Tim Cooper

People look to share schemes to save their communities

People look to share schemes to save their communities
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Community share schemes are becoming an important weapon in the long-standing fight to save our communities. Numbers of local pubs, shops and schools continue to decline as they have for many years. But the rapidly increasing use of community share schemes to save such assets is striking a new, positive note among the usual stream of negative stories about communities.

To give an indication, the number of community share scheme offerings in 2015 was 200, which is more than double the number of initial public offerings on the alternative investment market, albeit that the sums involved would usually be much smaller. At this time of decentralisation – when so many people are trying to wrest back control from large corporations and central governments - community shares look like a concept whose time is coming.

I have seen this situation play out in my own village of Pavenham, where The Cock pub has been faced with an increasingly uncertain future and even potential closure. It seemed a bleak prospect given that the school, shop, post office and second pub have long since shut.

Hundreds of other communities across the country face a similar predicament. The number of pubs in the UK has declined steadily since the war, and continues to decrease by around 21 a week due to a wide range of issues from cheap supermarket booze to healthier lifestyles.

However, the response of my fellow villagers in proposing to buy the pub through a community share scheme – aided by recent developments in its structure - has been impressive.

In 2009, community shares gained funding from the Department of Communities and Local Government and were brought within Cooperatives UK, which has helped formalise the structure and promoted best practice and training.

A key factor is that anyone can buy a share for between £1 and £100,000 (though schemes often set their own range) and each shareholder gets one vote, regardless of how much they put in. This prevents large investors from taking control and is one of the most important ways in which community shares differ from other ownership structures.

The downside is that this can sometimes put larger investors off, but it is broadly seen as a positive approach and the model is proving itself. Since 2009, over 100,000 people have invested more than £120 million to support in excess of 400 community businesses throughout the UK.

Research by the Plunkett Foundation found that the success rate of community shops – one of the most popular uses of such schemes - is 95 per cent, compared to 46 per cent for the average small business. One reason for this resilience is that when people own a community asset, they feel responsible, not just for managing it and making it work financially but also for using it as a customer, thus creating a virtuous circle. And even if a bid is not successful, rallying around a ‘saving’ crusade can invigorate a community and its assets. This has certainly been the case in my village, where the efforts to buy the pub are still ongoing.

As well as saving local pubs and shops, community share schemes have financed renewable energy schemes and new football clubs, transformed community facilities, and restored heritage buildings. One high-profile success story has been music venue The Bell in Bath, which raised over £700,000 to help maintain its community culture and has boosted turnover since. Another is Hastings Pier, which reopened this year after raising £600,000 from 3,000 investors.

Now for the glass-half-empty view. A community share is withdrawable share capital, so you can ask for your money back. But shares can never be worth more than you pay for them, they can only reduce in value if the venture that they create struggles financially. Whether you receive interest or not depends on the terms of the scheme. And it is often very hard work to raise enough money to buy the asset and make it a viable business. This is especially true given the tough trading conditions that tend to necessitate such projects.

But thousands of investors have already been persuaded that these risks are worth it and that, above all, they are assisting the creation of stronger, more independent and more vibrant communities.

We can all raise a glass to that.

Tim Cooper is a freelance financial journalist.