Report on employee ownership published

The Employee Ownership Association (EOA) has published a report that calls for a three-fold increase in the value of employee-owned firms to UK gross domestic product (GDP) by 2020.

The Employee ownership impact report, which makes the business case for more organisations to opt for employee ownership, showed that the sector currently accounts for 3% of GDP and is growing 10% year-on-year.

The EOA’s goal is for the employee-owned sector to contribute more than £100 billion to the UK economy by 2020.

It sets out targets to deliver this strategy, including:

  • Creating a network of financial bodies that regularly fund employee-ownership transactions.
  • Directly assist 100 organisations through their transition into employee ownership over the next three years.
  • Deliver an ongoing programme of awareness-raising events across the UK.
  • Significantly improve the clarity of material that demonstrates the benefits of employee ownership.
  • Play a leading role in the government-backed Employee Ownership Implementation Group.

The government has also confirmed that it will support the creation of a UK Employee Ownership Day on 4 July.

Nick Clegg, deputy prime minister, said: “I want to see employee-owned firms hardwired into the British economy and I welcome the Employee Ownership Association’s ambitious plans for growth, outlined in the new guide to employee ownership published today.

“Up and down the country, across public and private sectors, people-centered workplaces are contributing more and more to the economy and, through tough economic times, these firms can outperform others.

“I want to go further, which is why, from April next year we’ll inject £50 million into the sector, making it easier for staff to take over the running of [organisations] and for new firms to set up under employee-owned models.”

Jo Swinson, minister of employment relations and consumer affairs, added: “The EOA has set a bold and challenging target for businesses.

“The evidence shows that employee ownership can make an important difference in building a stronger economy and a fairer society.”

Ian Hasdell, chief executive officer at the EOA, said: “It is very positive that [Clegg] is endorsing the economic business case for more employee ownership set out in the new report.

 “Employee ownership in the UK is growing and the businesses concerned thriving, because they enhance the working conditions and entitlements of employee owners. Clearly, what our members wish to see is the translation of these helpful words of support into bold practical action from government, particularly on taxation, that will help to deliver on our mission to increase the contribution of employee ownership to 10% of UK GDP by 2020.”

Michael Thompson, chief executive of employee-owned Childbase Partnership, added: “The evidence is undeniable: organisations that put employee wellbeing and collaboration at the centre of their operation reap the benefits of increased productivity and quality.

“That these results have been achieved by employee-owned organisations in the midst of recession, and in spite of current restrictions, makes a compelling case for government action now to support the process.

“The reality is that without incentivised support for entrepreneurs and their employees to pursue co-ownership, few will be willing to take the financial risk of drastically changing their company structures and practices.”

This follows the 2013 Budget, on 20 March, in which the government announced that it will invest £50 million annually from 2014-2015 to incentivise the employee ownership sector, as well as announcements that the first £2,000 of share value that any employee receives under the new status will be free from income tax and national insurance (NI) contributions, and that the government will fund capital gains tax relief on the shares.

On 20 March, the government’s employee-owner scheme, which would allow employees to give up some employment rights in return for shares in their employer was blocked by the House of Lords.