Member Article

Co-operative economy grows for 5th consecutive year

As the Co-operative economy has grown for a 5th consecutive year and the number of Co-operatives has increased by 28%, we asked Ed Mayo, Secretary General of Co-operatives UK why they have been performing so well:

H: Danielle Robinson – Host

A: Ed Mayo, Secretary General of Co-operatives UK

H: The number of entrepreneurs, employers and communities taking ownership and control of their own businesses through a co-operative enterprise has reached an all-time high so what is driving the growth in member owned organisations like co-operatives?

A: It’s a tough time for all business at the moment but if there is one thing you want to do in that kind of climate is to keep those who are closely involved in the business motivated and active and creative, innovating. That’s the Co-operative model, the Co-operative business model. It essentially says you’re a business that’s owned by those who are closest into the business. It may be the staff, it may be employee owned, maybe the customers, consumer owned, it maybe enterprises, suppliers coming together. So I think that’s the key at the moment. We’ve seen now the fifth consecutive year of growth in the co-operative sector and we’ve seen a real increase both in the number of co-operatives and in the turnover of co-operatives as well. So it is not the largest part of the economy by any means but there is a sign of hope there and something I think that all business could learn from.

H: What do you think it is about co-operatives that are so popular?

A: We certainly know that in terms of public perceptions there is a very high degree of trust in co-operative businesses in the sense that co-operative businesses will act fairly. So that’s a fabulous dividend to have but you have to nurture that, you have to keep it honest in that sense. So the co-operative model is about sharing the benefits so it’s a model of dispersed ownership. We have now over 15 million, 15.4 million members across the UK. So that’s a huge number of people that have bought into the success of these businesses and they get a share in the benefits. So that seems to be a good way of going about it. Yes, money isn’t the only motivation but if you can share what money you make that’s a good business strategy.

H: The co-operative economy has done very well for the past five years. What do you think the outlook is for the next five years, what are the main challenges that you face?

A: I think in some sectors we are seeing some co-operatives emerge that could transform the market and really the next five years is about whether that happens or whether they remain small. Co-operatives are of course very big in retail, big in financial services, big in agriculture but we are also seeing co-operatives emerge in some creative industries, digital sectors and one example would be the energy sector where over the last eighteen months Co-operative Energy has been launched by one of the consumer co-operatives, Midcounties Co-operative and that’s challenging the big six utility companies. The ugly six in some ways, not usually loved in the public’s mind’s eye. Well Co-operative Energy has come forward, drawing on that trust and sense of fairness. It’s picked up 150,000 customers, members over the first eighteen months. The question for the next five years is, can it really change that market? It’s a market that doesn’t work for consumers, people feel as if they are being ripped off. Co-operative energy changes, is a game changer because it shares the profits. It is a profit making business we are there to make profits like any other business. It’s what we do with the profit that differs because those profits are shared with the people that own the enterprise. So if you sign up to Co-operative Energy then and actually you get a share in the profits that are made. Now that’s quite an attractive proposition.

H: How does the UK Co-operative company compare globally?

A: We are one of the largest co-operatives sectors across the world and we’ve got some of the most innovative co-operatives here in the UK but having said that co-operatives, it’s a bit like football I think in many ways where we invented it but there are others who do it a bit better than we do. Certainly Brazil is good at football. Brazil has got a very, very high rate of co-operative growth as well as to the other so called brick countries in Brazil, Russia, India, China, some people had South Africa as well. So there are great models to look at overseas. If I had to pick one my favourite from overseas that I would love to see here in the UK it’s Barcelona Football Club. Barcelona, as with many of the German Bundesliga Clubs are member owned, they run as co-operatives. Hugely successful on the field but they help to buy in fans as well in terms of what they do. We’ve got some, a number, a growing number of football co-operatives in the lower leagues. It would be lovely to see that come into the Premier League here in England or wider across the UK.

H: Are there any other lessons that you think we should learn from other countries?

A: I think one of the great success stories from countries like the Netherlands has been the getting farmers together into co-operatives. Here in the UK the supermarkets as the former Prime Minster famously said, Tony Blair he said the supermarkets have got the farmers in an arm lock. That’s about power it’s about the amount of power that supermarkets have. If farmers get together in co-operatives of course they’ve got more bargaining power and that’s not as airy as some game, if you work together then you can improve the supply chain, you can improve quality. So for example Ribena all the blackcurrants come from a co-operative of the farmers that grow the currants. Now that works for the farmers but it also works for the company the produces Ribena because they’ve got a productive relationship. But farmer’s coming together is something that other countries do better than we do here in the UK. Scotland is probably ahead of the game. More farmers, three quarters of farmers in Scotland are members of co-ops but if we are going to keep our rural economy going in the UK there is a lot that we could learn from overseas.

