Why the employee ownership sector has the right to be confident

21^st November 2014

After attending the 2014 Employee Ownership Annual Conference, David Fagleman, Senior Researcher, ResPublica, provides his reflections

The 2014 Employee Ownership Association Annual Conference in Nottingham was the largest yet. Around 500 delegates attended a day of seminars and keynotes to hear how their membership is successfully laying the foundations for a new economy based on the principle of employee engagement.

Organised by the Employee Ownership Association (EOA), the membership organisation for UK employee owned businesses, delegates included employee owners, policy-makers, onlookers and most encouragingly, companies that are about to embark on the transition to become employee owned.

Before the proceedings had started the sector enjoyed a ringing endorsement from the Government. In light of the news that TEn Insurance, an independent broker network, had completed a switch to the new employee-ownership trust (EOT) business model, the Business Minister Jo Swinson commended the move and declared that ‘employee ownership is good for business, employees and good for the economy’. Advised by a Fieldfisher team comprised of Graeme Nuttall, author of the Nuttall Review, the transition took advantage of the new tax regime for EOTs introduced by the Coalition Government in the Finance Act 2014.

In the words of Malcolm Lee, Managing Director, founder and former major shareholder of TEn, the adaption of the EOT model secures the long-term future of the business in a way that allows its employees to share in its success. Those championing the sector are hopeful that this move will encourage others, especially those in the financial sector, to consider employee ownership as a succession solution, as it is not only good for employees but good for business.

Whilst a Minister’s endorsement is a fitting way to kick start a conference, the employee ownership sector already has a lot to shout about. Contributing £30bn annually to the UK economy (4 per cent of GDP), employee owned businesses are growing at an annual rate of just under 10 per cent and have outperformed the market during the economic downturn with an 11 per cent increase in sales compared to the 0.6 per cent growth of non-employee businesses. Year-on-year, employee owned businesses have increased employee numbers by 3.3 per cent, productivity by 4.5 per cent and the sales revenues of the top 50 companies increase by 4.6 per cent.

This success was reflected in the opening address, provided by Iain Hasdell, Chief Executive of the EOA. Reviewing their achievements, he highlighted that they had effectively made a powerful business case for employee ownership and raised awareness through a range of annual events, including Employee Ownership Day. This culminated in a Government consultation and the inclusion of tax incentives for employee ownership trusts in the Finance Act 2014, of which TEn Insurance recently took advantage. These new measures not only increase the attractiveness of indirect employee ownership structures for businesses but also enables employee owned companies, such as Childbase, to secure their future and deliver more for their employees.

The rallying call from their Chief Executive was for the sector to be confident. To behave as successful, as big and as important as they actually are. They should, he said, hold their heads high and recognise their right to be treated in the same ‘high class way’ as the aerospace and agriculture industry, who they now match for size and economic contribution, and outstrip on the innovation stakes. Considering the above statistics and the success of public service mutuals, employee ownership is now firmly in the mainstream and it should feel confident to act accordingly.

Offering a long-term alternative to established and unpopular business models, employee ownership is increasingly becoming an attractive option for a range of organisations. With Government support and favourable tax measures, the last few years have been advantageous for the sector and they look on course to meet their target of contributing 10 per cent of GDP by 2020.

They should be confident, their future looks increasingly bright. Bring on #EOA2015!!