Budget series: Promote EO to unlock UK productivity

This post first appeared on our old blog on 21st November, 2017

Our EO specialists tell us what they hope for from the upcoming Budget. With input from Ewan Hall and Campbell McDonald.

Written by Josh Gaw

Tomorrow’s Budget will see Chancellor Philip Hammond do his best to respond to ever-growing nervousness from the business community around Brexit uncertainty. At this point it’s hard not to see ‘fiscal’ Phil as a Chancellor who spends a lot of his time on the back foot. Not to be too Strictly about it, but even his own colleagues are accusing him of having two back feet.

At the Spring Budget we saw him getting into all sorts of contortions to show he was on the side of business, throwing out a bevy of business-centred moves including stumping up additional funds for firms affected by rising business rates – all in the face of noisy angst from the sector.

Tomorrow, he’ll being trying to dazzle the judges with his plans for how this Government will stabilise the economy and incentivise businesses to stay in the UK. And excitingly, this Budget is just the first act of a double-header – closely followed by the Prime Minister’s latest stab at an Industrial Strategy to be published next Monday.

What we need both of these announcements to tackle head on is productivity – or rather, our struggles as a nation to point it in the right direction. Currently we’re told it takes British workers a day longer than our G7 peers to deliver the same outcome.

There is a growing consensus that the route to improving productivity is right under our noses – and it is as straight forward as running our businesses better than we do today. Witness the great work being done by Sir Charlie Mayfield and others through the new Be the Business movement.

At Baxendale we have over 17 years’ experience supporting businesses to transition into employee ownership (EO) models and have seen first-hand the profound positive impact it has on productivity.

The stronger employee engagement, happier staff, long-view thinking and more enlightened management practices that come with an EO approach have shown time again they create more effective and fairer organisations. No surprise then that we would like to see the Chancellor do what he can to promote more of this particular model for doing business.

Earlier this year, Baxendale participated in and contributed to ‘The Ownership Effect’ inquiry, which aimed to encourage more debate and increased understanding of the employee owned sector than ever before.

Seizing these opportunities to raise awareness of EO models is vital, especially as there are still numerous areas where EO has been held back from achieving its full potential. Unfortunately, a number of these are legislative hurdles.

With a few simple changes, Hammond could build on the positive developments introduced by the Finance Act 2014 and help build a stronger future for EO and the UK economy. The key measures a dream budget for EO would include, are:

Support the sector in raising awareness of the benefits of EO
Currently the biggest challenge facing EO is the lack of awareness of it. Providing additional resource and support to help build understanding and raise its profile would make a substantial difference. Funding for an organisation such as the Employee Ownership Association could see the kind of step change in England that the Scottish government achieved with its EO support for Co-operative Development Scotland and Scottish Enterprise.

Abolishing the 125-year lifespan limits on English Employee Ownership Trusts
To help build sustainability for EO businesses, government should look long-term rather than artificially limit the lives of their trusts. This policy is often a block on transitioning to EO that many business owners cannot see past.

Increase the levels of profit dividend that can be distributed to employee owners without a tax penalty
Under current legislation, up to £3,600 per year can be distributed to each employee of EO organisations without a tax penalty. We would call government to assess this threshold as with increasing inflation, should this threshold not also increase?

Removing hurdles and encouraging business to look towards EO could be a tool used by Hammond to generate innovative solutions to business challenges – especially tackling our profound and deep-rooted productivity crisis.

Have we got it right? Let us know what announcements you are hoping to see on 22 November on twitter: @WeAreBaxendale #hopesforhammond

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