New FTSE Index to encourage investment in successful employee ownership (EO) companies
One Year On Report outlines progress made to support employee ownership.
Investors will find it easier to identify and invest in UK businesses which have adopted employee ownership following the launch of a new FTSE compliant UK Employee Ownership Index by Business Minister Jo Swinson today (19 November 2013).
The Business Minister announced the new Index alongside the EO One Year On Report at a launch event at the City of London today (19 November 2013).The Index will enable investors to easily identify the 69 UK public companies listed on the London Stock Exchange that have at least 3% of their issued share capital held by, or for, the benefit of employees other than main board directors.
Employee ownership, where workers have a voice as well as a stake in the success of their business, is widely recognised as a sustainable business model which helps drive staff commitment, productivity, resilience and innovation. This Index demonstrates that in previous periods businesses in the sector that have embraced employee ownership regularly outperform the comparable FTSE 100 and All-Share indices.
At the launch event, Graeme Nuttall, the author of the Nuttall Review into employee ownership, announced a new ‘health check’ to monitor ongoing progress by government and the EO sector towards making employee ownership a mainstream part of the UK economy.
The report, which measures the progress made by government and the EO sector against each of the 28 Nuttall Review recommendations made in October 2012, found that significant progress has been made against all of the recommendations. In particular:
- raising awareness of employee ownership through the first national Employee Ownership Day on 4 July 2013
- the allocation of £50 million annually from 2014-15 to introduce tax reliefs for businesses adopting the employee ownership model
- the publication of joint government and industry-led guidance to help businesses adopt the employee ownership model.
Business Minister Jo Swinson said:
As we build a stronger economy, there has never been a more important time to promote successful ways of running a business. Evidence shows that businesses that adopt the employee ownership model can be more profitable, create more jobs and are more resilient to economic shocks.
The Nuttall Review set us an ambitious challenge a year ago but I am delighted to say the government and the sector have risen to meet it. We have made substantial progress in laying the foundations for a thriving and growing employee ownership sector in the UK, but there is more to do to raise awareness.
The Employee Ownership Index will now mean investors can identify thriving employee ownership businesses and be part of their success. I hope more businesses recognise the value of this model and give their employees a greater stake in their future and the success of their company.
The Business Minister, who was joined by 4 new employee ownership companies at the launch event, committed to examining remaining issues faced by the sector. She also called on businesses to tell government what they can do to further reduce the complexities of employee ownership.
Paul Dolman-Darroll, owner of new employee-owned start-up Gamevy said:
I’ve always known that I wanted to work in an employee-owned business. When we set up Gamevy we know building a really brilliant team was going to be the biggest challenge. So employee ownership, where attracting good people is easier, seemed like the right move. We’ve had contact from several people wanting to copy our model and awareness is growing that this is a viable alternative to the traditional approach.
Graeme Nuttall, author of the Nuttall Review on employee ownership said:
One year on from the government’s response to the Nuttall Review, it is right to say that much has been achieved. I thank all those who have helped make the Nuttall Review recommendations move from the page to reality. However the bar has now been raised and there is more to do if we are all to succeed in making this the decade of employee ownership.
Iain Hasdell, CEO of the Employee Ownership Association (EOA):
The EOA is the voice of employee owned organisations across the UK and we are very pleased with the momentum achieved since the independent Review we called for in 2012. Awareness is expanding on a daily basis. The priority now is to make even more progress towards the EOA target of growing UK employee ownership to 10% of UK GDP by 2020; a target which has been widely endorsed by our partners.
Notes to Editors
The Report, validated by Graeme Nuttall and representatives of the employee ownership sector, can be found at One Year On Report.
The UK Employee Ownership Index provides information on UK public companies quoted on the London Stock Exchange which have 10% or more (or in a different version 3% or more) of their issued share capital held by or for the benefit of employees other than main board directors.The Index is being calculated by FTSE International according to FTSE methodologies.
Employee ownership call for evidence is available at ‘Amending the perpetuities rule and simplifying employee ownership’.
Graeme Nuttall’s health check is a series of questions for government and others to periodically answer in order to monitor their progress towards making employee ownership a mainstream part of the UK economy. The health check will be published in the Foreword to the One Year On Report.
Employee ownership is where all employees have a ‘significant and meaningful’ stake in a business. This means employees must have both a financial stake in the business (eg by owning shares) and a say in how it’s run, known as ‘employee engagement’. Employee ownership can take 1 of 3 forms:
- direct employee ownership - employees hold shares in the business directly, often through a tax-advantaged share scheme
- indirect employee ownership – an employee benefit trust holds shares or other assets on behalf of employees
- a combination of direct and indirect ownership.
6.Case studies of businesses speaking at the launch event:
Gamevy – makes online games and is an employee owned tech start-up, created as wholly EO. Started in Old St Tech City earlier this year (2013) and still based in central London (Farringdon)
Mary Knowles Homecare - Milton Keynes based domiciliary care company. Start-up, wholly employee owned. CEO named the company after his grandma. He used to work for the John Lewis Partnership and wanted to replicate the ethos of staff reward in his own business, which opened in 2013
Union Industries - Leeds based manufacturer of security roller-doors and contamination units - set up in 1972. Director is Isobel Schofield (Mrs S) who is planning for retirement and has decided on EO. She has found the information on EO, decided on the model, and begun to create an Employee Benefit Trust (EBT) within the past 12 months, working in partnership with Baxendale
Aspire Sussex – A charitable staff-run social enterprise which leads in planning, promotion and delivery of adult education across Sussex. Annually they provide learning opportunities to over 20,000 adults. CEO Ros Parker was highly commended in the Baxendale Leadership Award 2013, and Aspire were highly commended in the Cabinet Office Mutual of the Year Award
7.More information on the Employee Ownership Association, whose members include John Lewis, Gripple Ltd, Arup, and Scott Bader can be found at: www.employeeownership.co.uk.
8.The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set 4 ambitions in the ‘Plan for Growth’, published at Budget 2011:
- to create the most competitive tax system in the G20
- to make the UK the best place in Europe to start, finance and grow a business
- to encourage investment and exports as a route to a more balanced economy
- to create a more educated workforce that is the most flexible in Europe
Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.
9.The government wants to make the UK the best place to start and grow a business. Earlier in November 2013 government launched a public campaign to celebrate GREAT British success stories. The government wants to inspire other small businesses and point them towards the support that can help them grow. It will also reaffirm its commitment to small business with a statement in December for how the whole of government will back them. This will set out a range of measures to continue helping budding entrepreneurs and existing businesses succeed.