Investing in social services

The Social Services sector is an important and growing sector in Europe, currently opening its interest to loans and other forms of private financing to fulfil part of its financing needs. This represents a huge investment opportunity for private investors to enter into a new, unexplored market; which can be measured in billions of euro.

This is clearly an opportunity investors cannot miss to create a more inclusive society, yet also an entry point into an important new sector. The European Fund for Strategic Investments could serve to facilitate your access to this sector by reducing any possible initial risk.

Most social service providers rely primarily on funding by public authorities. Most contracts between service providers and public authorities would include a portion dedicated to investment needs and innovation. This means that there is a more reliable stream of funding to reimburse loans compared to if such a provider would be relying solely on other private income sources. It is also important to note that the funding of social services varies from country to country, or even from region to region.

In several EU countries, research shows that (certain subsectors of) the Social Services sector has better or largely better track records in success, reimbursement and loan loss rations than industry, commerce and agriculture. Although depending on the case or subsector, this can partially be explained by:

• the system of an obligatory authorisation (and thus certain quality conditions) for the exploitation of the entity,
• the subvention systems for those recognised entities,
• the presence of controlling systematics and supervision by national, regional or local authorities,
• the growing demand for certain services and the impact of the economic crisis on the nature of demand, such as mental health services, services for persons with disabilities or for elderly people
• other Income channels or a better diversification of income than the traditional commercial sectors; such as for charities, donations, legs, subventions, long term support of foundations, etc.,
• a regulatory or legal or even constitutional right for services built in to national, regional or local decrees or laws;
• the fact that a part of the stakeholders are public actors and less likely to disappear;
• a better reputation than traditional industry or commerce.

Social Services can be general defined as care and support “services for older people, people with disabilities and children, as well as services to reach excluded and disadvantaged groups”.

The Social Services sector is current the biggest job creating sector in Europe today:

- employing over 10 million people in Europe

- creating over 2 million new jobs since 2008.

Together with health services, social services represents 7% of the total economic output in the EU-28[1]. There are significant differences from country to country with countries like the United Kingdom, the Netherlands, Belgium, Germany and the Nordic countries spending over 10% of their GDP of Social and Health Services.

The sector will continue to grow in response to the ageing society, changing family patterns and developing social rights obligations. This will clearly lead to a growing demand for social service provision, as well as changes to the way in which this is done.

[1] European Commission – EU Employment and Social Situation – Quarterly Review – Supplement December 2014

What is a Social Service provider?

In most EU Member States, social service providers are primarily Small and Medium-sized Enterprises, employing under 500 staff. They also tend to be part of the Social Economy, although this is not always the case.

The social services sector is however extremely diverse with some social service providers employing up to 10,000 people and others only a few. All EU Member States have the three types of organisations (not-for-profit, public, private) active as service providers; although to varying extent. In Western and Southern Europe, most providers are not-for-profit organisations. In Nordic countries, the service is not only financed but also provided by the local or regional authority. In the UK and Ireland, most service providers are from the private sector.

Their financing primarily comes from public funding, due to the service of general/public interest they play for society. This is typically done through various forms of sub-contracts from local authorities. This however depends from country to country.

The growing demand for social services, as well as the necessity to shift towards community-based and empowering models of care, the Social Services sector has significant demand for investment. Being innovative in nature, many Social Service providers are looking at new ways to provide quality services and therefore at new ways of financing.

Service providers currently require loans for the following types of projects:

• Training and re-training of staff
• Innovative practices in service provision
• Social Housing
• Sheltered housing and independent & assisted living facilities
• Respite or day care centres
• Temporary care centres
• Digital care & support technologies
• Inclusive education adaptations
• Inclusive employment adaptations
• Transport (vehicles, etc)

Social Services play an essential role towards

• Social Cohesion because social service providers play an important role in enabling a society which works towards strengthening access to social rights for all, the well-being of all, fights exclusion and marginalisation, creates a sense of belonging, promotes trust and offers its members the opportunity of upward social mobility.
• Sustainable and inclusive economic growth because social cohesion is at the heart of enabling all people to be active in the community, in employment and in education. This is turn leads to heightened contribution to the economy and therefore towards growth.
• Job Creation in Europe because of the triple impact the social services have on jobs. Firstly, the sector already employs 10.106.800 people (EC, 2016)[1]in the sector and will continue to grow to guarantee the ability for all to access quality social services in the future; in particular in times of changing demographics. In between the second quarter of 2008 and second quarter of 2015, 1.477.000 new jobs were created in social services (EC, 2016) Secondly, social service providers contribute significantly to getting people excluded from the labour market- back into jobs; either directly or indirectly. Thirdly, the provision of quality social services allows higher labour market participation rates for some groups of people often excluded from it, in particularly women.

[1] European Semester Thematic Fiche – Health and Health Systems