Now is the decade for employee owned businesses to thrive

IT is the best possible time for businesses in the UK to take advantage of the employee owned business model according to an industry expert.

lain Hasdell, CEO of the Employee Ownership Association – the association of employee owned and trust owned businesses in the UK– said he believes we are in the decade where employee ownership has far more momentum around it than ever before.

Hasdell was speaking at a Round Table discussion held at Lupton Fawcett Lee & Priestley law firm in Leeds city centre, hosted by TheBusinessDesk.com founder, David Parkin.

“I believe we are in the decade where employee ownership has far more momentum around it than ever before. If we are in the decade of employee ownership, we are only three years in, and have only really just got started,” Hasdell said.

“In the last two years, the number of employee owned businesses in the UK has grown by 10%. A lot is happening. It is a growing part of the economy. We are hopeful there will be more business advisors saying ‘having you thought of this model?’. We are hoping to get there in the next three years.”

According to the association, this sector of the economy is worth over £30 bn annually. Currently, the sector accounts for 3% of GDP and is growing 10% year on year in the UK.

“I doubt three or four years ago we would have been having this conversation in the middle of a financial services city. If we are in the decade of employee ownership, we are only three years in and only really just got started,” Hasdell added.

“What surprises most people is when they look at employee owned companies, how many sectors it is in. Employee owned businesses are in pretty much every sector and is represented across the geography of the UK.

“And wherever we go in economy, there are plenty of examples of employee owned businesses. People start by hearing a successful story and then the trick is to get them to understand what an employee owned business actually is.”

Earlier this year, deputy prime minister Nick Clegg MP said from April next year, government will inject £50m into the sector, making it easier for staff to take over the running of companies and for new firms to set up under employee owned models.

However, members of Yorkshire business community said the lack of awareness around employee ownership needs addressing.

Jonathan Oxley, a director in corporate finance at Lupton Fawcett Lee & Priestley, said: “Part of the problem is that people haven’t got the message. The growth is there and I think this growth will continue, but I think there are things that are needed to kick start it.”

Melanie List, a senior tax lawyer at Lupton Fawcett Lee & Priestley said it is now vital to raise the awareness of what this model can look like and what the benefits can be to businesses.

“This is an alternative business model and it is about all of us understanding it and being able to discuss it with different people. That’s important,” she said.

Hasdell said there is a lack of awareness at the “top”.

“The policy makers just don’t quite get it. And the accountants, lawyers, for example – they have a lack of awareness,” he said.

Sheffield-based speech recognition software firm Voice Technologies became employee owned this year. The deal involved the creation of an Employee Benefit Trust, which acquired 75% of the business, with founder Heather Wylie retaining 25%.

Managing director, Alistair Graham, said throughout the transaction, the management spent a lot of time focusing on customers and the employees, but due to the lack of awareness of professionals, it was “touch and go”.

“It took the banks six months to go away and say ‘oh yeah that’s the same model as John Lewis’,” he said.

“It was touch and go for us and in hindsight, we should have engaged with the banks earlier.”

Hasdell said the banks make employee ownership seem “mysterious” but in principle is an easy structure.

“The structure is really quite straight forward – it is the engagement and communication which is more complex,” he said.

“The knowledge, awareness and skill of advisors is lacking and we have got to work at that.”