Even though the coronavirus pandemic has had a negative impact on the global economy and has brought many challenges to daily life (not least the human cost), we must recognise that it has also brought some positive changes. One of these, which is the focus of this article, is how many employee owed businesses, across the globe, have thrived during the pandemic, and how many businesses are seriously considering the transition to employee ownership as a result.
Global growth
The White Rose Centre Employee Ownership survey for England and Wales, published in June 2021, found that that from June 2020 to June 2021, 148 new UK employee owned businesses were created which was a 31% increase from the year before. The survey also found that as of June 2021, there had been 113 new EO businesses and since January 2020, making an impressive total of 730 EO businesses in the UK and that 1 in 20 private company sales were using the EOT model. In the previous years' survey, it was stated that London and Scotland have had the highest growth for employee owned businesses since 2017. Scotland's growth in the employee ownership sector is particularly notable. This might be due to Scotland having a large proportion of SMEs in its economy and the transition, using the employee ownership trust model, is particularly attractive for small businesses. It is also likely a result of support offered by organisations such as Co-operative Development Scotland.
The statistics show that employee owned businesses are becoming more popular in the UK.
In the US, the Employee Ownership Foundation collaborated with Rutgers University School of Management and Labour Relations to examine the pandemic's effect upon employee owned businesses. The study started on 5 August 2020 and ended on 23 September 2020 and focused on areas such as job retention and benefits. One of the findings was that employee owned businesses were between three and four times more likely to retain staff, at all levels, compared to the other businesses. Another finding was that of the employee owned businesses surveyed, 26.9% had imposed a cut to employee pay compared to 57.3% of other businesses surveyed. These statistics highlight how resilient employee owned businesses have been when compared to other businesses during the pandemic.
Changing business mind-set
Employee owned companies recognise their employees as owners within their business, highlighting how such business structures value all their staff and many have strong collaborative and inclusive cultures.
During lockdown, it is clear to see that throughout the UK, many individuals became more connected to their local community and many have supported their local amenities. This can be explained in part by the emphasis on home working and staying at home, and also the prohibition on travel.
As well as many individuals becoming more involved in their local community, businesses have begun to re-think their business structures and focus on creating a collaborative and inclusive culture within their workforce. 3Gem, a market research company, and Vestd, a technology services company, carried out a poll in 2020 in regards to employee equity trends in the UK, and found that over half of the 500 businesses that completed the poll, would like to offer shares to employees. This indicates a shift in business mind-set and highlights that there may be (amongst other things) a new interest in shared ownership. This may be due to the fact that in lockdown, it can be difficult to motivate staff when working from home. Therefore, businesses have been thinking of other ways they can incentivise their employees and offering equity has been seen as an attractive alternative to other incentives, such as pay and promotion. The sense of community that has developed during lockdown may well be further developed by a desire for further engagement and participation, whether through the EOT (indirect) model of ownership of by offering shares directly to employees.
UK community business initiatives
The White Rose Centre Employee Ownership survey for England and Wales, published in June 2021, found that that from June 2020 to June 2021, 148 new UK employee owned businesses were created which was a 31% increase from the year before. The survey also found that as of June 2021, there had been 113 new EO businesses and since January 2020, making an impressive total of 730 EO businesses in the UK and that 1 in 20 private company sales were using the EOT model. In the previous years' survey, it was stated that London and Scotland have had the highest growth for employee owned businesses since 2017. Scotland's growth in the employee ownership sector is particularly notable. This might be due to Scotland having a large proportion of SMEs in its economy and the transition, using the employee ownership trust model, is particularly attractive for small businesses. It is also likely a result of support offered by organisations such as Co-operative Development Scotland.
The statistics show that employee owned businesses are becoming more popular in the UK.
In the US, the Employee Ownership Foundation collaborated with Rutgers University School of Management and Labour Relations to examine the pandemic's effect upon employee owned businesses. The study started on 5 August 2020 and ended on 23 September 2020 and focused on areas such as job retention and benefits. One of the findings was that employee owned businesses were between three and four times more likely to retain staff, at all levels, compared to the other businesses. Another finding was that of the employee owned businesses surveyed, 26.9% had imposed a cut to employee pay compared to 57.3% of other businesses surveyed. These statistics highlight how resilient employee owned businesses have been when compared to other businesses during the pandemic.
Changing business mind-set
Employee owned companies recognise their employees as owners within their business, highlighting how such business structures value all their staff and many have strong collaborative and inclusive cultures.
