Employee Share Schemes 2018 The Good, The Bad & The Future

 

 

 

 

 

 

 

 

 

Despite Government taking its eye off the ball on EMI options, in other ways 2018 has seen major steps towards increased employee ownership.

The EMI story

This was a desultory one but with a satisfactory ending – for the time being.  Our concern is that a similar problem may come around again in 2019 but this time with no solution in sight.

EMI tax reliefs are regarded as State Aid under EU rules, requiring EU Commission approval which needs to be renewed on a regular basis.  The previous approval was set to expire in April 2018 but the UK Government only became aware of this days before the expiry, resulting in the tax reliefs ceasing to apply and worries that amidst Brexit negotiations renewal would not be a priority for the EU Commission.

In the event, the Commission did come through with renewed approval and no damage was done.

But there could be a new, final chapter in this short story.  Under an agreed Brexit withdrawal it will be necessary, if EMI is to continue, that State Aid approval also continues, and currently it is not clear that this has been provided for under any withdrawal terms.  A no-deal withdrawal does not present this problem but of course would throw up wider issues on a wholly different scale.

But aside from the EMI lash-up, 2018 has been otherwise been a positive year, particular for all-employee ownership and ownership succession through employee ownership trusts (EOT).

 

Employee ownership

In June, the Ownership Dividend inquiry into employee ownership was published http://theownershipeffect.co.uk/, finding amongst things that increased employee ownership in UK business has the potential to:

  • Increase productivity and performance
  • Support the development of regional economies, and
  • Foster more engaged employees

A growing number of companies have seen the benefits of becoming employee owned and transferred ownership to an employee ownership trust.  In 2018 these included household names such as Riverford Organics www.riverford.co.uk and Aardman Animations www.aardman.com  and others including orms (architects) www.orms.co.uk and Blue Chip Technology (computer design and manufacture) www.bluechiptechnology.com

The Scottish government announced financial support for extending employee ownership, and the Labour Party announced its own radical plans to increase the number of employee owners in the UK.

The record 750 delegates at the November annual conference of the Employee Ownership Association www.employeeownership.co.uk showed an unprecedented level of interest in employee ownership. With EOTs becoming an increasingly attractive exit route for business owners, and with professional advisers increasingly aware of this, we predict that 2019 will be the year in which employee ownership comes into the mainstream.

If you would like to explore how employee ownership or an employee share scheme might be introduced in your company, please contact us for an initial discussion.

We are happy to meet at our offices without charge or commitment and will be very pleased to hear from you.

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