Diverse forms of ownership such as co-ops and mutuals are necessary to help the UK rebuild after the Covid-19 pandemic, says a new report.
The Rebuilding Business for Society report says these organisations can play a leading role in reinvigorating communities, especially those left behind by economic or social change.
Compiled by the Association of Financial Mutuals, the Building Societies Association, Co-operatives UK, the Employee Ownership Association, and Social Enterprise UK, it calls for “meaningful change” in the institutions that shape the business environment to end the dominance of shareholder ownership models in the corporate world.
It warns: “Imbalances of power, differences in the availability of information, and a reliance on trusted relationships rather than complete contracts are more accurate descriptions of most markets, such that maximising returns for shareholders has often been seen to come at the expense of other groups.
“In particular, the nature of shareholding has also shifted from direct ownership to ownership via institutional, overseas and transient investors, who have put less active pressure on managers to pursue with equal passion a range of objectives beyond profit.”
As the UK looks to its recovery from the Covid-19 crisis, co-ops, employee-owned firms and other new economy models could help to deliver more sustainable and equitable outcomes. The report argues that the ownership model of a business shapes its culture and purpose; and determines who gets the value created.
It says the business environment needs to enable different types of firm – “designed into the policy-making system with checks and balances to ensure that impacts on different types of firm have been considered”.
Mike Regnier, CEO of the Yorkshire Building Society and chair of the Building Societies Association, said: “The Covid pandemic has brought out the best in people and their communities, and we need to facilitate the development of institutions that embrace this spirit.”
“By building on their heritage of democratic ownership, co-operatives, mutual, employee-owned firms and social enterprises can integrate communities and play a leading role in securing a more sustainable economic, social and environmental future for all.”
At the online launch of the report shadow, shadow chancellor Anneliese Dodds – a Labour/Co-op MP – said: “It’s so important that we talk about these issues now … we are facing a very high level of unemployment and the deepest recession in 300 years, potentially. We need to face up to that.”
She said the co-ops and employee owned models could help in the challenges of rebuilding sustainable businesses and creating decent jobs.
Three key approaches outlined in the report include:
- Creating an enabling environment for forms of business ownership beyond shareholder owners
- Providing an option for businesses that are seeking to recapitalise after the Covid pandemic to introduce employee or customer ownership, including repaying government support out of future earnings
- Supporting community-led economic development, particularly in the hardest-hit regions, to engage local people in incubating new forms of wealth creation which would support the Government’s ambitions to “level up” different regions.
Lord Adebowale, chair of Social Enterprise UK, said: “The challenges we face in rebuilding society after this global pandemic alongside the need to tackle the climate emergency means we have to change business as usual.
“The UK has been a global leader in developing new forms of business from co-operatives and building societies to social enterprises. We need more of these businesses if we are going to bounce back quickly and fairly from Covid-19.
“This report provides government with a number of recommendations on how this can be done and I hope that these businesses will be at the heart of Britain’s economic fightback from coronavirus.”
James Wright, policy lead at Co-operatives UK, said: “The world needs a new normal for doing business; one that effectively avoids environmental and social harms, while distributing wealth and power more fairly. Because of how they are owned and run, mutuals lead the way, as this report shows.”
David Sproxton, co-founder of employee-owned Aardman Animations, said: “The employee-owned model has provided security for our colleagues, allowed us to retain our creativity and talent and has kept good jobs rooted in our local economy. As we look to recover from Covid, we need to a grow the number of inclusive business models that offer better resilience and income in equality.
“The government must support this shift if it wants to level up the economy, and the Comprehensive Spending Review is an opportunity to unlock more purposeful businesses like Aardman Animations, right across the country.”