Deb Oxley is the Chief Executive of the Employee Ownership Association, representing organisations which are employee owned, or transitioning to employee ownership, across the UK.

The theory of the EOA and its insight partner Ownership at Work is that employee ownership succession saves jobs by rooting them in the communities they serve, more resiliently, for the longer term.

In good times:  through giving employees a stake and a say these businesses share profits promoting a highly responsive, innovative, and motivated workforce which helps grow the business, protecting existing jobs and creating new ones.

In tough times: EO firms have shown they respond well to challenging external factors, often making shared sacrifices if required – typically with leaders showing the way – to protect jobs and stay afloat.

Therefore, the answer to how employee ownership can really make an impact to save jobs, and create new jobs, is:

• To grow more employee ownership by raising awareness, and grow the knowledge of those needed to support it.
• To diversify finding new ways and models to deliver an employee ownership stake that help to sustain businesses as part of the recovery and renewal of the UK economy.

Employee ownership delivers better outcomes for individuals, the business and the economy

In 2018 an independent panel of 20 leading business organisations recommend that the UK should support the growth of employee ownership. The panel concluded that “there was significant and valuable dividend to be obtained from creating greater amounts of employee ownership in our economy.”

Evidenced in the testimonies of more than 80 employee-owned businesses that employee owned businesses, through offering a meaningful stake and a say, was that employee ownership aligned the interests of owners, managers and workers, behind a shared goal and ensure that employees can:

• Enjoy higher engagement, motivation and wellbeing;
• top up their salaries by sharing in the capital value they create;
• and work within transparent governance regimes that lock in benefits for the long-term.

All these gains cement employees’ sense of fairness and happiness at work and unlocks discretionary effort of individuals, working to a common goal and ‘taking ownership’ of issues and opportunities, impacting on productivity and efficiency and innovation. In addition, the independence of the business sees it plan based on long-term stewardship of value, which enables resilience.

It became know as the “Whoosh” effect by many.  Aber Instruments, a supplier of advanced systems for use in the brewing and biotech sectors, which transition to EO in 2008, had coined this phrase. At one point a struggling business, where the employee owners agreed to take a 10% pay cut during a difficult trading period, saw this action in the interest of the business pay off. It was followed by a two-year period in which revenues grew by 30%. Later when the original founders staff realised “they don’t have to just do what the founders’ mission was – they can run with it now … when that happens, you get a ‘whoosh’ effect.”

Employee ownership has become popular as succession solution for SMEs, and family businesses that have no natural succession. While the sector is still small, about 600-700 business, it is growing, more than 220 of those have been since the start of 2020.

The shared stories and good practice recently saw the EOA define the building blocks of good employee ownership as - good governance, good engagement and communications, and good leadership. Something businesses have said this builds a sense of trust in the business that helps it stand up to shocks.

Chris McDermott, Managing Director, Cambridge Weight Plan, felt this when dealing with the shock of the pandemic. “The trust in each other to do what was needed was paramount our recovery, like a scaffolding around our wounded business, helping us heal and get back to full fitness quicker than we could have ever hoped for”.

While Union Industries suffered its own shock. When a fire destroyed its new facility, the sense of ownership felt by its employee owners saw them arrive in their droves in the early hours of the morning when news broke on social media. The production line was up and running in the car park within hours. Despite this and the work to get the facility open again, with the pandemic breaking in the middle, not one order was missed and they have since reported their best trading year to date.

Growing more businesses that give employees a stake and a say

While employee and worker ownership is seeing increased growth, for regional economies to really benefit, this needs to happen a scale, not incrementally as it is currently doing so.

There are several that barriers that need more attention:

• A lack of access to finance both for transitions and growth – EOA members have reported a lack of consistency from banks, because the understanding of employee ownership and willingness to lend, depends on an not on clear policy . Access to finance is improving, but there is a way to go.
• A lack of awareness and knowledge from professional advisers – the offer of support to explore the worker co-op model as businesses are starting out or at early evolution or about employee ownership at the point of succession is not routinely offered and sometimes advised against. Worse still, some only advise to use EOTs for the tax benefits, missing out on the purpose and benefits of employee ownership.
• A general lack of awareness – while awareness is growing as the sector grows, this is mainly through the EOA and its members and stakeholders championing employee ownership, it is not routinely part of teachings about business at universities, or part of advice at business organisations.
• A lack of communicated cross-party government support and ambition. When you read Hansard there is cross-party support for employee ownership dating back to the seventies. However, there is a lack of consensus on the ‘how’ and this risks employee and worker ownership becoming a political football.

In 2018, two other things happened that inspired the EOA and Co-ops UK to ask government to trust in them to deliver the how. Firstly, the Main Street Employee Ownership Act, saw both sides of the aisle come together in the US to support the growth of employee ownership.

Then, Scotland set a target for five-fold increase in the number of employee owners, with a government supported plan that supported businesses looking at succession to explore employee ownership and for advisers to increase their knowledge and support.

This inspired a plan to address the lack of support in English regions and the #1MillionOwners campaign was established. The Scottish five-fold increase ambition was echoed, but instead with a focus on the individual, to deliver one million employee and worker owners in the UK by 2030.

Shortly an English economic region will pioneer this approach to work collaboratively with the EOA and Co-ops UK, to address the barriers and create awareness, develop knowledge and support the capacity of the region to grow employee and worker ownership.

New ways and models to offer an ownership stake

Meanwhile, the work of Ownership at Work with Author Nigel Mason has seen them put forward a number of options of innovating new ways of growing employee owned businesses in both small and large organisations, borrowing from great policy and share schemes that already exist in the paper Equity for All.

More recently as the UK moves into a period of adjustments where SMEs with start having to pay back bounce back loans, Ownership at Work teamed up with the FSB to explore a Debt for Equity solution.

The Office for Budget Responsibility’s worst case scenario estimates that £34 billion of BBLS and CBILS loans could default. The paper “A Shares for Debt Recovery Plan”, outlines routes through which bounce back loans – 100% state underwritten facilities worth up to £50,000 launched at the start of last year’s lockdown – could be converted into EOTs in order to ensure the survival of viable businesses and help close the UK’s productivity gap.

The paper aims to minimise the effect of individual SMEs failing altogether, which would see government not just shouldering the cost of the original loan, but also lost tax revenues from businesses and employees, who might then require additional support through the benefits system.

Martin McTague, FSB National Vice Chair, Policy & Advocacy Chairman, said:

“Many small businesses will be contemplating whether it is worth carrying on with their levels of debt, or if it is worth starting again.”

While it is acknowledged that it is not suitable or desirable for all businesses, it was felt that it could be used alongside other measures.

Martin continues: “Writing off the debt for small businesses in return for employee stakes in the business means that balance sheets instantly become healthier, jobs are maintained, and businesses get the boosts associated with employee ownership.”

Nigel Mason, Ownership at Work fellow who authored the paper, said: “In times of adversity, we must look for opportunity. With great policies and share schemes already in place, it is about innovating to offer businesses the chance to be part of the UK’s recovery rather than lose jobs to pandemic debt.”

Conclusion

To truly make grow a more inclusive and resilient economy by growing employee and worker ownership, the need is for visible cross-party support and buy-in from politicians and policy makers, and increased investment.

It seems that many people are quietly supportive of the ‘what and the ‘why’ of employee ownership, what this article shows is that when it comes to the how, there are answers that are tried, tested, and planned for, or that have the potential to be innovated.