Employee ownership: Remploy and beyond

Employee ownership could save Remploy factory after success of the co-operative model in the UK and beyond

Remploy workers living with the threat of redundancy in Birmingham this Christmas could have a more hopeful New Year if plans to turn their factory into an employee-owned business work out successfully.

The factory in Garrets Green is part of the government-owned Remploy group and currently employs 75 people, 68 of whom are disabled.

Under controversial plans, the government is looking at closing 50 Remploy factories across the country with the loss of 875 jobs including those of almost 700 disabled workers.

However, three Remploy factories in the automotive industry, including Garrets Green, have been identified as viable businesses and the government is now looking to offload these as going concerns.

Local Liberal Democrat MP, John Hemming, is spearheading moves to convert the Garrets Green factory into an employee owned business.

“The mutual model like John Lewis a good one for employment,” says Hemming. “There’s no reason why the business shouldn’t make a profit just because it’s got a broader shareholding.”

Like other leading Lib Dems, including leader Nick Clegg, Hemming is an enthusiastic supporter of employee ownership. Hemming once attempted to turn his own multi-million pound IT business over to employee-ownership but the plans didn’t materialise, but he is now using his business experience to help the Garrets Green workers and has set up a registered company in his office.

“We’re at an early stage in the process,” says Hemming, “but we’re getting very encouraging feedback from the government so I’m optimistic.”

Examples of success

Employee ownership could well prove to be the lifeboat the Garrets Green workers need – it has played a key role in ensuring the long-term future of other businesses.

Three years ago, staff and journalists at the West Highland Free Press, on the Isle of Skye, were faced with the choice of either being bought out by a much larger publishing company and risk losing the local links with their community or going it alone.

“The weekly newspaper was founded by five friends in 1972,” explains managing director Paul Wood speaking from the newspaper’s office.

“However, as they began to pursue new interests they felt the time had come to sell their shares in the newspaper. Rather than selling the business on the open market, they approached the employees to see whether they would be interested in buying the shares.”

Despite the difficulties facing the newspaper industry, the 15 staff nonetheless took the decision to buy out the original shareholders, and in 2009 the West Highland Free Press became the UK’s first employee-owned newspaper.

“We knew that if the newspaper was sold and subsumed into a bigger group it would mean job losses,” says Wood.

So what has been the main benefit of employee ownership?

“Businesses that are owned by their employees gives them a stake in where you work and a say in what you do,” replies Wood. “Plus more importantly for newspapers like us, it lets you stay and live and work in your community.”

Of course, converting to an employee ownership model isn’t the only option for workers whose business is facing an uncertain future.

Co-operative Web based in Longbridge in the West Midlands is a successful co-operative which provides bespoke software and services for clients including Cadbury, Simple, and numerous councils and primary care trusts.

Beginning life as the tiny four-strong IT department of the much larger Mid Counties consumer co-op, the decision to breakaway from its parent company was taken when it became that the existing relationship was failing.

“We weren’t making money, weren’t growing and it just wasn’t working out,” says managing director Ed Russell.

“It was clear that we weren’t part of Mid Counties main focus, which was running a large supermarket, so eventually it was decided that it would be better for both parties if we split off.”

Beginning with just four employees and a turnover of £150,000 in 2006, the business has now grown to a staff of 23 with a current turnover of £850,000.

Russell attributes the ongoing growth of the business since becoming a co-op to their ability to be more entrepreneurial and take risks outside of a larger business – and that the people in the business, who know it best, have the overall say in how it works.

“Everybody who works here owns a piece of the company, so no matter who people deal with, they can be assured of talking to someone who cares about meeting our promises, and cares that our clients get the best possible result from working with us,” says Russell.

“The main upside is that most of the time it feels like we’re all pulling in the same direction.”

Co-operatives still need good business models to survive

In a move to help more workers rescue businesses that are on the verge of insolvency to convert to co-op status, Co-operatives UK, the trade body promoting co-ops in the UK has recently unveiled a new scheme.

The right to buy out initiative which has been launched with the backing of the government will be piloted in 2013 and will draw on expertise from the Department for Business, Innovation and Skills.

The scheme builds on successful examples of employee buyouts in the UK and is an approach that has seen wider uptake across the world.

In Spain, for example, a similar right to buy out has resulted in 120,000 jobs being saved or created through the formation of 12,000 worker co-operatives. In France, between 1989 and 2010, more than 700 businesses on the verge of closing down have been transformed into co-operative businesses saving thousands of jobs.

Russell welcomes the launch of the scheme: “Anything that creates more awareness about co-ops and can potentially bring more co-ops into the market is a good thing.”

However Russell adds a warning note: “Being a co-op isn’t a panacea for a failing business. People need to remember that a co-operative is still a commercial organisation and that you have to have a good business model in order to survive financially.”

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