Iain Hasdell is the Chief Executive of the Employee Ownership Association the voice of employee owned businesses in the UK
The report of the independent Nuttall Review into barriers to employee ownership in the UK has just been released at a Summit on employee ownership chaired by the Deputy Prime Minister. This marks another important step along the way towards employee ownership becoming a central part of industrial policy. And, critically, it will feed directly and very strongly into the separate review of employee ownership taxation that was announced recently by the Chancellor.
The Employee Ownership Association, the voice of employee owned businesses in the UK, very much welcomes the key recommendations in the Nuttall Review, having pushed hard for the Review to take place and having been closely involved in its work. Businesses that are owned by their employees contribute over £30 billion to the UK economy each year. And employee owned business tend overall to have higher productivity, greater levels of innovation, better resilience to economic turbulence and more engaged, fulfilled workers who are less stressed than colleagues in conventionally owned organisations. Even a cursory look at the compelling success stories of employee owned businesses such as Gripple, Clansman, Childbase,Unipart, and Sutcliffe Play demonstrates the very special value of employee ownership.
Chapter 2 of the Nuttall Report summarises the empirical evidence on the unique performance of employee owned businesses. The EOA is massively enthusiastic about the content of the Nuttall Report. The diagnostic sections go to the heart of the main challenges to be overcome in growing the number of employee owned businesses. And the prescriptions are compelling.
Nuttall recommends a major campaign to raise awareness of employee ownership options. He calls for much more progress at a faster pace on creating better access to finance for businesses that want to implement employee ownership. He points to the need for a more modern approach to some elements of the taxation system that affects employee owners. He recommends the simplification of employee ownership models through the development of simple toolkits and ‘off the shelf’ templates to cover tax, legal and other regulatory considerations – what the Deputy Prime Minister is calling ‘employee ownership in a box’. And Nuttall urges business and government to work together to remove the key barriers to employee ownership.
That brings me to one of those barriers – the role of financial advisors – which the report discusses in several places. Put simply the majority, with some brilliant exceptions, of accountants do not yet 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 are frequently found wanting when it comes to serving the needs of clients who are pursuing employee ownership.
Too often, either as auditors, or commercial advisors, accountants default to the PLC world in which they are regularly most comfortable. This militates against employee ownership in favour of sales of companies to competitors and/or management buy outs. This is nobody’s fault – this is not about ascribing culpability. But it is a significant challenge that the profession has to overcome.It has to start at the grass roots – with employee ownership becoming a much bigger and integral part of the learning and qualification process for those in the accountancy profession. And be reinforced within professional service Firms through the creation of many more teams who achieve genuine expertise in employee ownership matters. This is perfectly plausible.The ordinary disciplines of market demand and supply will lubricate progress as the number of employee owned clients grows. It is now too big a business opportunity to be ignored.
The Nuttall Report sets out an array of work for the EOA to take forward, including collaboration with the Employee Engagement Taskforce and also building on the Breedon Review on access to finance. As part of that agenda of practical next steps we are looking forward with confidence to helping the accountancy profession pick up the gauntlet of employee ownership in a very positive way. When the profession does this it will be a vital contribution to the future growth of employee ownership in the UK.