Ownership Dividend report confirms more EO would help UK economy, and calls on government to build capacity
Friday, July 6, 2018
An independent panel of 20 leading business organisations* recommend that Employee Ownership is vital to counter a slew of economic challenges
The Ownership Effect Inquiry was led by the EOA and supported by The eaga Trust and the John Lewis Partnership with the academic support of Cass and Manchester Alliance Business Schools. The results of the inquiry have been published in the report entitled The Ownership Dividend.
We’ve read it from cover to cover, and here are the headlines:
The EO sector has a combined turnover of over £30 billion, and is growing by 10% each year
The evidence shows employee ownership can deliver significant outcomes that directly address fundamental challenges the economy faces
The ownership dividend pays off at an Individual, Business and Wider Economic level
And benefits businesses of all shapes and sizes
Through EO, Individuals are more engaged, motivated and happier; share the wealth they help create; and work with transparent governance to lock in these benefits long term
Businesses achieve greater levels of productivity than their non-EO counterparts; are better able to retain and recruit talent, and are more sustainable during economic downturns. In fact, many find that after becoming employee owned, they achieve record-breaking sales
EO businesses drive economic resilience at a regional level; the dividends are spent locally and also, EO businesses tend to have explicit commitments to their communities
When communities support businesses, they show their satisfaction by becoming loyal customers, helping companies to thrive
The ‘family business’ sector in the UK is worth a whopping £519 billion, but it’s at risk due to inadequate succession planning. Businesses are being passed on or sold at a rate of 85,000 businesses per year, with many taking sub-par deals that damage the economy: EO can prevent this by securing long-term business planning
Selling on to employees is an ideal answer to the problem of succession. Trade sales can weaken and even dismantle businesses, whereas selling to employees brings the benefits above, securing futures for the employees, legacy and communities
However, the report found that although benefits are indisputable, Employee Ownership is not covered adequately in the business education sector. This goes for universities and business schools as well as the banks, accountants and lawyers often responsible for supplying advice to companies. Often EO is stumbled upon as a last resort, when, especially around succession, it should be one of the first.
The report calls for…
The UK government to invest directly in boosting the creation of new EO firms through a high profile, capacity-building initiative
Plus to increase funding for the Mutuals Support Programme 2, which encourages public services to adopt an EO structure as a solution to challenges (we are key providers for this)
National trade, management and business bodies should work with the EOA to develop training & CPD schemes
Plus business schools and higher education should work with the EOA to create appropriate modules
Financial institutions should work with the sector to raise levels of EO understanding, plus explore mechanisms that allow for easier investment
The government should reinstate a minister for EO and other mutual models, supported by a dedicated Whitehall team
Nationally active accountancy, legal and professional firms should promote EO to business owners: to not do so is not laying out all the options
The government should continue to create the strongest business environment to promote and foster EOBs (e.g. ensure employee buyout costs are deductible for corporation tax purposes in the same way as other tax-advantaged share schemes; increase, and/or index-link the current £3,600 limit on tax free bonuses that are there to encourage the creation of EOBs).
What can we do?
Those of us who know first hand the benefits of employee ownership can do our bit to spread awareness. Talk about it with business owners, with your local communities, your accountants and the media. Share our video and engage with the EO community through the EOA.
This year the sector has already made a lot of noise, as we’ve seen from features in the Guardian, The Times and on the BBC. And what do these pieces focus on? Stories, because it’s stories about people that readers find the most inspirational.
Tell your EO transformation story and help make sure that the next time there’s a conversation between an advisory firm and a business seeking a succession solution, employee ownership is the first and not the last option on the table.
