Public servants who form ‘John Lewis style’ mutuals to take control of their services need better access to external finance if they are to transform public services, a report published today argues.

The Boston Consulting Group report, Soft Finance, Hard Choices, analysed the performance of 71 mutuals, which currently deliver £1.2 billion of public services, as well as 15 mutual projects in development. It found clear evidence that mutuals are improving service quality and driving innovation. It also showed that they are performing well as businesses with the 62 mutuals launched since 2010 generating substantial growth and creating as many as 3,000 new jobs.

The report warned that as the number of new mutuals increased, greater consideration must be given to attracting social and private capital investment to ensure long-term sustainability. It recommends that Big Society Capital takes a lead in the social finance sector and commercial investors attach greater weight to the track record of the service before it became a mutual when making investment decisions. It warns that government should ensure that ‘soft finance’ such as grant funding does not crowd out commercial finance.

As a means for improving the performance of the mutuals, it also recommends that parent organisations from which the mutual spins-out should provide more support for long-term strategic planning and that more board members with private sector experience should be recruited.

Nick Hurd, Minister for Civil Society, said: Public service mutuals are coming out of the incubator and into the mainstream. The early pioneers have shown that giving frontline staff more power to make decisions can lead to better more efficient public services.

Many new mutuals are now in development. We are reaching a critical mass and the movement is rapidly taking on a life of its own. We need to prepare now to ensure that the market is ready to support thousands of mutuals working across a diverse range of services in the future. Already we’ve focused government support for mutuals on business development. I hope this report will help mutuals build closer relationships with external investors.