Funding CICs in the West Midlands: What Next for Funders and the Social Economy?
The Rise of CICs: A Shift in the Sector
Since their introduction in 2005, Community Interest Companies (CICs) have gained momentum as a flexible and accessible model for those seeking to combine social purpose with the ability to trade. In the West Midlands, the number of CICs has grown rapidly, particularly since the pandemic. Many were created in response to crisis situations, led by grassroots actors who formalised their work to continue supporting communities in need.
CICs are particularly prominent in sectors such as youth work, mental health, the creative industries, and employability. For founders – especially those from racially minoritised communities – the structure offers speed, control, and a sense of legitimacy when seeking funding. However, it also presents challenges, particularly around governance, regulation, and long-term sustainability.
Insights from Funders and VCSE Infrastructure Bodies
The event brought together several key funders and intermediaries:
School for Social Entrepreneurs provided an overview of the legal and regulatory framework for CICs, highlighting the critical importance of asset locks and the recent increase in the cap on profit distribution to directors from 25% to 50%.
Lloyds Bank Foundation shared how its approach has evolved to include CICs, particularly those led by Black and racially minoritised individuals. While initial engagement was slow, the Foundation has adapted its processes to better reflect the realities of CIC governance, provided the organisation’s core purpose remains rooted in community benefit.
Barrow Cadbury Trust emphasised that its funding decisions are based on what an organisation does, not its legal form. Nonetheless, a clear business model, charitable purpose, and strong governance are essential.
Solihull Metropolitan Borough Council raised concerns from a local authority perspective, particularly regarding safeguarding and the lack of external regulation for CICs working with vulnerable groups. With CICs now matching charities in number locally, Solihull has witnessed first-hand the speed with which new organisations can register and begin operating – both positively and negatively.
What the Room Said: Reflections from Small Group Discussions
Roundtable discussions surfaced several recurring themes:
Ease of entry vs. long-term sustainability: CICs are easy to set up, but many lack access to the advice, support and resources needed to grow or govern well.
Tailored support and guidance is missing: Too often, new organisations are left to guess which structure is most appropriate, and once operating, there is little bespoke support to help CICs develop.
Funding forms and frameworks don’t fit: Many funders still use application processes and monitoring systems designed for charities, creating unnecessary barriers for CICs. Core funding remains hard to access.
When does grant dependency become unsustainable?
Funders acknowledged a lack of clarity around how long CICs should receive grants before being expected to trade more or at point to start to reduce dependency on grant support. There was a call for more defined frameworks that account for varying stages of maturity and sector-specific challenges.
Towards a Social Economy Strategy for the West Midlands
The event also linked to broader regional ambitions. A representative from the West Midlands Combined Authority (WMCA) shared insights from the region’s Social Economy Growth Plan, which aims to double the size of the social economy over the next decade.
Key messages included:
CICs now make up 30–40% of the region’s 9,340 social economy organisations, highlighting their central role in inclusive economic growth.
The strategy aims to integrate the social economy into mainstream economic planning through Business Growth West Midlands, promoting recognition of public value and social return alongside financial metrics.
Investment gaps persist: Compared to other UK regions, the West Midlands receives less social investment, grant finance, and repayable finance from sources such as Big Issue Invest and Social Investment Business. This remains a significant barrier to growth.
Infrastructure for growth: Skills development, access to markets, tailored business support, and appropriate investment mechanisms are critical to achieving sustainable growth. Funders have an important role to play within this ecosystem.
What’s Next?
The event left no doubt that CICs are here to stay – and that funders must evolve to meet them where they are. As the West Midlands seeks to build a more inclusive, socially-driven economy, grant-makers, local authorities, and intermediaries will need to consider how their strategies and systems can support both the diversity and the resilience of CICs.
The session made clear that the legal structure should not be a barrier – but neither should it be an afterthought. With intentional support, tailored funding mechanisms, and recognition of the structural inequalities that drive many founders towards the CIC model, the region has an opportunity to unlock the full potential of its social economy.
