Business owners are being urged to consider handing over their companies to their employees when they retire.
Ahead of Employee Ownership Day tomorrow (Friday, June 29) Deb Oxley, chief executive of the Employee Ownership Association, visited Swindon on Tuesday to talk about businesses owned by their workers.
She was speaking at a partner forum held by the National Self Build and Renovation Centre, 81 percent of which owned by its employees.
Deb said that as business owners approach retirement age, succession starts to become an issue – especially if they have no family members interested in taking over the business they built.
Options include selling to a commercial rival, or participating in a management buyout, which often requires the backing of demanding venture capitalists on the part of the new owners.
By creating an employee-owned enterprise, with shares held in a trust, businesses owners can ensure the longevity of the firms they built: handing over control of the business over a longer period of time – and there is no desire to show the managing directly quickly to the door – and taking dividend payments from the trust.
Jobs and supply lines are protected, and the company name and reputation lives on long after the founder has departed.
The UK business population, said Deb, is dominated by SMEs, which employ 60 percent of the working population. But six in ten of those businesses have no succession plan, making the SME economy vulnerable.
Pointing to UN sustainability goals, Deb said the UK had "dreadful measures" on wealth and income inequality, with 44 percent of the country's wealth owned by 10 percent of the population, and households in the top 20 percent of earners enjoying five times more income than the bottom 20 percent.
"We should be ashamed of this level of inequality, which leads to divisions in society," said Deb.
Setting out the benefits of employee ownership, Deb – who was on her first visit to the NSBRC – said that because they’re co-owners, staff in employee-owned businesses tend to be more entrepreneurial and committed to the company and its success: every employee effectively becomes a salesperson for the business they now have a financial stake in, and feel more empowered to introduce new ideas.
They also tend to be better at recruiting and retaining talented, committed staff because they have high employment standards, involve staff and give everyone a stake.
A recent YouGov survey commissioned by the Employee Ownership Association found that 44 percent of young people were more likely to apply for a job at a firm that was employee owned. In the same survey, 41 percent of respondents said they were more likely to buy from an employee-owned business, and 58 percent viewed them as being more trustworthy.
"That's important at a time when trust in business is at an all-time low because of the bad behaviour of a small number of business owners," said Deb.
The employee ownership economy is now estimated to be worth between £30 billion and £40 billion a year – a greater contributor to the UK economy than the agriculture sector.
Perhaps the most well-known employee-owned business is the John Lewis Partnership. Others include Cambridge Weight Plan, architects Make, filmmakers Aardman Animations, and audio retailer Richer Sounds, whose founder Julian Richer announced just last month that he was transferring 60 percent of his shares into an Employee Ownership Trust as he prepares for retirement.
The NSBRC became employee-owned in 2014, after its previous operator went into administration. NSBRC will be celebrating Employee Ownership day with an early finish, staff barbecue, and a £2,500 per employee pay-out from the profits generated in the past 12 months.
The business will also be buying back shares held by financial backer Capital for Colleagues.
"Employee ownership creates businesses whose employees care enough to go the extra mile, that take a long-term view, and which are more resilient and able to survive economic shocks," said Deb. "They are a force for good."