Invest now in employee and worker ownership for a more inclusive economy

Ed Mayo, Co-operatives UK and Deb Oxley, Employee Ownership Association

It’s time to move on from simply talking about the benefits of a more inclusive economy – and start investing in one.

The delivery of an inclusive economy requires more political will and targeted investment.

When it comes to reducing wealth inequality, driving employee engagement and tackling regional resilience, employee and worker ownership offers a proven and popular opportunity to achieve this.

The recent announcement of the move by Richer Sounds to become employee owned received universal political support with commentators in tabloids and broadsheets alike applauding the decision to sell a business to its employees. Julian Richer’s decision was also heralded as a great example of how business can do well whilst doing good, at a time when there is a growing appetite for a change in the way we do business in the UK.

There is also a route to creating a pipeline of new businesses that give employees and workers both a stake and a say, through supporting the creation of more worker cooperative start-ups.

The evidence to support this is strong and there are clear worked examples of where government intervention has helped to grow employee and worker ownership, in Scotland and Wales.

While over in the US, both Republicans and Democrats alike have secured the President’s support for a more inclusive economy by his signing of the Main Street Employee Ownership Act, which delivers compulsory business support at State level for more employee ownership and worker co-operatives.

So while the UK sits in its current state of political and economic uncertainty, now is the right time for UK government to commit, through new policy, to investment in creating more businesses that have a proven record of accomplishment of higher productivity, greater economic resilience and wider regional impact.

As awareness and credibility of employee and worker ownership grows, there has been a noticeable shift in the shape and scale of the sector. Once reliant on a handful of larger businesses, there has been growth in employee ownership amongst SMEs as a succession solution with 60% of growth in the sector happening since 2014 – the year the Employee Ownership Trust (EOT) model was introduced.

In countries such as France and Italy, it is common for employee-owned firms to be established as worker co-ops, sharing ownership on a one member, one vote basis.

Alongside this, a trend of conversions of slightly larger high profile businesses such as Aardman, Richer Sounds and Riverford Organics has raised the profile of the potential impact on the economy of giving employees and workers a stake and a say in business can have.

The numbers of worker co-ops and employee-owned firms in the UK is on the rise. This includes small start-ups, with freelancers coming together in participative teams. In the technology sector, a North London hub, Space4, run by the worker co-op Outlandish has helped to spark the formation of five further co-ops, with a second location due to open shortly.

The evidence shows these businesses benefit from the alignment of interests created by everyone having a stake and a say. This ‘ownership dividend’ includes stronger performance, better commercial resilience and more inclusion as the benefits are shared across the business. UK productivity has flatlined and even gone into decline in recent months, but research suggests that the productivity of the top 50 employee-owned firms is rising by an extraordinary 7% per annum.

The investment by the Scottish Government has established employee buyouts as a mainstream option for business succession, showing that awareness raising and technical support works. As a result, Scotland leads the UK in the number of such conversions, averaging one a month, with more than 100 in the pipeline. An independent evaluation for Co-operative Development Scotland cited a tenfold return on investment in gross value added for every pound invested in on-the-ground support. Overseas, cities have taken a lead in doing the same, with New York City kickstarting a programme in 2018 that has helped the formation of close to 50 new worker co-operatives.

Scotland has now set an ambition for a fivefold increase in employee and worker ownership by 2030. If extended UK-wide, we estimate that this could create one million worker owners by the end of the next decade. One million owners, committed to the business, rooted in the UK rather than footloose and tax-shy, could be key to the future UK economy.

Evidence suggests that the biggest barrier to a more widespread adoption of worker ownership during start-up, early evolution and employee ownership at succession, is a lack of awareness, practical understanding and confidence among entrepreneurs, business owners, workers and those who advise them. Yet we can also point to evidence that suggests when people and businesses are given the right information, in context, with access to expert help, more of them will choose to adopt employee or worker ownership.

Across the UK millions of pounds of public money is spent each year promoting entrepreneurship and providing business advice. Precious little of it encourages and supports employee and worker ownership. If we can change this, then this part of the answer to a more inclusive, productive and resilient regional economies will grow to become much more common and widely appreciated – part of a new, better, mainstream.

Together, we are calling on the UK government to allocate funding in the next Spending Review, to support local pilots that increase awareness and provide expert support for people to choose employee and worker ownership, during start-up and through the planned conversion of established businesses, using both the worker co-op and employee ownership models.

The UK’s best employee owned businesses and worker co-ops offer part of the solution to a more inclusive economy at a time of uncertainty and demonstrate that sharing ownership and influence is the key to motivation and to success.

Ed Mayo, Co-operatives UK and Deb Oxley, Employee Ownership Association  Blog www.edmayo.coopTwitter @edmayo1 Twiter @DebOxley