Moving employee ownership into the mainstream

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At a time of little or low economic growth, the business of employee ownership is thriving.

You might already know that employee owned businesses contribute somewhere in the region of £30bn annually to GDP, more than agriculture, and using membership of the Employee Ownership Association (EOA) as an indicator, the sector is growing at approx. 10% per annum.

The sector’s biggest 50 companies employ 175,000 people, have combined sales turnover of £22.5bn and in the last 3 years, have collectively outperformed the UK economy in both.  And in 2016 there have been more transitions of privately owned firms into employee ownership than ever, as owners and founders chose the model to support their succession objectives or to help drive more business growth.

Employee ownership can be seen in all sectors of the economy; from the restoration of classic cars to the manufacture of play equipment and there isn’t a month goes by when another new business proudly announces its move.  And unlike other forms of economic growth which may have traditionally been centred around the SE, employee ownership can be found across the whole of the UK, sustaining valuable, regional based employment and stability.

But the UK needs more employee ownership.

The EOA campaigns for more employee ownership as we know that this is a sector which demonstrates more transparent corporate governance, higher levels of productivity, greater resilience and better employee engagement.

Through its broader ownership and governance, businesses that are employee owned act more responsibly to all of their employees, to the community in which they are based, to their suppliers and to their customers.  They think and act for the long term, invest for the future and are able to make a balanced response to market conditions, without the pressure of external shareholders who traditionally seek a short term return.

All of this is a pleasant contrast I am sure you will agree to the corporate behaviours seen in the likes of Sports Direct and BHS in recent months and a much needed antidote to the ‘anti-business’ response of some media commentators.

Notwithstanding the positive position that the sector finds itself in however, there is still much to do until employee ownership is truly part of the mainstream of British business and becomes as normal a thing to do as a trade sale or a management buy-out.

The challenge faced by the sector in order to become mainstream is however relatively straight forward.

It needs more and broader awareness of the benefits and opportunities presented by employee ownership for owners and founders, greater understanding of its economic value and business relevance for funders, the media and the advisory marketplace and the availability of more professional advisors able to support owners and founders who want to use the model.

In our experience of assisting hundreds of business owners through the journey towards employee ownership, it is clear that it is the trusted advisers, and in particular practice accountants, who are often a first point of contact for owners considering the long-term future of their company.  Whilst these accountants are duty bound to ensure they act in the very best interests of their clients, evidence from the latest research into the take up of the Employee Ownership Trust (EOT) model reveals that in too many practices, it appears there is a knowledge gap with regards to employee ownership.

These advisers are not only failing to offer a choice for owners, but those who choose not to explore the potential of employee ownership are missing out on a valuable opportunity to retain a significant proportion of their own client base. As unlike with a trade sale, where any existing client-adviser relationship typically comes to an immediate end post-transaction, facilitating the transition to employee ownership allows advisers to continue supporting clients for the long-term.

Therefore, it is my assertion that accountancy practices not only have a duty, but also a significant commercial opportunity to ensure that there is at least one member of their team with employee ownership specialist knowledge.

At a time when off-shoring is making headlines for all the wrong reasons, when the corporate governance of some of the UK’s big businesses is under scrutiny and as the UK looks for answers to its productivity puzzle, it has also never been more important for professional advisers to understand and support the growth of a sector which contributes so significantly and so positively to the British economy.

Forward thinking accountants who appreciate the current role and future potential of employee ownership in the UK economy are uniquely placed, both to help drive further growth and to capitalise on the opportunity for their own business and we look forward to welcoming more of them to collaborate with the EOA and its membership.

 

Deb Oxley, Chief Executive, Employee Ownership Association

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To find out more about the EOA, please visit:

www.employeeownership.co.uk.

Twitter: @employeeowned

Facebook: / EmployeeOwnershipAssociation

LinkedIn: Employee Ownership Association