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New essay on employee ownership by Visiting Fellow, Graeme Nuttall OBE

March 26, 2024

Graeme Nuttall OBE, Visiting Fellow at Kellogg College, has contributed an essay on employee ownership to ‘A Wealth of Opportunities’. This is a collection of essays from decision-makers and opinion-formers across different political and professional backgrounds on acquiring, leveraging, sharing and drawing down wealth. Published by think tank Bright Blue and funded by abrdn Financial Fairness Trust the essays are intended as a first step towards a prospectus that can capture public imagination and support for reforming wealth.

In his essay titled ‘Employee ownership as a supercharged all-party solution to bolster wealth’, Graeme positions employee ownership as a crucial method to mitigate income inequality and distribute wealth. He asserts that policymakers, regardless of their political affiliations, should endorse employee ownership if the UK aims to address its wealth disparity effectively.

Graeme argues that employee ownership generates additional income for workers compared to those in non-employee-owned enterprises, a fact supported by findings from the UK’s EO Knowledge Programme. He explains that in employee-owned companies, profits that would typically go to investors are redirected towards employees, leading to increased financial gains. He uses the employee-owned John Lewis Partnership as an example, which, recent trading issues notwithstanding, paid bonuses to its employees averaging 14.8% of salary over the 50 years to 2020. Graeme suggests this is not an isolated example, explaining that “Employee-owned companies are shown to be more productive and innovative, with little or no external debt. This increases the profits available for distribution. These extra profits will be distributed fairly and this is likely to be in addition to higher minimum wages. These and other elements have a powerful financial multiplier effect.”

In addition to advocating for employee ownership as a means to address income inequality and enhance wealth, Graeme acknowledges the bipartisan support it has received in the UK. Notably, he mentions the Coalition Government’s endorsement of employee ownership as a distinct policy area during its tenure (2010-2015).

Graeme dismisses concerns that tackling inequality necessitates changing public attitudes, asserting that the widespread adoption of employee ownership could bypass this challenge. He suggests that existing business owners could willingly transition their companies to employee ownership as a succession strategy, provided there are supportive measures in place, such as tax incentives and other forms of assistance. He concludes by acknowledging that while employee ownership is not a singular solution to inequality, its widespread implementation could yield significant positive outcomes in reducing financial and non-financial disparities and increasing household wealth.

Bright Blue published a separate report in January 2024, ‘Mind your business Expanding democratic business in the UK’, in support of more employee ownership.  Thomas Nurcombe, co-editor of ‘A Wealth of Opportunities’ (with Ryan Shorthouse) and a Researcher at Bright Blue states Bright Blue’s view that:

“Employee-owned businesses are pivotal for ensuring a more equitable spread of wealth in our economy. Increasing them can help to bridge the wealth gap, better reward hard work and assist the less affluent to acquire property, all the while giving a well-needed boost to our national productivity”.

James de le Vingne, Chief Executive of the UK’s Employee Ownership Association adds:

“The findings from 2023’s EO Knowledge Programme demonstrate unequivocally that, alongside driving headline economic growth, employee ownership is one of the measures available to us to meaningfully reduce income and wealth inequality in the UK. While employee-owned businesses are found to pay higher basic wages, profit-sharing is also hard-wired into their business model, enabling employees to directly benefit from the value that their work creates.”

Download Bright Blue’s essay collection: A Wealth of Opportunities. Graeme Nuttall’s essay ‘Shared Success – Employee ownership as a supercharged ‘all-party’ solution to bolster wealth’ is chapter 15 of this collection.

As the Coalition Government’s independent adviser on employee ownership, Graeme authored ‘Sharing Success: The Nuttall Review of Employee Ownership’.

Graeme is a Research Associate at Kellogg’s Centre for Mutual and Co-owned Business.