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#walescoopreport Employee ownership could offer long term resilience in the Welsh SME sector

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#walescoopreport Employee ownership could offer long term resilience in the Welsh SME sector

In the second of our blogs on the potential implications of the recommendations of the Welsh Co-operatives and Mutuals Commission, we look at the potential for developing employee ownership approaches in Wales.


Rhian Edwards is Manager of the Succession and Consortia project in the Wales Co-operative Centre and has been heavily involved with work in Wales and the UK raising awareness of Employee Ownership as a viable succession option and as a means of encouraging engagement and growth in our indigenous businesses
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The Welsh Co-operatives and Mutuals Commission report has recommended increased support for those employee groups who could consider employee ownership as a means of continuing viable businesses which are at risk of closure as well as specialist funding mechanisms to support employee buy-outs.

Employee ownership is a proven growth driver so it makes sense to raise awareness of, and support, a business model which is good for the business, good for the employees and good for the community the business is rooted in.

CASS Business School, a highly respected school within City University has been at the forefront of research into employee owned businesses for many years. Its 2010 study “Model Growth: Do Employee Owned Businesses Provide Sustainable Advantage” concluded that employee owned businesses are more likely to be resilient in both the ‘good times’ (2005-08) and recession (2008-09) than their non-employee owned counterparts.
CASS Business School has recently published a follow up study which concludes that employee owned businesses showed significantly higher growth in sales turnover relative to non-employee owned businesses throughout the recession (until 2011). This was reflected in higher growth in employee numbers and in employee contribution to profitability. This research demonstrates that although employee ownership is not a panacea that guarantees growth – after all, employee owned businesses are just as effected by external forces as any other business –increased employee ownership and engagement almost always results in increased stability and resilience than those businesses that don’t engage effectively with their employees.

At the Wales Co-operative Centre we have a long standing commitment to increasing employee engagement and empowering individuals within the workplace. A few years ago, we published ‘Defusing the Business Succession Time-bomb’ which asserted that Wales was in danger of losing an unreasonably high percentage of indigenous small enterprises over the next five to ten years due to poorly planned succession and unrealistic expectations of the potential for trade sales.

The Commissions report has recognised this issue and tried to address some of the big barriers to the approach: awareness, available support and finance.
There is no doubt that employee ownership is a valid and sustainable plan for long term business succession. Allan Meek, Managing Director of Caerphilly based SCS Group explains,

“For me one of the main advantages of employee ownership as an exit model for owner managers is the freedom to be open about plans for the future and for the exit to be conducted for the mutual benefit of the owner and the business”

There is evidence that businesses with high levels of employee ownership have substantial advantages over those without. Employee-owners have higher levels of job satisfaction, feel a greater sense of achievement, fulfilment and job security and are more likely to recommend their workplace than employees in non-employee owned businesses.

Barry Wise was one of four founding directors in Aberystwyth based Aber Instruments. He states,

“Employee Ownership ensures that everyone embraces a culture of openness and team-working. In turn this leads to all employees sharing some responsibility for the well being of the organisation and this drives profitability… The long term stability of the company is enhanced by Employee Ownership because employees, who know the business inside out, have a say in their future. This minimises external influence and our share structure ensures that ownership stays “within the four walls”.

Gill Wilde from Skye Instruments in Llandrindod Wells believes that the benefits of employee ownership are multiple,

“The first benefit is job security. No external shareholders can influence our direction. The success, or failure, is down to the employees. The second is financial; we have a profit sharing scheme so our employees benefit financially from our success. Thirdly, our employees have a voice. They have the opportunity to contribute to any activity of the business. Their views and suggestions are considered seriously and treated professionally. All employees are eligible to act as Trustees on the Employee Benefit Trust or as Directors in the company.”

Allan Meek of SCS Group agrees,

“We use employee ownership as part of a toolkit for engagement of our employees which is part of our core business strategy and we believe a source of competitive advantage. It is hard to say how much this alone encourages people to go the extra mile but it goes a long way to show employees that their opinions count”.

Employee ownership can also help ensure indigenous companies stay indigenous. As Gill Wilde explains,

“There are limited job opportunities in rural areas that aren’t connected to tourism and agriculture. Transferring the ownership of Skye Instruments to its employees enables a high tech business to remain and grow in the area and to be able to continue to offer specialist careers to future generations”.

Barry Wise concurs,

“We have seen other companies sell out and, as a result jobs and know-how have been lost in the locality. We were determined not to go that way. Employee Ownership brings stability and control over our destiny”.

In the new financial year, Capital Gains Tax exemptions have been introduced to encourage business owners to consider employee ownership as a viable means of succession.

If the recommendations in the Welsh Co-operatives and Mutuals Commission report are taken up there is every possibility that employee ownership could become a common and accepted business model in Wales, and one that makes a substantial contribution to the Welsh economy.

