Employee ownership is not a panacea, but it does represent a proven and effective remedy for some of the key challenges facing the Scottish economy. The concept has been shown to work, and the American and UK experiences all show results in terms of creating, saving and retaining businesses which display higher levels of motivation and competitiveness. Employee ownership provides the opportunity for Scottish companies to gain competitive advantage and guarantees for future generations, a stronger, more sustainable business sector.
The organisation principally promotes employee ownership in 4 ways.
The problem of succession is a serious one. It is estimated that 30,000 businesses in Europe fail each year due to a lack of succession. Around 40,000 principal shareholders seek to withdraw capital from businesses in the UK each year, and within the next five years a significant number of Scottish owners are due to retire.
The European Commission report clearly identified selling to the employees as a remedy to this problem. Selling a business to employees is not only a way of ensuring succession, for the principal it is the most tax effective way of releasing capital and rewarding employees for past service. Employee buy-ins can also be used as a means of raising capital for growth, sustaining businesses during short term crises and releasing workforce potential.
The shareholders felt a responsibility to the workforce and the local community where they had operated for nearly two-hundred years.
The shareholders also wanted to realise their investment in the most tax efficient way but without jeopardising the company's financial stability.
The management of the company recognised the need to reward, involve and motivate the workforce in a highly competitive industry.
Through the creation of employee trusts and by an allocation of shares to employees, paid for from profits, ownership is being passed to employees - securing the company's future ownership, rewarding employees and enabling shareholders to realise their capital tax-effectively.
Meetings were held with employees and with the management. Those reluctant were invited to set up an employee owned business and tender for a contract to provide services to the company.
With the help of Employee Ownership Scotland two new businesses were formed and contracts secured to provide services to the bus company at commercial rates.
The businesses are now aiming to expand by providing services to other bus companies and businesses outside of the industry.
Two redundant employees met a young fasion designer who had access to a national retailer. Together they approached Employee Ownership Scotland for advice on how they might start up a new business.
Employee Ownership Scotland worked with the team to produce a business plan, raise finance, acquire premises, plant and equipment, structure the company and help the team work together effectively.
The new employee owned company commenced trading two months later having secured orders worth £500,000.
Twenty people who would not normally be considered entrepreneurs and who otherwise be unemployed have found rewarding employment thorugh their own efforts and the help of Employee Ownership Scotland. Employment, investment and ownership have been retained in Scotland.
For further information on Employee Ownership Scotland please contact Spike Finalyson, Chief Executive by telephoning (UK) 0141 554 3797 of fax (UK) 0141 554 5163.