Partner Article

Towards an Enlightened Economy

August used to be the month during which farm owners would gift to their workers a new pair of gloves for the year ahead. Those times are still remembered in many rural locations and are often marked with a single glove tied throughout the month to a pole in market places or on village greens.

Industrial relations in the UK have in many ways come a very long way since that period in our history. But in so many aspects they have not. The quasi feudal dynamic between employee and employer persists in a number of sectors of our economy. It is not a coincidence that poor levels of productivity continue to blight our economic competitiveness. The UK is presently almost 20% behind the other G8 countries on a range of measures of productivity.

So last month’s brilliantly successful inaugural UK Employee Ownership Day was of huge importance when set against this historical economic and social context. It marked another progressive step towards securing a modern and enlightened economy. It reminded employees, policy makers and business communities that the unequal nature of economic ownership in the UK will, if unaltered, continue to have major negative social consequences and costs. Business ownership and wealth in the UK has become incredibly concentrated amongst a small number of individuals and institutions with 50% of the people in the UK owning just 1% of the wealth, and 20% owning 84% of the wealth.

Through over 100 events across the UK, EO Day 2013 confirmed that employee ownership is now the most prominent alternative to the external ownership of businesses in the UK. EO Day 2013 wonderfully highlighted the growth and competitiveness contribution employee ownership makes, including in the smaller knowledge-based companies on which the UK economy increasingly relies.

The Day profiled for a bigger audience than ever before how employee owned business have higher productivity, greater levels of innovation, better resilience to economic turbulence and more engaged, happy workers who are less stressed than colleagues in externally owned organisations. The Day showcased how employee owned businesses in the real economy, selling high quality services including world class public services and making marvellous products, compete, succeed and outperform others as a direct result of being employee owned. Above all else it demonstrated that the economic business case for employee ownership is becoming properly understood.

It is equally encouraging that the Treasury has now launched its formal Consultation about how the fiscal incentives to grow employee ownership in the UK, announced in Budget 2013, should be implemented. The Employee Ownership Association with its Members fought hard last year for the Treasury Review into taxation for employee owners. It is very positive that the Review has culminated in these new proposals. We strongly support the detailed recommendations contained in the Consultation. These will deliver a total exemption from Capital Gains Tax for a business owner selling a controlling interest in their business to its employees within an employee ownership structure. Also on the table is a welcome reform of the taxation of profit related pay in employee owned businesses that use the indirect method of employee ownership, often through an Employee Benefit Trust.

The Consultation runs throughout this month and into September. I encourage you please to endorse the EOA response to it by finding a few moments to write to the Treasury with your views. Your voice will be incredibly powerful and important in this process.

I suspect that Government will need to find a modest amount of additional funding, beyond the £50m per year already identified for these new fiscal incentives, if they are to be meaningful rather than token measures. This is particularly true of the profit related pay reforms which must be introduced at cash values that make a very significant real difference to employees. If such additional investment proves necessary the return on it for the economy and for the Exchequer clearly justifies it. In recent weeks the Government has loudly and very publically embraced the EOA’s target of 10% of UK GDP being delivered by employee owned organisations by 2020. This unprecedented support has been a tremendous and very welcome development. But only if Government backs the employee ownership measures announced in Budget 2013 with the correct amounts of finance, will its commitment to the10% target be taken even more seriously.

So these remain exciting times for employee ownership. We really are very much in the decade of employee ownership – its time has come.

For those of you able to take some time off during August I wish you a relaxing, peaceful break.

Iain Hasdell is Chief Executive of the EOA

Email: iain.hasdell@employeeownership.co.uk

The EOA Annual Conference, the UK’s pre-eminent gathering on employee ownership will be held on the evening of Tuesday 12th November and during the day of Wednesday 13th November 2013 at the National Motorcycle Museum, Solihull, West Midlands. Details about the programme and how to book may be found here http://bit.ly/12bs5sk

This was posted in Bdaily's Members' News section by Employee Ownership Association .