Research from the White Rose Employee Ownership Centre found that by June 2021, there were 730 employee-owned businesses in the UK. This number had been increasing year on year, with over 250 of these businesses having become employee-owned in the previous 18 months.
Employee ownership is an ownership model in which a business is totally or significantly owned by its employees, either directly, indirectly via a trust, or via a management buy-out. So why is there such an appetite to become employee owned? We believe it comes down to several reasons, summed up as: succession, business growth, making a positive contribution to our communities and it being a socially responsible thing to do.
The Ownership Dividend Report (2018) found that the Employee Ownership proves popular wherever the company operates and whatever the industry. Importantly it can deliver a more productive and inclusive economy in three ways:
- Improving UK productivity – via more businesses unlocking the enhanced performance and productivity powered by the increased personal endeavour and discretional efforts of employees acting with greater common purpose once they become employee owners.
- Resilient regional economies – via a more sustainable and resilient business model that root jobs locally by providing an effective business succession solution, business independence and the ability to plan growth and investment over the longer term.
- More engaged employees – via more inclusive, transparent and effective models of corporate governance and employee engagement which better involve, motivate and financially reward individuals through their ownership stake.
In Wales, SMEs account for 99% of the business count and 62% of private sector employment, with family ownership common. 43% of these businesses do not have a succession plan in place, with only 12% of family firms making it to the third generation (Rooted and resilient, Social Business Wales report 2017). What happens when the owner steps aside? Does the business fold? Is it sold, if so to whom and what will they do with it?
Employee ownership has a huge role to play in this ability to provide a viable succession plan and to ensure jobs are rooted in our local economy. Broadening the awareness and understanding of employee ownership as a business succession approach offers a way for many more Welsh SME owners to realise the value of their business in a way that creates benefits for themselves, for their employees and for Welsh society.
History of Employee Ownership in Wales
Over 50 Welsh companies have received advice about ownership transition from the Wales Co-operative Centre, which completed its first assignment in 1994 with the £9million purchase of Tower Colliery by its employees.
Tower Colliery was the last deep mine in the South Wales coalfield, situated to the extreme North of the coalfield, just outside of Hirwaun. In 1994, after over 100 years of coaling, Tower, along with the other few remaining South Wales deep mines, was considered uneconomic and threatened with closure. A campaign was started by the National Union of Mineworkers [NUM] members at Tower to organise an employee buyout and establish a workers’ co-operative. A small group was elected by the workforce each of whom had committed an initial £1,000 of their redundancy money to the project to prepare the tender for the mine. The group was known as the TEBO [Tower Employee Buy Out] team and the mine became the property of the workers from 1 January 1995.
“From the very moment we took the pit over, I knew we were going to create something the world had never seen before … I’ve always believed ordinary people can stand up for themselves and change the world.” (Tyrone O’Sullivan — First Chairman of the Board and the driving force behind the Tower Colliery Employee Buy Out).
Since then many businesses across different sectors in Wales have become employee owned. These businesses, such as Tregroes Waffles and BIC Innovation have seen real business growth, citing employee ownership as fundamental in incorporating new ideas and developing new approaches to the way they operate.
As Huw Watkins Founding Director of BIC Innovation puts it: “Employees at all levels have increased their involvement in the running of the business and as a result, it has created something special, a real feeling of belonging.”
Employee Ownership as a model can help create a Welsh economy that puts an onus on productivity and financial success that brings colleagues together, supports innovation, enterprise and risk-taking, builds greater engagement and commitment, and rewards people well for their efforts.
The Wales Co-operative Centre through the Social Business Wales programme funded by Welsh Government and the European Regional Development Fund, has built up knowledge and expertise in delivering the advice and hand-holding required for businesses to transition to employee ownership.
We will continue to support business owners in Wales to transition to employee ownership. In doing so we can deliver on a Wales where businesses are rooted in their communities, are champions for a fairer and greener society, for stronger co-operative working and for the greater social good.