28 Jun 2012

Norman Lamb: Employee ownership and growth

As the Treasury reviews the role of employee owned business, MP Norman Lamb says widening the business practice will help to empower employees

Growing our economy out of a period of crisis is this government’s most pressing priority. We want to encourage investment and exports and make Britain one of the world’s most enterprise-friendly countries. And we want to build a more responsible business culture, where the rewards of capitalism are shared fairly across society.

We have already taken action on tax, regulation and planning to support British businesses and promote economic growth. And we are reviewing investment in UK equity markets and strengthening the relationship between company pay and performance. But we are determined to get the culture right on the shop floor, too. This is where employee ownership becomes potentially very powerful – by spreading capital and empowering employees I believe we can establish a more diverse economy and help drive future growth.

Employee ownership is a great liberal principle, which is still as persuasive today as it was when John Stuart Mill advocated aligning capital and labour, to ensure the division between the two was “gradually superseded by partnership”.

This isn’t about compulsion. It’s about making it easier for businesses to adopt employee ownership
Norman Lamb

Evidence from Cass Business School suggests employee-owned businesses can be more profitable, productive and resilient during tough economic times than conventionally owned businesses. Indeed, although it’s still a small part of the economy, the challenging period between 2009 and 2011 saw a 25% increase in the number of employee-owned businesses, and the sector now covers around 130,000 employees.

This success is entirely logical. If you own a stake in your workplace then you have a greater interest in its success. Ownership encourages responsibility, which motivates employees to be more productive. Companies with engaged staff also enjoy reduced absenteeism, increased retention, greater innovation, collaboration and job satisfaction.

Employee ownership doesn’t guarantee company success, but it can play an important role in driving future economic growth as part of a balanced economy. The deputy prime minister asked me to make employee ownership models as well known and understood as franchising or management buyouts. But to be clear, this is about making it easier for businesses to adopt employee ownership. This is not about compulsion.

Since February, Graeme Nuttall, a partner at Field Fisher Waterhouse, has been reviewing the barriers to employee ownership. There is a lack of awareness of employee ownership models. This needs addressing if more are to get off the ground. We’re discussing whether government should introduce a light-touch “right to request” for employee ownership and share schemes. There would need to be a right to say no, but it could ensure ownership is considered at key stages of the business.

The review has been examining whether smaller employers have access to the best possible advice when they are setting up or expanding a business. I want employee ownership models to be among the default options professional advisers consider.Government can also help reduce the complexity in adopting employee ownership. We will look at the possibility of developing a simple off-the-shelf model and I’d encourage ICAEW members to support us with their expertise.

The Treasury is reviewing the role of employee ownership in supporting growth. This includes looking at how tax and other barriers to its take-up can be addressed. We also need to think about how we sustain high quality public services in an age of austerity and with an ageing population. The key is to empower those delivering public services so we increase productivity and improve quality. New models of ownership – social enterprises and mutuals – should be a part of this. Francis Maude, in the Cabinet Office, is leading on this agenda.

My ambition is to take employee ownership into the mainstream British economy. I don’t imagine the bulk of UK businesses will be employee owned in 20 years time, and I don’t reject other models. But there is a case for more diversity of ownership in terms of benefits for the wider economy. Facilitating this diversity is my top priority as a government minister and it has support across the Coalition. 


Norman Lamb is minister for employment relations, consumer and postal affairs