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Welsh Co-operatives Mean Business

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co-ops united logoThree of the most successful co-operative businesses in Wales are exhibiting at a major international trade fair and expo in Manchester this week. Dairy producers Calon Wen, packing specialists Primepac Solutions and renewables specialists Dulas will be joining the Wales Co-operative Centre and The Co-operative Group at the International Co-operative Alliance’s ‘Co-operatives United’ conference and biennial international trade Expo at the Manchester Central Convention Centre (formerly known as Manchester G-Mex).

The conference and expo, which runs from 29th October to 2nd November,  marks the culmination of the United Nations International Year of the Co-operative with a  global celebration of co-operative business. The expo is an opportunity for the Welsh co-operative sector to develop trading links with other co-operatives across the world. Wales Co-operative Centre research, commissioned as part of the International Year of Co-operatives, has demonstrated that the co-operative sector in Wales is a key economic driver and this event is an opportunity for the businesses attending to develop trading opportunities across the world.

Calon Wen is a co-operative of 27 family-run farms across Wales who supply organic milk products throughout the UK. The co-operative was developed from a desire to ensure that as much Welsh organic milk is processed in Wales as possible. Since its inception it has developed innovative partnerships with both suppliers and customers and supplies products to most of the main supermarkets in the UK.

Primepac is a worker co-operative created when nineteen staff members invested their redundancy payments in a new employee owned company after the Dutch Company pulled out. They opened a production facility in Ebbw Vale which fills bottles and sachets for clients in a number of sectors. Since they started in 2005 they have grown into a £3 million per year turnover company.

Dulas Ltd was set up by engineers from the Centre for Alternative Technology in Machynlleth to provide professional renewable energy services on a commercial basis. Dulas is owned by its employees, has no external investors and is financed largely through sales. Dulas has won numerous awards for its outstanding performance and innovative products. The company has 110 employees with most at its headquarters in Machynlleth, making it one of the largest employers in the area, as well as an office in Scotland. In 2012, Dulas featured in the Wales Fast Growth 50 for the fourth year in a row.

As well as exhibiting, two of the businesses will also participate in a buyer workshop in front of up to 30 businesses interested in Welsh co-operative produce. Steve Meredith, Sales Director of Primepac Solutions is looking forward to the event, “The ICA Expo is an excellent opportunity to meet with businesses from across the world, to swap ideas, make new contacts and hopefully develop new business opportunities”.

Mike Clay, Marketing Manager at Dulas stated, “We are looking forward to exhibiting at ICA Expo and as we are celebrating our 30th Anniversary in the International Year of the C-ooperatives this will be a landmark moment for us.  We hope to hear from organisations interested in how renewable energy can secure power supply, reduce energy costs and deliver the environmental benefits that serve to protect our whole planet”.

Calon Wen’s Marketing Director Richard Arnold states, “Calon Wen  is keen to develop and grow its distribution beyond the Welsh borders, with interaction with other cooperative groups high on its agenda”, he continues,  “Demonstrating our milk, butter cream and award winning cheeses at an event like ICA Expo, is we hope, going to get us in front of like-minded customers and buyers from across the sector and while its further afield than we’ve ventured recently, we think it looks like it has all the ingredients for an excellent event”.

Derek Walker, Chief Executive of the Wales Co-operative Centre is delighted to be able to work with examples of co-operative success in Wales and help showcase them on a world stage, “Dulas, Primepac and Calon Wen are proof that co-operatives mean business. In Wales, the co-operative and mutual sector contributes in the region of £1billion to the economy. These businesses exemplify the ambition and ability of the co-operative sector in Wales and I wish them luck in developing new markets and gaining new business at this event”.

Mike Ash-Edwards, The Co-operative Group Regional Secretary for Wales, said: “Co-operation has its historical roots in Wales and co-operative ways of working still resonate with communities across the country. In addition to the 400 Co-operative stores and branches owned by our 500,000 members in Wales, there are many more examples of co-operation in action which deserve to be celebrated during the United Nations International Year of Co-operatives. We are very much looking forward to working alongside the Wales Co-operative Centre to showcase an ethical business model that puts control in the hands of workers, members and local communities.”

In Wales, co-operatives and mutuals are estimated to generate in the region of £1billion for the Welsh economy per year. Co-operatives employ in the region of 7,000 people in Wales and the co-operative sector in the UK generates an estimated £25billion in revenue which is equivalent to 2% of UK GDP. The co-operative sector in Wales is sustainable, provides high quality jobs, benefits communities and the environment and is committed to generating growth in Wales.

As well as the Expo activities, the ‘Co-ops in Wales’ stand will feature a host of co-operative related activities. These include daily prize draws to win bottles of Welsh Co-operatively produced Cider, postcards of Welsh co-operatives, cheese tasting and information on the work of the exhibiting co-operatives and the co-operative sector in Wales. Further information on the co-operative sector in Wales and the exhibiting co-operatives can be found at www.coopsinwales.coop

Written by Mark Smith

October 30, 2012 at 2:34 pm

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