Why employee-owned businesses are good for the economy

21 June 2024

3 min read

Employee ownership business team working productively

In recent years, the UK has witnessed a significant rise in employee-owned businesses (EOBs), which are emerging as a robust and sustainable model for economic growth. EOBs are not only fostering a more equitable and engaged workforce but also contributing disproportionately to the economy.

Here, Senior Associate and experienced corporate lawyer Mairead Platt explores the concept of people-powered growth through employee-ownership and its impact on the UK economy.

EOBs on the rise

The UK has seen a significant increase in the number of employee-owned businesses. According to the Employee Ownership Association (EOA), the sector has been growing steadily with a notable rise in more recent years. This growth is driven by various factors, including succession planning for retiring business owners and the desire for sustainable business models.

How EOBs benefit the UK economy

With employee ownership becoming increasingly recognised within the business community, most are familiar with the benefits of this model to business owners, employees and the business itself, but the benefit of EOBs to the UK economy is often overlooked.

The EOA commissioned independent think-tank Ownership at Work to explore the impacts of employee ownership in the UK. Its People Powered Growth Report revealed that EOBs deliver more than other business types to support the economy.

The data showed that EOBs:

Experience increased productivity — EOBs are 8% to 12% more productive than non-EOBs.
Create more jobs — EOBs are over 50% more likely to grow their workforce than non-EOBs.
Make greater contributions to the economy — despite making up just 0.1% of businesses, EOBs drive 0.8% of direct GVA and 1.7% to 2.1% of overall economic activity.

Local economic benefits of employee-owned businesses

EOBs often have a strong local focus, contributing positively to their communities. The economic benefits of success are more likely to be distributed locally, supporting regional economies and reducing wealth inequality, which is why EOBs are supported by government. EOBs provide a stronger growth, healthier and fairer economy, as well as contributing to upskilling efforts and being more community and sustainability focussed.

The future of employee ownership in the UK

The research commissioned by the EOA demonstrates that EOBs contribute more to the UK economy than non-EOBs. With growing awareness of the benefits and increasing support from government, more companies are likely to consider this model. As these businesses demonstrate resilience and sustainable growth, they can serve as a blueprint for a more inclusive and equitable economic future.

EOBs represent a compelling model for people-powered growth in the UK. By aligning the interests of employees with the success of the company, these businesses foster a more motivated workforce, sustainable practices, and equitable wealth distribution. The future looks promising for employee-owned businesses in the UK. As the sector continues to grow, it holds the potential to reshape the landscape of the UK economy, promoting resilience, innovation, and community well-being.