Carole Leslie

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  1. A new landscape for employee ownership?

    April 6, 2014

    On the 17th January 2012, Nick Clegg pledged to “drive employee ownership into the bloodstream of the UK economy”. Such a step change hasn’t quite happened yet, but he did make several strong moves which helped raise the profile of a business model that’s gaining interest across the globe.

    The most noteworthy policy change was the move to bestow Capital Gains Tax relief when an owner sells their business to the employees. As Policy Director of EOA at the time, I was involved in the discussions with various HMRC,BIS and Treasury officials. Danny Alexander, Chief Secretary to the Treasury, has taken an active interest in employee ownership, having visited the very successful Woollard & Henry engineering company in Aberdeen, innovative manufacturing company Gripple in Sheffield, and opened the new offices of Highland Home Carers in Inverness. He was always very supportive in discussions, but did challenge why there was a need to incentivise a sector that appeared to do very well without any help. A good question. There are some spectacular success stories demonstrating how employee owned firms can be more productive and profitable, with happier staff and customers than similar conventionally structured companies.

    Tax breaks were not a factor for these owners, and I believe tax breaks will not be an incentive for future business owners. Yet, I’d judge these tax incentives to be a huge success- and they’re not even in force yet! What the tax breaks have done – already – is create tremendous interest within the adviser community. Lawyers and accountants were largely oblivious to employee ownership prior to these changes. This meant that the option was not even going on the table when the client had the business succession conversation. Trade sales, MBOs, Listing – no mention of selling to employees. Employee ownership is now on the agenda.

    The Institute for Chartered Accountants in England & Wales hosted the launch of the Nuttall report in July 2012. Co-operative Development Scotland, responsible for promoting collaborative business models in Scotland, has been running a series of very well attended seminars for professional advisers interested in raising their knowledge levels on employee ownership.

    This is all good. The biggest hurdle obstructing the progress of employee ownership isn’t fiscal, it’s awareness. Not enough business owners and entrepreneurs know the model exists, and if they do, there are insufficient expert advisers with the knowledge to advise and support companies through the process. By giving tax relief to business sales to employees, the government has ensured that the professions now have a duty to know about, and explore the model with their clients.

    Perhaps not a new landscape yet, but it might just be a new dawn.

  2. Employee Ownership – the time has come

    July 4, 2012

    When the EOA first proposed the idea of an employee ownership summit to BIS back in early 2011, we were pleased at the warm reception. We discussed with BIS officials the format, the content and whether there was any possibility of a Government Minister making a key note speech. The objective was to raise the profile of employee ownership as a business model and encourage more business owners to consider this as part of their exit strategy.  How many attendees could we expect?  We guessed 60.  Employee ownership is a topic which elicits positive noises yet not one that’s widely understood or adopted. Yes, it’s a good business model with lots of stellar examples.  But it was still a secret. The challenge was in encouraging business leaders to give up half a day to attend a meeting on something they would be barely aware of. It would be even more difficult to attract advisers e.g. accountants and lawyers to take time off from fee earning to attend..

    July 4th 2012 was the turning point. A summit meeting, held in the City of London, hosted by the Institute for Chartered Accountants of England and Wales launched the Nuttall report on employee ownership. There were more than 200 attendees – from employee owned businesses, from the professions, from financial institutions, from the unions. The event was chaired by BIS Minister, Norman Lamb and attended by the Deputy Prime Minister, Nick Clegg and Cabinet Office Minister, Francis Maude. All three ministers mixed with guests and participated in table discussions. The Department of Business Innovation and Skills did a superb job of organising what was a landmark event. There was media interest across the globe, with column inches in all of the major publications and widespread broadcast reporting.  ”I wish we had a Norman Lamb here” said one of my employee ownership contacts in the States.

    The difference a year makes. In the past year, we have seen a surge of interest in finding new ways of doing business. Tired of the short termism fostered by external shareholders, the unfairness of disproportionate executive pay, the general disenchantment that exists in our traditional commercial world have all created a fertile ground for finding a better way.

    Employee ownership has always had cross party political support but few vocal champions.  Norman Lamb, in his short tenure to date, has made things happen. The Nuttall report will be read with interest, and there is commitment to act upon the recommendations.  The Treasury review into the fiscal landscape surrounding employee ownership is due to report in the Autumn.

    The 4th July Summit is only the start.  The time for employee ownership has come.