The government\’s controversial welfare to work initiative has suffered another blow after it emerged that a social enterprise firm hired to get the long-term jobless into employment has gone into liquidation, claiming banks refused to lend it money to stay afloat because they considered the work programme to be too financially risky.
Eco Actif, a community interest company based in Sutton, Surrey, closed suddenly on Friday morning. It provided employment support for around 500 people in the south-east of London, operating as a subcontractor in a regional supply chain headed by the welfare to work company A4e.
Its chief executive, Amanda Palmer-Roye, said Eco-Actif had performed well in getting people into work and had a £1m order book but had been unable to raise the capital to sustain itself under the government\’s payment by results system, under which firms must wait 18 months between delivery and payment.
You need capital to be able to run an organisation. Doesn\’t matter whether you are a for profit or a not for profit. You still need capital, working capital at the very least, to cover the gap between expenditure and income.
And the problem with a not for profit is that, well, how do you pay for the capital? With a \”social enterprise\” (I think this means no nasty outside shareholders, right?) where\’s it going to come from?
This is a problem that all mutuals, worker owned companies etc face. You need capital. Where\’s it coming from?