Has the CIC bubble burst?

There are now more than 37,000 Community Interest Companies registered in the UK. That's a remarkable number. When the CIC model was introduced in 2005, it gave something genuinely useful to organisations that wanted to trade with purpose, a legal structure that said, clearly and formally, this business exists to benefit the community, not just its shareholders. For many of the organisations I work with, it has been exactly the right vehicle. I've seen it used brilliantly.

But something has been shifting.

Over the past few years, I've noticed a growing pattern, and the data is now beginning to back it up. A proportion of people registering CICs are doing so not because they're genuinely committed to community benefit, but because the CIC label opens doors. Grant funding doors, in particular. The model is being used as a wrapper, a way to look like a social enterprise without actually being one.

Why the CIC model is appealing to the wrong people

The CIC is, by design, relatively straightforward to set up. That accessibility is one of its strengths. But it also creates an opening for misuse.

Unlike a registered charity, a CIC doesn't sit under the Charity Commission's oversight. The CIC Regulator, a small office sitting within Companies House, has limited investigative resource. In 2023–24, the regulator received 34 complaints and launched no formal investigations. That's not a criticism of the regulator's intent; it reflects the constraints under which they operate. But the practical result is that a badly run or dishonestly run CIC faces fewer immediate consequences than a charity in similar circumstances.

At the same time, many grant-making bodies, particularly local authority and community funds, include CICs on their eligible applicant lists. That's entirely reasonable. Many of the best community organisations in Kent are CICs. But it does mean that registering a CIC has, for some people, become a route to funding rather than a genuine expression of social purpose.

The Fundraising Regulator's most recent casework report makes this visible in a different way: complaints about CICs now account for 18% of all complaints they receive, up from 12% the year before. The concerns range from misleading fundraising practices to pressure tactics and operating without the correct licences. In some cases, members of the public were led to believe they were donating to a charity. The damage being done here isn't just financial. It's reputational, and it affects every legitimate CIC by association.

What this means for the model, and for you

I want to be clear about something: the CIC model itself is not broken. The asset lock, the community interest test, the annual reporting requirement, these are meaningful protections. When a CIC is set up properly, with a genuine community mission embedded in its articles and a director who understands what they've signed up to, it works well. I believe in it.

What's happening is that a small but visible minority are undermining something that the majority are using with integrity. And the ripple effects are real. Funders are becoming more cautious. Some are tightening their eligibility criteria. Grant panels are asking harder questions. For organisations doing genuine work, that means more scrutiny, more hoops, and occasionally more suspicion than they deserve.

Almost every week I get asked for help with setting up a CIC, and one of the first questions I ask is, "How will your CIC generate income?" If the answer starts with, "Grants", then I often grumpily advise them to go and find some pals and start a CIO instead. But then I remember how powerful the CIC model is as a way for business to do good and to change lives, and I start helping them understand the purity and power of this business model when it's treated with respect and integrity. That often helps build clarity, enthusiasm and belief in this glorious way of doing business.

I still really hate seeing those social media influencers online, cynically flogging CICs as a way to access free grants to artists and creatives. It undermines everything the model stands for.

What good looks like

If you're running a CIC, or considering setting one up, here's what distinguishes the legitimate from the opportunistic.

A genuine CIC has a community interest statement that reflects what the organisation actually does, not what sounds most fundable. Its directors understand the asset lock and what it means. Its community interest report, filed annually, describes real activity and real impact. Its income comes from trading, contracts, and grants that genuinely match its stated purpose, not from a creative interpretation of eligibility criteria.

In practice, funders are getting better at spotting the difference. Stronger governance, clearer impact evidence, and a track record of delivery all matter more now than they did five years ago. That's not a bad thing, it raises the bar for everyone, including those doing the work properly.

The question worth asking

If you're wondering whether your CIC, or a CIC you're thinking about setting up, is on the right side of this line, that's actually a healthy question to be asking. It usually means you care about the answer.

The CIC bubble hasn't burst. But the era of easy passage is over. Funders are more discerning, regulators are paying closer attention, and the sector itself is beginning to have these conversations more openly. That's a good thing, even when it's uncomfortable.

If you'd like to talk through your CIC's structure, governance, or funding strategy, I offer a free 45-minute advice session.

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