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Public service spin-out sector thriving but faces big future challenges

Against the backdrop of an ongoing age of austerity, the UK's spin-out sector shows an increase in employment, turnover and service-user participation, new report says.

Published by the Transition Institute and University of Northampton in conjunction with policy and practice hub Collaborate, the report Public service spin-outs 2014: Needs and wants finds the spin-out sector in relatively rude health, reporting sustainable growth in turnover, profits and staffing levels, as well as increased levels of service provision.

However, the report also highlights a number of barriers that the sector needs to overcome if it is to achieve sustainable growth, with the research identifying three core ‘needs and wants’ and a number of policy solutions that the sector wants to see adopted.

Report’s key findings

Whilst a majority of spin-outs emerged as a response to public sector cuts, the research found that on average spin-outs reported:

  • an increase in full time staffing levels of 44%
  • an increase in turnover of £5.8 million since spinning-out (over an average of five years ago)
  • an increase in service-user participation at board level from 10% to 40%

The research also identified ongoing barriers faced by spin-outs when trying to secure investment and compete for contracts. These included:

  • Commissioning frameworks that do not value the opportunities provided by spin-outs
  • A lack of access to finance and investment opportunities
  • Growth inhibited by weak or inconsistent political support

Launched at a conference in London today, 7 May – exactly a year to the date of the next General Election – the report also calls for more support from the political parties for spin-outs and for greater innovation within public service delivery.

With an expert panel including Lord Victor Adebowale, Chief Executive of Turning Point, Matthew Taylor, Chief Executive of the Royal Society of Arts and Professor Julian Le Grand of the London School of Economics and Chair of the Mutuals Taskforce, the conference heard from the report’s author Dr Richard Hazenberg and practitioners from leading spin-out social enterprises, including City Health Care Partnership, Catalyst Mutual Enterprise CIC and Aspire Wellbeing.

Lord Adebowale, Chair of Collaborate, said:

“This research comes at a critical time for services to the public, and provides the opportunity to take stock, learn and support a positive vision for transitions to services fit to meet growing public needs."

Report author, Dr Hazenberg, University of Northampton, said:

“It demonstrates the strength and continuing growth of the spin-out sector in the UK, which is resulting in increasing turnover, profits and most importantly job creation. The demand for public services in local areas remains strong and also shows that sustainable public service delivery through mutual and social enterprise models is possible."

For further details on the work of Collaborate and the Transition Institute, please contact Collaborate Director Henry Kippin.

Notes to editors:

About ‘spin-outs’

A ‘spin-out’ is an organization that has transitioned  out of a public sector body to become an independent public service provider. Spin-outs tend to prioritise the maximisation of social value within their services and usually take the structure of a co-operative, mutual or social enterprise, such as those supported through the Government’s Mutuals Support Programme.

About this research

The Transition Institute surveyed 66 spin-out organisations (about a third of the total spin-out sector), and provides the most comprehensive picture to date of the extent of the spin-out sector.

About Collaborate

Policy experts Collaborate CIC promote effective and sustainable collaboration between the public, business and social sectors in order to secure improvements in public service outcomes, build sustainable communities and foster a strong civil society.

About the Transition Institute

The Transition Institute supports the emergence of public sector staff setting up and then spinning out as independent organisations to deliver innovative and effective public services alongside social value.

About the University of Northampton

The University of Northampton aims to be Britain’s leading university for social enterprise by 2015. It was awarded the international accolade of ‘Changemaker Campus’ in 2013, the first UK and EU university to achieve this designation.

The Public Service Spin-Outs: Needs and Wants report is available to download here

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