EOBs: the importance of people-powered growth in the UK
The EO Knowledge Programme, commissioned by the Employee Ownership Association (EOA) and undertaken by independent think tank Ownership at Work, compares EOBs and non-EOBs to assess their impact on individuals, businesses, communities, and the wider economy. The results show that this small but growing section of the UK economy is having a disproportionately powerful impact on economic growth, by supporting the development of a resilient and motivated workforce and creating benefits to local communities and society.
Read the full EO Knowledge Programme report, October 2023 here
Driving growth
The UK has suffered sluggish productivity growth since the 2008 global financial crisis, lagging behind its G7 counterparts in economic recovery. Given that productivity is widely recognised as a crucial driver of economic growth and improved living standards, the adoption of an Employee Ownership (EO) model carries even greater significance for its potential impact on productivity.
The analysis estimates that EOBs are around 8% - 12% more productive than non-EOBs, on a Gross Value Added (GVA) per employee basis*. They also make an outsized contribution to employment (employing 0.7% of total employees) and national output (0.8%) while representing only 0.1% of the total number of firms in the UK.
Employee-owned businesses have surged in number over the past 10 years, particularly since the UK government’s introduction of the new Employee Ownership Trust model (EOT) in 2014. Whilst they currently represent just 0.1% of the total number of firms in the UK (at around 1,650 businesses), they are making a significant and disproportionate contribution to the economy.
Dramatic increase in Employee Ownership Trusts (EOTs) in the UK
EOBs currently contribute £32-£41 billion annually in total GVA (direct, indirect, and induced), of which £12-15 billion is direct GVA. If growth continues at the current rate, the EO model is projected to contribute an additional £61-£74 billion in total GVA to the economy by 2030, including £22-£27 billion in direct GVA.
Investing in R&D boosts productivity
There is a well-established link between investment in R&D and improved productivity, which also plays to the characteristics of an employee-owned business. The research found that EOBs were almost twice as likely to have increased investment over the past 5 years and are more likely to be planning to increase investment next year, compared to non-EOBs.
EOBs are investing in R&D
Employee-owned firms are also more likely to be expanding their workforce, less likely to have a high turnover of employees and more than a third more likely to see their profits increase.Together, the GVA analysis, employment figures, performance data, productivity benefits and R&D investment intentions of this research indicate that the future growth of the EO model could create significant wider economic benefits for the UK.
Source: EO Programme Knowledge Programme, October 2023
Delivering broad-based employee benefits
Creating ‘good work’ is at the heart of the EO model. Through active corporate governance, information sharing, employee engagement, improved benefits, flexibility and skills development opportunities, EOBs are creating an environment that supports resiliency, retention, and reward.
Source: EO Programme Knowledge Programme, October 2023
Empowering your people
Openness and engagement around business information is an important feature of a successful EO model and a critical driver of the added benefits it brings. Among all the impactful EOB practices, it was the most widely mentioned in the in-depth interviews conducted as part of the EO Knowledge Programme. The research found that employees in EOBs are much more likely to have business information shared with them than those in non-EOBs, across every category surveyed (costs, decision-making by the senior team, investments, performance, new business and sales) and across all business sizes.
Sharing critical business information with employees
There is widespread consensus that transparent communications about company finances and performance can be highly impactful in helping employees to think and act like owners; helping to boost business acumen and skills development among staff and enabling them to understand the link between performance and reward. When this becomes a two-way dialogue, it can also help to hone company decision-making and strategy - 78% of the EOBs surveyed said employees can regularly influence strategic decisions, compared to 59% of non-EOBs.
Source: EO Knowledge Programme Survey
Broader employee support reaps business rewards
A greater focus on fair pay and rewards is another driver of productivity in employee-owned businesses. The analysis shows that dividends and bonuses in EOBs are more than double those at non-EOBs, with EOBs also typically offering a higher minimum annual wage than non-EOBs (by around £2,900). And support extends beyond financial benefits and strategic influence. The EOBs surveyed are investing in a range of enhanced benefits, including health and wellbeing support, to create cultures that serve employees as well as the business.
The benefits of this holistic approach to the employee are evident in the survey results, with 83% of those surveyed reporting increased employee engagement and motivation since adopting an EO model, and 73% seeing increased job satisfaction.
A thriving sustainable economy
EOB’s ‘good work’ approach extends to the wider community, with employee-owned businesses doing more than other business types to support a fairer economy, local community causes and increased sustainability.
The research found that EOBs of all sizes are more likely to support their local community across all surveyed aspects, from making charitable donations (85% of EOBs versus 55% of non-EOBs) to performing a social impact assessment. EOBs are also more likely to have “environmental sustainability” accreditation (35%) than non-EOBs (16%). As well as doing good, decision-makers recognise that taking an ethical stance – which is reinforced by switching to an EO model - can be good for business while helping to attract and retain the best workforce.
Why adopt an EO model?
According to the EO Knowledge Programme, the three most popular reasons for adopting an EO model are:
- To ensure the business remains independent
- To protect and promote the livelihoods of current and future employees
- To protect and sustain the core values, culture, and ethos of the business
But as the research shows, the benefits are much more wide-reaching than they may first appear. The EO model is thriving by supporting the development of a skilled and motivated workforce, delivering beyond improved productivity and economic growth to support a resilient, sustainable economy. The sector continues to grow in popularity with a record number of businesses transitioning to Employee Ownership last year. It is a structure that we expect to continue to gain traction with business leaders and policymakers alike.
