Employee ownership still blazing a trail

accapr —  22 March 2013 — 1 Comment

 

By Iain Hasdell, chief executive of the Employee Ownership Association

IASB

The current level of UK fascination with, and enthusiasm for, employee ownership is unprecedented.

It is now the most prominent alternative to conventional forms of business ownership in the UK. Interest in it within business communities is increasing daily. The number of employee-owned businesses is currently growing at an annual rate of 10 per cent. And there is a growing realisation that employee ownership in its many forms drives economic growth, innovation and quality whilst spreading wealth and optimising the fulfilment of employees. It already contributes, according to figures from the Employee Ownership Association (EOA), more than £30 billion each year to UK GDP.

The fact that it is a growing economic force in the UK is partly a reaction to our economic context. This context has called into question the short-termism of conventional forms of business ownership and the consequences of that on the economy and our communities. But the emerging popularity of employee ownership is also a response to the compelling evidence of its economic benefits, particularly the high levels of productivity and innovation it delivers. The Deputy Prime Minister will be discussing this when he launches a key EOA report on the economic business case for more employee ownership at the inaugural Oakeshott lecture on 27 March. The Coalition has confirmed a capital gains tax break for employers who sell their company to their employees in the Budget.

Despite the current momentum there remains much to do to create the kind of future for employee ownership that the EOA, with our members and a range of partners, have consistently sought. A future in which there is far greater awareness of employee ownership, its benefits and implementation options; there is a simplification of those options; and there is better access to finance and advice for organisations that want to create and/or fund employee ownership.

Work on all of those strands continues apace, mainly under the auspices of the Government sponsored Employee Ownership Implementation Group Chaired by Jo Swinson, the Minister with responsibility for employee ownership. After the Budget the Group will start to execute a significant awareness programme that will include a specific focus on accountants and financial advisors.

The majority of accountants and financial advisors, with some brilliant exceptions, do not yet fully understand employee ownership, the various models that are available, how to finance transitions to employee ownership and how corporate financial governance needs to work in businesses that are owned by their employees. Consequently they do not introduce the option of an employee buy out often enough and are sometimes found wanting when it comes to serving the needs of clients who are pursuing employee ownership. The awareness programme will really help to overcome this issue. There are encouraging signs that the accountancy profession is picking up the gauntlet of employee ownership in a very positive way. As the profession does this it will be making a vital contribution to the future growth of employee ownership in the UK.

The Implementation Group will also soon be launching a series of standard legal documents that will make it far easier to implement employee ownership. This is the simplification agenda in action.  And the Group is making progress on the development of an asset class of patient capital and social investment that aligns with the financial requirements of employee ownership.

So employee ownership continues to blaze a trail. We really are in the decade of employee ownership. It is now becoming a core component of the UK’s economic growth agenda. It is a successful business model in every sector of the economy that constantly challenges the conventional wisdom of those who suggest business ownership always needs external investors. And a range of measures are being put in place for the longer term to support the current growth in the number of employee-owned businesses in the UK.

Businesses, professional bodies and a host of others need to put their shoulders to the wheel to keep up this momentum – indeed to increase it. I am sure they will.

Let us all grab this great opportunity whilst we have it!

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One response to Employee ownership still blazing a trail

  1. 

    What are the real benefits of employee ownership? What solid reasons are there for listed and most importantly, family owned businesses to go for employee ownership, in consideration of the countries, such as Pakistan, where the presence of family owned businesses is much?

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