COVID-19 caused a significant slow-down for the growing community of circular businesses in London, putting at risk the capital’s ability and speed to become a low-carbon city and leader in the circular economy.
ReLondon secured grants from the Mayor of London’s Green New Deal fund to support 21 circular businesses with up to £10,000 each. This money sought to help businesses survive COVID-19 while supporting a green recovery.
Six months on from the scheme, we have seen a 23% overall growth in the circular businesses supported, with 40 new jobs created. This is contributing to a resilient economy in London that increases rates of recycling, reuse, repair, sharing and renting and reduces waste and consumption-based emissions.
What was the challenge?
Through our work supporting small and medium-sized businesses (SMEs) in London to embrace the circular economy, ReLondon’s business transformation team has seen first-hand the negative impacts of COVID-19, which have forced a significant slow-down for London’s circular businesses.
COVID19 and associated health measures caused disruptions to business in many ways. For example, global supply chain disturbances due to COVID restrictions made it difficult or expensive to get the materials needed to make products. Manufacturers or service providers struggled to operate because staff were unavailable or on furlough, making it hard or impossible to fulfil orders on time. And reaching customers became difficult during lockdown, particularly for retail businesses reliant on footfall.
For a small business or start-up, continued disruptions like these threaten their existence. Many have limited cashflow, so any pause in income makes it impossible to pay employees or invest in improvements to their products or services. To add to the pressures, a turbulent economy makes private investors more hesitant to invest, meaning that other sources of capital dry up.
Businesses that operate in the circular economy are still new, and we feared that the pandemic would make insolvent an already fragile community of businesses in London. This would affect job security, and the potential for job creation, all while impacting London’s ability to reduce waste and increase rates of reuse, recycling, repair, sharing and renting.
Dave Henry, COO & Co-Founder of Beagle Button
The COVID-19 pandemic and the subsequent economic shock had a major impact on levels of investment in early stage businesses in the UK… and therefore delayed our product launch.
What did we do?
In November 2020, the Mayor of London launched London’s Green New Deal fund. The purpose was to help green industries that are essential for the capital to meet its climate targets recover from the economic and social impacts of COVID-19.
ReLondon won funding to disburse grants to circular economy businesses in London, with the aim of preserving and sustaining circular innovation in the city. We were able to offer a total of £200k to 21 circular businesses in the form of emergency grants worth up to £10,000 each. These grants were used to cover operational costs while waiting for revenue to pick up again, with a large proportion (65%) of funds being used on salaries, and another 25% covering fixed costs (such as rent & bills) and equipment/materials.
Through this funding we were keen to support businesses and communities disproportionally affected by the pandemic, notably those led by individuals from Black, Asian or Minority Ethnic groups, female-led businesses, and businesses dependent upon the hospitality and leisure sectors: 45% of businesses selected for this support were led by individuals from Black, Asian, or Minority Ethnic communities; 70% of businesses were led by women (or equal share ownership); and 80% of businesses were dependent on the hospitality and retail sectors.
What were the outcomes?
We have been excited to see the grants stabilise, strengthen, and grow the circular economy in London. They have helped to create and safeguard jobs, while delivering solutions that tackle the climate emergency in London.
The grants have played an important role in the continued operation of businesses despite disruptions. We saw 64 jobs successfully safeguarded : at the point of application, 100% businesses receiving grants identified jobs at risk, but six months on only 22% still do. And as time goes on, we expect the actions taken thanks to this funding will further contribute to the health and security of businesses.
Businesses haven’t just survived the turbulence of COVID19 – many have also come through having successfully grown, thanks to support from the grants. Since March 2021, the grants contributed to a 23% increase in the total number of jobs across the portfolio, with SMEs typically growing by 4% each. This is because the grants have provided the lifeline for businesses to embrace opportunities– whether that be new demand for subscription services or a growing awareness and appetite from citizens for products and services with a positive impact. 5 businesses were even able to launch new products to the market, and 3 others raised additional private investment off the back of grant-funded activities.
Other positive outcomes of the scheme have been the additional social benefits that circular solutions have engendered in the community – ranging from fostering a sense of community or helping grow awareness of the circular economy through education and engagement (see examples by reading our case studies of Goldfinger and Lendobox).
What was learned?
This support has highlighted the value of grant funding in building business resilience in times of uncertainty. A key aspect that made these grants helpful was the flexibility with which they could be deployed by the businesses – specifically, that they could be used to fund core costs. Over 80% of funds were spent on salaries and fixed costs. This differs from other grant schemes that might constrain the use of funds to specific project spend, limiting the businesses’ ability to flexibly deploy and adapt spending on core operations or R&D initiatives as economic conditions change.
In addition, the fact that circular businesses were able to grow despite the challenges of COVID-19, and create employment opportunities in the process, reinforces our continued believe in the potential for a circular economy to drive strong recovery for the capital.
Shirley Rodrigues, Deputy Mayor for Environment and Energy
Supporting small businesses to deliver innovative circular products and services and helping them develop circular business models is an important part of the Mayor’s ambitions to make London net zero carbon by 2030. I am delighted that these innovative SMEs have benefitted from the Mayor’s Green New Deal fund, and I am positive it will make a significant impact on this sector in London.
ReLondon will follow up with grant recipients in 9 months’ time to understand the longer-term benefits of this grant scheme; this will help inform the design and deployment of future initiatives. We are building on the learnings of this initiative to develop new funding opportunities for SMEs interested in the circular economy, for example working with Islington Council to offer grants to local businesses in January 2022.
Building on the need we’ve identified for flexible funding, ReLondon is also actively exploring innovative funding mechanisms for circular SMEs through a Circular Economy Outcomes Fund for London. We want to enable circular businesses to access the right type of financing to further stabilise and grow their business models in the capital.
If you would like to explore working with ReLondon to deploy finance towards circular businesses, please get in touch with the business transformation team at email@example.com