grow. Funding for businesses is interest-free, and can be partially repaid through social action rather than money. Member organisations make the decisions about what to invest in, with Power to Change serving an incubator role.

“Through this work, we’ve connected the sector up quite well,” says Ailbhe. “Community businesses in Liverpool now know each other very well and have a much more coherent combined voice than they had previously. This has led to good relationships between businesses and decision makers too, so the six local authorities now know the sector quite well, and work much more closely with businesses.”

At the time of Kindred’s first evaluation being published, over 70% of organisations in the network were led by women, while over 20% were Black-led. Since lockdown, according to Kindred, 10% of all firms set up are community interest companies. This is all evidence to suggest that Power to Change’s support for this way of working has the potential to spark real change, through demonstrating the value of an inclusive, socially conscious economy.

“The social enterprises we support through our place-based approach create high-quality jobs with good conditions and pay,” says Ailbhe. “And they create jobs in communities where perhaps nobody else is creating them.” Cafe Laziz in St Helens, for example, was set up in 2019 by an English language teacher who recognised the difficulty her students faced in finding work once granted refugee status.

The business uses hospitality and cooking training to build refugees’ confidence, helping them to improve their language skills, build a community and boost their future employability. Kindred’s conversation sessions and workshops helped founder Debra Hill to develop her vision quickly, with the business serving 620 customers in its first 22 weeks. The cafe now also runs craft sessions, community networking events, talks and donation drives, serving as a community hub that brings new and long-term residents together.

The social enterprises we support through our place-based approach create high-quality jobs with good conditions and pay, in communities where perhaps nobody else is creating them

Ailbhe McNabola

A key feature of Power to Change’s approach in Liverpool is that it harnesses the strengths and knowledge of existing community businesses to support new ones. In line with the organisation’s learning-led philosophy, this follows feedback from the Community Business Panel – a group of experienced community business leaders working in deprived areas that Power to Change commissioned to advise on strategy and funding.

“When the panel helped us reflect by looking back on our first five years, they highlighted that a lot of our focus was geared towards new organisations,” says Tim. “They said ‘look, we also need support’, and really reminded us not to think about just increasing the size of the community business market, but also to help existing community businesses survive and grow.”

As well as impacting the place-based approach that led to funding Kindred, this observation has influenced Power to Change’s future plans. “Looking ahead, we’re now trying to shift the power dynamic so that applicants and grant holders – existing community businesses – have much more control over how they use their funding and what support they get,” explains Tim.

Powering Up, one of the organisation’s current grant programmes, is an example of this. “Powering Up will see us offer capacity support on particular themes where we’re looking to shift power,” says Tim. The themes in question will be digital growth, environmental sustainability, financial resilience, and diversity, equity and inclusion.

The programme will include business skills advice (e.g. HR guidance, financial planning and crisis management) and professional coaching (e.g. leadership support, peer mentoring and wellbeing referrals). This will help existing community businesses to grow and become leaders in the sector, moving on to serve as exemplars to others.

“We previously acted like a lot of traditional funders, in that we had applications, assessment and grant management,” says Tim. “This new way of working will see us become much more responsive to the needs and adaptability of community businesses, based on the lessons we’ve learned.”

Alongside work on innovative funding models such as community shares and crowdfunding, and leadership training for new businesses in the north of England, this demonstrates Power to Change’s long-term approach. Rather than simply funding community businesses, the organisation is building a sustainable community business sector, in which grant holders help one another, shape new programmes, and determine the support they need.

This puts communities first, rejecting the traditional dynamic of top-down guidance. In a society emerging from the worst of the COVID-19 pandemic, this will surely help the areas and individuals hit hardest to recover on their own terms.

“We’re also working on young people as a cross-cutting theme,” says Ailbhe. This is important as community businesses are often reliant on volunteers, and younger age groups tend to volunteer in much lower numbers.

“In a sense, it’s succession planning for the sector – we need to help organisations stay relevant in their communities by getting young people engaged. We need to reach entrepreneurial young people who want to make a difference.”

Thank you to Ailbhe McNabola, Stephen Miller and Tim Davies-Pugh for speaking to Temoor Iqbal on 8 February 2022.

For more information on the impact and difference our funding makes, please read our other impact features. The feature on the School for Social Entrepreneurs looks at businesses with a social purpose, while Every One Every Day explores how a project in Barking and Dagenham has supported residents to improve their community.

Our report From neighbours to neighbourhood: Learning on how to boost pride in place explores community businesses as one of the ways to increase local pride and connection.