Inspire EO: Informing thinking around employee ownership

12^th January 2015

Interest in employee ownership is, in my experience, most often motivated by a desire for a fairer and more responsible form of capitalism and a drive to encourage personal responsibility among employees.

There is a growing consensus that the plc model, at least in the way that it currently tends to operate – based on a narrow and short-term pursuit of ‘shareholder value’ – is not always the best way to maximise long-term value for shareholders or the health of the economy.

And in this country, we lack the plural mix of ownership that has come to characterise the markets of other countries. In Germany, for example, there are four times as many non-plc owned companies as in the UK.

But last year, the Government passed into law a number of measures aimed at growing the sector; and these were very welcome. These include exemptions around Capital Gains Tax and Inheritance Tax for companies which become employee owned, and also income tax relief on bonuses to £3,600 – where an Employee Owned Trust holds a majority of shares.

These measures have started to have an effect, and employee ownership has never been more popular. Employee owned businesses now contribute more than £30 billion every year to the economy, and membership of the Employee Ownership Association has doubled as more and more businesses realise the commercial benefits of employee ownership.

Employee owned companies are more profitable over the long-term, and resilient during recessions. Staff are more engaged, productive, and tend to experience higher levels of job satisfaction and wellbeing. Companies can be more innovative, and deliver higher levels of customer satisfaction.

For instance, employee owned businesses grew sales by 11.1% in the recession, compared to non-employee owned businesses which grew by 0.6%. Productivity increased 4.5% year-on-year, when across the UK economy as a whole it is flat. And 80% of employee owners would recommend their organisation as a place to work.

In the case of the John Lewis Partnership, last year we created 6,300 net new jobs; staff shared a £200m bonus; and absenteeism was 3.4% (compared to 7.8% for the retail sector). Productivity is higher and staff turnover lower, helping us to deliver sustainable growth, employment, and better business performance.

This success is not restricted to the private sector. There are now over 100 public service mutuals, delivering services from libraries to community health. Whilst employee ownership is not a panacea, it can help to deliver better services and value – Hull City Healthcare Partnership has found efficiencies of almost £4m since 2012/13, whilst simultaneously increasing patient and staff satisfaction.

Of course, there is still more to do. At present, employee owned companies contribute around 4 per cent of GDP, when the Employee Ownership Association and Government have endorsed a target of 10% by 2020. This is ambitious, but the momentum is there.

To this end, together with Nationwide, KPMG, CH2M HILL and the EOA, we are organising a free one-day conference on employee ownership. This will take place on Thursday 5 February at the National Motorcycle Museum near Birmingham.

Inspire EO will be free to attend, and will have workshops and advisers available throughout the day. Whether you are an established business thinking of succession; a start up entrepreneur looking to access finance; or a local authority looking to deliver better public services, Inspire EO could help to inform your thinking.

We will have a range of workshops and expert advisers available throughout the day and keynote presentations from figures such as Sir George Cox and Caroline Murphy.

Simply visit www.inspireEO.co.uk for more details, and to register to attend.