Modernising the UK
However we access news throughout July it will be dominated by the most profound allegations against the UK establishment this century has seen so far. The suggestion, not proven, that establishment figures in politics, the armed forces, the judiciary and beyond were involved in the organised abuse of children and conspired to conceal the truth from prosecutors is as amazing as it is deeply disgusting.
So let us focus instead on a different and much more positive debate about the UK establishment, in this case the business and economic establishment. The business and economic establishment, and I include here the majority of financiers, professional advisors, politicians, civil servants, policy advisors and business leaders, support or at least accept a particular paradigm.
The paradigm is of an economy with a disproportionately high number of businesses that are externally owned and operate with a dominant goal of driving near term external shareholder value. An economy that is too often structurally obsessed with short termism. An economy in which levels of employee engagement in our businesses are in the lower quartile of international standards, because of the way many of our businesses are owned and managed. An economy that is on average 20% behind our main industrialised competitors on many aspects of productivity. An economy that is 16th in the world rankings for business innovation.
But belief in and support for this paradigm is in decline. Things are changing. Short termism has an important catalytic role to play in key parts of the economy as do mergers, acquisitions and business failures. But there is a growing recognition that too many in UK businesses are constantly looking to create opportunities to sell the business they are leading and have some equity in. Similarly, it is fantastic that a number of our publically listed companies are world class. They make a magnificent contribution to our economy. But there is a serious dialogue going on about how a relative reduction in external ownership, a model that often has absentee shareholders, can ensure that more of our economic activity aligns with the productivity, innovation, investment and competitiveness outcomes it needs to deliver.
Employee ownership is now very much part of that dialogue. The profile of employee ownership has risen to unprecedented levels. More and more people understand that 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 has a massive role to play in our economic future. That we need more employee ownership in the UK because of the higher productivity, greater levels of innovation and outstanding financial performance it delivers.
The benefits of employee ownership to our economy and our society are compelling. That message, and the evidence to support it, is influencing new audiences every day. The data published this month by the EOA on the performance of employee owned firms is already adding further impetus. With 4.5% year on year productivity increases and 25% annual increases in profits, employee owned businesses really are at the forefront of driving economic growth in the UK.
And UK Employee Ownership Day on 4th July was another very significant step forward in that process of reaching new audiences. With more than 100 events across the UK, and the involvement of literally thousands of employee owners and other partners, it was a stunning day of celebrations and awareness raising activities. It was the most successful initiative ever mounted to profile the economic & social benefits of businesses being owned by their employees. Employee Ownership Day has already surpassed the high expectations I had for it when I first established it in 2013. Thank you so much to everyone who was involved across the UK for making EO Day 2014 such a wonderful 24 hours. A brief overview of EO Day 2014 is available here.
We are making good progress together. The successes of employee owned businesses out there in the real economy, outperforming their competitors continue to impress. The phenomenal contribution that employee ownership is making to the delivery of brilliant public services is equally powerful. These are exciting times.
And if I briefly return to the establishment for a moment, the promotion of employee ownership is not a negative attack on the establishment. It is, instead, about refining our current economic and industrial thinking to align with the world of today. Creating much more employee ownership is a natural part of the on-going modernisation of our country. It absolutely fits with the Marquis de Condorcet philosophy of development, a philosophy that foresees continuous, organic improvement in the freedoms and rights of individuals in society and the economy.
So let us stay focused on the positives, build on this momentum and stay true to our mission of 10% of UK GDP being delivered by employee ownership by 2020.
We are moving quickly in the right direction.
Iain Hasdell is Chief Executive of the EOA