Those Who Came Before Us
As our part of the world starts its seasonal tilt towards the sun, daylight hours are increasing and spring is upon us. It is a time of rejuvenation and renewal.
Whilst co-incidental, it is fitting that just at the time the earth’s axis is creating spring, there is at the moment a renewed and energetic focus on two debates that are hugely connected with the future of employee ownership: the issue of ownership in our economy; and our economic competitiveness.
Economic ownership remains one of the fundamental macroeconomic issues yet to be addressed since the economic crash. Business ownership and wealth in the UK has become, as the recent report of the Ownership Commission testifies, incredibly concentrated amongst a small number of individuals and institutions with the plc model for businesses being over-dominant. 50% of the people in the UK own just 1% of the wealth, with the wealthiest 20% owning a huge 84% of the wealth. This unequal nature of economic ownership in the UK will, if unaltered, continue to have major negative social consequences and costs. There is, therefore, a burning need in the UK to help nurture and achieve greater diversification of ownership of wealth and business.
Employee ownership can, should and will play a significant role in this structural reform and rebuilding of the UK economy. Encouragingly, the power of employee ownership is slowly but surely getting through to opinion formers, advisors, politicians and the wider business community. There is a growing realisation that too many in traditionally owned UK businesses are constantly looking to create opportunities to sell the business they are leading and have some equity in. When the employees are the owners, the emphasis is different. Employee owned businesses think and plan for the very long term and are driven by the development of broad value rather than short-term financial gain. By doing so they retain the associated jobs, skills and wealth in local communities by redefining the company as much more than a set of liquid and fixed assets to be financially valued and cashed in.
This is part of the reason why employee ownership is now the most prominent alternative to conventional forms of business ownership in the UK.
On the second front, that of competitiveness, productivity growth remains the key determinant of our ability to compete in world markets. UK economic strategy should focus squarely on this. The capacity for productivity growth lies largely within domestic businesses, although foreign investment will continue to play a role. Thus, promoting economic environments that make domestic firms thrive, grow and compete is critical. Because of the growth and competitiveness contribution it makes, including in the smaller knowledge-based companies on which the UK economy increasingly relies, employee ownership needs to be and will be a much a bigger part of our future economy.
This is also the month of the UK Government’s Budget, the only realistic point in the year at which Government can announce and then implement new tax measures. The recent Treasury Review into employee ownership, that the EOA pushed hard for and contributed heavily to, took much evidence about the positive business case for increasing the number of employee owned businesses. Government responded to the Review with some warm and very welcome words. It committed to keeping open the idea of introducing further tax incentives this year to promote employee ownership. This Budget is absolutely the time for the words of support to be reflected in bold action. The Budget will need to contain at least one significant tax measure to help grow employee ownership, if the Coalition’s support for employee ownership is to be taken more seriously.
All these economic and business issues emphasise that the growth of employee ownership is a long term agenda. Progress at the moment is very good but we need to sustain it over many years. That is why I refer to this being the decade of employee ownership. We are of course at this time building on the work of a previous generation of enthusiasts and advocates. So I want to conclude with a word about one of those employee ownership pioneers of the past, Robert Oakeshott. Nobody made a bigger contribution to the popularity of employee ownership in the UK and overseas than Robert did when he was alive. I am very proud to say that, in tribute to his legacy, the EOA with a range of partners including Robert’s family has established an annual Oakeshott Lecture. The inaugural Lecture will be held later this month, delivered to an invited audience by the Deputy Prime Minister.
In being ambitious for the future let us always remember the contributions of those who came before us.
Iain Hasdell is Chief Executive of the EOA