Employee Ownership Top 50 commentary

by Nigel Mason, RM2

It’s been an interesting year with conversations about employee ownership and employee share ownership in the political mainstream.

At the same time the squeeze on the High Street has seen many household names such as House of Fraser collapsing into administration and Debenhams reducing its number of stores by 50 after a string of profit warnings.

While our own number one in the Top 50 largest employee owned businesses, retailer John Lewis Partnership, has also seen a fall in both profits and head count, its independence and stable trust structure mean it has been able to take a longer term view than most retailers, which includes a rebrand that puts its employee owners front and centre: John Lewis and Partners and Waitrose and Partners.

As if to illustrate that employee ownership is not a panacea, these same tough trading conditions in the retail sector have seen the demise of wholesaler Palmer and Harvey which in turn has impacted the Employee Ownership Top 50 results. For the first time in five years, we have seen a decrease in the combined sales of the Top 50, down 13% on the equivalent figure from the 2017 list, mainly due to Palmer and Harvey’s absence this year.

However, when you look at total sales on a like for like basis, i.e. compare each of the 50 companies on this year’s list against its own prior year results, total sales are up by 6.5%, suggesting this is an impressive group of high growth businesses.

The annual improvement in productivity across the Top 50 is up from 6.2% in 2017 to 7.3% in 2018 but the annual improvement in operating profits is 9.2% in 2018 compared to 10.7% in 2017.

The number of employees it take to qualify for the Top 50 has continued to rise, starting at 143 in 2014 and increasing to 389 in 2018, while the total employees in the Top 50 has risen from 151,000 in 2014 to 171,000 in 2018.

So while an initial look at the Top 50 largest employee owned business might suggest the sector is slightly contracting, we know that is far from the case. With more than 250 businesses transitioning to employee ownership via an EOT since 2014, the significance of the Top 50 in the sector as a whole is slowly diminishing, as the sector diversifies in size.

One of these recently converted EOT businesses is Riverford Organics which transitioned to employee ownership earlier this year. It has entered the Top 50 at number 34, joining other new entrants Shaw Healthcare (8), Medway Community Healthcare (14) Tithegrove Holdings (43) and Curtins Group (50).

These have displaced First Community Health & Care and W L Gore & Associates while others to leave the list include Prospects Group because it has been acquired and Remploy because its employee ownership has fallen below 25%.

As we continue our conversations with government about support for employee ownership we hope to see the sector continue to grow in 2019.