Employee ownership offers an escape route for so many challenges facing the government The businesses tend to perform better, particularly in recessionary times. Wealth created is shared amongst employees, not channeled into the pockets of tax avoiding executives and we now find that employees tend to be happier and healthier thus easing the burden on our health and benefits systems. What’s not to like?
Indeed, this Government has been vocally supportive of employee ownership yet the only concrete proposal has been the widely derided “rights for shares” scheme. With only two measures, the Chancellor has an opportunity to recover the government’s position as champions of the “John Lewis economy”. These measures look at business succession and access to finance.
We need more business owners considering selling to employees as an exit route. The Nuttall report identified the lack of knowledge from professional advisers such as lawyers and accountants as an obstacle to wider adoption. By introducing a tax incentive to business owners who sell to their employees, such as exists in the US, would instantly create sufficient noise to ensure that employee buy-outs are on the table alongside trade sales, IPO and MBOs when it comes to discussing exit options for owners. In this way, we would see more of our SME and family firms remaining in their communities providing sustainable employment and skills for future generations.
Even the most successful employee owned businesses report problems with access to finance. Mainstream investors want to see a planned exit date preferably at a significant premium to the value of their investment. The employee-owned business, with its desire to maintain the jobs and investment in the local area for the long term, can find this incompatible with their plans. Similarly, one of the trends we are seeing on bank funding is that even where it is available, banks are looking to get loans paid off in full in 5 years, whereas in the past they may have offered a 10 year period. Now we are seeing some banks taking an interest in supporting employee owned models, but it’s still too local to make the step-change required. We need a lender that considers long term sustainability over short term return and the Business Bank could be that vehicle.
The government has been telling us all year how much they support employee ownership. It’s good for business, for the economy and for individuals. Make it happen, Mr Osborne.
Carole Leslie is an Employee Ownership Specialist