H: One of the other things that the co-operatives seem to have done very well is this issue of gender equality in the fact that so many more women are at directorship levels are doing well in co-operatives compared with other business models. How is that come to be? What do you think other businesses could learn from the model?

A: There’s a great track record we’re now seeing across cooperatives in terms of the involvement of women on a more equal basis. At a very senior level of cooperatives are elected positions, directorships, chief execs, presidents and the like and I think that reflects the extent to which cooperatives are people-centred models, but also it’s good business sense in terms of being able to draw on talent from wherever it is. I think we’re well passed the day when anybody could claim that somehow business talent was something that men had that women didn’t. It’s quite easy to see that there is real entrepreneurship and insight there across both genders and more widely in terms of diversity. Coops have been faster on the uptake in terms of responding to that. We’re seeing efforts across the FTSE companies, the listed companies, to try and increase the number of women on boards for example, but it’s still incredibly low, only 13% in listed companies across the economy whereas in cooperatives it’s now around 37%, so I think there is a story there of coops being smart in terms of business recognising the contribution that can come from across their customers, from across the workforce as well, but also being ethical in how they do that.

H: The report was entitled, Home Grown. What is it about the Cooperative economy that is home grown?

A: We’re home grown in the sense that we’re businesses that tend to be started by people often locally, they’re coming together and using the cooperative model because it’s a good way of running a partnership. But we also stay home grown in the sense that because we’re not listed on stock markets, we can’t be bought out by American conglomerates or the like and packed up and sold elsewhere across the world. Again we cooperatives pay taxes, I know that’s very unusual in a business setting but we pay our taxes and we’re not owned overseas by offshore trusts or the like so it’s not as if taxes are lost. We did one thing for this report which is to track a £1 coin that’s spent in a Cooperative food shop, we did this in Lincolnshire and what we found was that pound coin stayed in the local economy far longer than if you spend it at a national chain or online with Amazon or the like. It stayed in the local economy working in the local economy because the Cooperative employs local people, it’s owned by local people, it’s supplied by local suppliers, so for every pound that’s spent in a Coop food shop, around 40p additionally is found to benefit the local economy, because it’s home grown in that way and that’s good news.

H: What is it about cooperatives that make them so different if you had to summarise it?

A: I think cooperatives are essentially about people’s need rather than people’s greed and at times when the economy is tough, there’s going to be a turning to that. We’re seeing cooperatives emerge for example where other business models won’t work, village shops for example being closed down that are being saved by the community coming together to run them cooperatively, because margins are so tight in retail, if you lose three or four people out 100 to out of town shopping store or online, then your margins may be too tight to continue. The cooperative model, if you’re customer owned, then you can draw on customer loyalty, and that’s hugely important to a village, it’s not just a shop, it’s about keeping the soul of the village and the community, so in that case and in other cases, being a cooperative allows you to approach business in a different way. There’s no doubt disadvantages and things other models could offer better but for sheer focus on people and galvanising people to try to do well and share the benefits, there’s nothing like a cooperative.

H: Where can people go to get some more information?

A: Well this fortnight is cooperatives fortnight where we’re coming together to celebrate the contribution of cooperatives around the country, so this report is a statistical report about the sector and that’s available on Google, home grown cooperative economy, you’ll find that. We also produce for the fortnight a smartphone app called Cooperate, we had to think about that one, Cooperate, and if you download that, that can show you cooperatives that are close to you and give you the choice to choose cooperative as well.

H: So it gives people the option very easily to find them, because a lot of things you wouldn’t realise are actually cooperatives. I think a lot of people probably take for granted that cooperatives are all around them and they just never thought about it.

A: That’s true and I think people know the Coop food shops and the like but they not have seen, well there’s a housing coop around the corner, there’s a number of schools across England which are now using the cooperative model as well, something like 500 schools, credit unions are cooperative, savings and loans associations and they’re not quite as visible if they’re not on the high street, but they play a key role in people’s lives.

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