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Jamie Lawrence

Wagestream

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Government unveils index to ramp up investment in employee-owned businesses

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Business minister Jo Swinson recently unveiled the latest iteration of an index designed to help investors identify publically-listed companies that are part-owned by their employees.

This year’s Employee Ownership Index will draw attention to the 69 companies on the London Stock Exchange that have over 3% of their shares held by, or for the benefit of, staff.

The Index has been in play since it was launched in 1995 and is released publicly every year by Field Fisher Waterhouse LLP. The methodology differs this year to make it easier for investors to identify suitable businesses.

Swinson unveiled the index at the launch of The Nuttall review of employee ownership: One year on report, a follow-up assessment of the progress made on the original 28 recommendations made in the original Nuttall report in October 2012.

Employee ownership is cited by proponents as a method of increasing productivity and engagement among employees by giving them a recognisable and valuable stake in the long-term success of the business.

"As we build a stronger economy, there has never been a more important time to promote successful ways of running a business," said Swinson. "Evidence shows that businesses that adopt the employee ownership model can be more profitable, create more jobs and are more resilient to economic shocks."

"The Employee Ownership Index will now mean investors can identify thriving employee ownership businesses and be part of their success. I hope more businesses recognise the value of this model and give their employees a greater stake in their future and the success of their company."

Graeme Nuttall said he was pleased with the progress made since the first report came out, but added there was “still more to do.”

Sam Dowling, Communications Director at the Employee Ownership Association, told HRZone: “The endorsement of the Employee Ownership Index by the London Stock Exchange is the latest step towards mainstreaming awareness of the increased productivity, resilience and innovation found in companies with significant employee ownership. Employee owned businesses contribute around £30bn to the UK economy each year and are an increasingly important part of the emerging economic growth in the UK. After a hugely successful eighteen months of activity, the EOA warmly welcomes the growing recognition of the importance of employee ownership in the UK.

“Looking forward, whilst we continue to applaud the enthusiasm of supporters across the business and political communities in supporting the employee ownership agenda, the picture is of modest incremental steps. The pace and scale of change over the next year needs to be significantly better if the EOA’s challenging but achievable target of 10% of GDP being delivered by employee-owned businesses by 2020 is to be reached.”

The Government has already pledged to allocate £50m from 2014/2015 to fund tax breaks for companies that adopt employee ownership structures.

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Jamie Lawrence

Insights Director

Read more from Jamie Lawrence
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