During lockdown, it is clear to see that throughout the UK, many individuals became more connected to their local community and many have supported their local amenities. This can be explained in part by the emphasis on home working and staying at home, and also the prohibition on travel.
As well as many individuals becoming more involved in their local community, businesses have begun to re-think their business structures and focus on creating a collaborative and inclusive culture within their workforce. 3Gem, a market research company, and Vestd, a technology services company, carried out a poll in 2020 in regards to employee equity trends in the UK, and found that over half of the 500 businesses that completed the poll, would like to offer shares to employees. This indicates a shift in business mind-set and highlights that there may be (amongst other things) a new interest in shared ownership. This may be due to the fact that in lockdown, it can be difficult to motivate staff when working from home. Therefore, businesses have been thinking of other ways they can incentivise their employees and offering equity has been seen as an attractive alternative to other incentives, such as pay and promotion. The sense of community that has developed during lockdown may well be further developed by a desire for further engagement and participation, whether through the EOT (indirect) model of ownership of by offering shares directly to employees.
UK community business initiatives
1. Community Ownership Fund
As a response to the pandemic, the UK government has launched a new £150 million Community Ownership Fund to help ensure that communities across England and Wales can support and continue benefiting from local facilities and amenities.
This means that since June 2021, community groups are able to bid in rounds for up to £250,000 matched-funding to help them buy local community amenities at risk of being lost, to run as community owned businesses. The second bidding round opened in December 2021. The Community Ownership Fund aims to ensure that community amenities that are an important part of the social community can continue to run and operate in the UK. Many employee owned businesses that we work with, help and support their local community and this no doubt shows an alignment of these causes with their ethos in creating a collaborative and inclusive environment in which all their staff are recognised as part owners of the business.
2. "Help to Grow" Scheme
Another initiative, a "Help to Grow" scheme, to help the UK economy recover from the Covid-19 pandemic, has been announced by Rishi Sunak and offers the heads of 130,000 SMEs the chance of MBA-style management training which includes training on business structure. The scheme also provides SMEs with the chance to get expert technology and digital advice and discounted software in the hope that they can utilise such advice to provide a good start to revival and some SMEs may decide, as part of the recovery process, to restructure their business.
3. The Ownership Hub
3. The Ownership Hub
On 22 June 2021, the Ownership Hub officially launched. This is a national initiative which aims to support businesses within geographical areas to grow employee and worker ownership in partnership with Co-operatives UK and the Employee Ownership Association. One of the Ownership Hub's campaigns is to create more than one million jobs by 2030 through businesses giving employees a stake in the business.
The Ownership Hub targets leaders of start-up businesses to discuss co-ops and employee ownership, long-standing businesses considering transitioning and educates professional advisors so that they can support employee or worker owned businesses.
Sheffield City Region is the first regional partner showing its commitment to grow the number of worker and employee owners in South Yorkshire. This is an exciting initiative as it aims to boost support for co-ops and employee ownership, particularly as the economy recovers due to the COVID pandemic, and we hope it gains significant traction throughout the UK.
The new normal
With many businesses re-considering their structure and the need to focus on employee incentives as well as individuals valuing and supporting their communities more than pre-COVID, the pandemic has shown us the important role employee owned businesses have within the UK economy and how resilient they have become. The pandemic has given many businesses the opportunity to pause and consider whether to transition to becoming employee owned.
It will be interesting to see the impact of this new thinking and the changing business mind-set of many employers, on the number of UK businesses that transition to employee owned post-COVID. As employee ownership has during lockdown demonstrated its attractiveness as a means of collective ownership and endeavour, we expect the statistics to show another increase in employee owned businesses in the next financial year.
References
Figures for the White Rose Centre for Employee Ownership survey are provided by Prof Andrew Robinson (University of Leeds) & Prof Andrew Pendleton (UNSW) (UK)
The study, titled “Employee-Owned Firms in the COVID-19 Pandemic: How Majority-Owned ESOP & Other Companies Have Responded to the COVID-19 Health and Economic Crises,” conducted from August 5 through September 23 of 2020 (US)
3Gem and Vestd poll: https://www.thehrdirector.com/business-news/employee-experience/uk-employees-hopeful-about-the-promise-of-digital-but-half-more-fed-up-with-work-than-ever/
Community Ownership Fund:
https://www.gov.uk/government/publications/community-ownership-fund
"Help to Grow" Scheme:
https://www.gov.uk/government/news/budget-2021-sets-path-for-recovery