Better together – why the UK needs bipartisan action to enable more employee ownership

Working together inevitably delivers better outcomes and more value. However, it’s hard to do, and in particular politically, as it requires compromise that is difficult to achieve.

So it was encouraging to hear of bipartisan cooperation on employee ownership in the US where President Trump has recently signed the Main Street Employee Ownership Act.

With estimated potential to double or even triple the growth rate of employee-owned companies over the next decade as well as stabilising jobs in local communities and reducing inequality by giving more employees a means of accumulating wealth, the legislation is the most far-reaching employee share ownership legislation in the US in over 20 years.

Closer to home employee ownership and share ownership is in the spotlight in different projects, policies and manifestos of the three main parties, but will any of those on their own deliver the evidenced opportunities that increasing the number of employee owned businesses could deliver for the individual, for businesses and the regional and national economies of the UK?

The US Act allows for loans of up to $5m to businesses to enable them to buy out retiring small-business owners, making employee buyouts easier to do by expanding the amount of credit available and creating more flexibility for sellers to transition out of their businesses over a few years. The law also tasks the Small Business Administration (SBA) to provide more awareness, technical assistance and training, both to the business owners who might be interested in selling to their employees and to the employees themselves.

The Act is the result of one Democratic Senator championing employee ownership and gaining the support of co-sponsors on both sides of the political aisle.

Back in the UK, the Scottish Government has recently strengthened its support for employee ownership with an innovative partnership with the private sector. Building on the financial assistance already provided by Scottish Enterprise through Cooperative Development Scotland, the new industry leadership group, Scotland for Employee Ownership seeks to make a sustained difference to the growth of employee ownership in Scotland. With a current return on investment of £10 for every £1 spent on support for employee ownership, Scotland has set itself an ambitious target of increasing the number of employee owned businesses from 100 to 500 by 2030.

The UK is experiencing some of its biggest challenges and as traditional political party lines become blurred, especially around how to effect a successful Brexit, this is the perfect time for all parties to come together to support more employee ownership in the economy.

And here’s the thing – the foundations of a coalescing of views around the benefits of employee ownership across each of the main political parties already exists, demonstrating that employee ownership is apolitical and should be universally supported by all political parties.

In June it was reported that Sir Michael Fallon had been tasked by the Government to identify possible mechanisms to widen share ownership. This week the Labour party announced plans to widen employee ownership by forcing businesses over 250 employees to establish ‘ownership funds’ that would enable collective share ownership. And in its last manifesto, the Lib Dems made a similar commitment, albeit on a right to request basis to acquire shares in a trust and have employee representation on boards.

UK economic challenges are similar to the US; a dependence on SME and family businesses; low productivity; economic inequality; and the need to spread wealth more evenly to support stronger regional growth. And it appears that each of the political parties are at least, in principle, in support of employee ownership as a route to address some of these challenges.

As evidenced recently in the EOA published Ownership Dividend, employee ownership provides an innovative and effective solution to each of these challenges. However, there has been no significant new Government support of the type just announced in the US or already effectively delivered by both Scottish Government and the Welsh Assembly Government since the introduction of the Employee Ownership Trust (EOT) in 2014.

This situation must change. Without an equivalent support package for the rest of the UK, English business owners are at a disadvantage to their peers in Scotland and Wales in terms of support for business succession and the UK economy is missing out on the potential of employee ownership to drive more productivity, deliver more resilience in the regions and effect more inclusive growth.

Whilst the EOA influences, inspires and supports UK employee ownership to become more respected, widespread and successful, as a not for profit membership body it has limited resources. To achieve our ambition of 3m employee owners by 2030 will require political will, additional resources and a recognition from all political parties that employee ownership is an essential ingredient in the mainstream UK business environment that demands their shared support.