Employee Ownership Scotland
Employee Ownership Scotland is a public and private sector-backed organisation which exists to promote the concept and practice of emploee ownership in business.

Looking to the future

With vision and commitment, employee ownership can have a disconcernable impact on the future economic health of Scotland. Effective support for employee ownership can come in the form of improved access to capital for emplyoee owned businesses, the promotion of the concept by national and local economic development agencies and continued resources made available by the Scottish Office, Scottish Enterprise, local government and the European Commission. This will help the Scottish economy to fully exploit the potential of employee ownership.

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 succession of family businesses

In Scotland, 80% of businesses of family owned. Together they employ over half the Scottish workforce. In studies carried out by the DTI and the European Commission, it is estimated that 10% of business failures are due to a lack of succession. Only a quarter of family businesses make it to the second generation, and only 14% to the third.

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 succession of family business

The family shareholders of a substantial Scottish manufacturing company in a highly competitive market wanted to dispose of their majority shareholding. They did not want to sell the company to a competitor who might break up the business or to float on the stock exchange. Neither did they want to invite a mangement buyout, realising that MBO's invariably lead to flotation within a few years.

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.

New-start businesses

A large Scottish bus company wanted to divest it's loss making engineering and fibreglass sections. A number of people would be made redundant and the owrk put out to tender. With the support of trades unions, Employee Ownership Scotland was contacted for help.

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.

Rescuing businesses in crisis

A multinational company announced the closure of a subsidiary manufacturing specialist Knitwear, with the loss of 80 jobs. The subsidiary had a product that was in demand but the level of turnover was small compared to the group's corporate plans.

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.

Training

Employee Ownership Scotland has a well established and innovative training service which is designed to support the other activities of the company. Alan McGregor of Impact Communications is retained by the company to project the majority of its training programmes. The training offered covers induction programmes for employees new to the employee ownership idea, specialist business start-up programmes in the fields of childcare, marketing and new technology. Company training staff are also licenced to deliver the Pacific Institute's STEPS to Excellence motivational programme. Most of the company's training programmes are free to delegates and are financed through Scottish unitary authority and Local Enterprise Companies in conjunction with the European Union's European Social Funds and European Regional Development Funds.

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.

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