Employee-owned John Lewis is considering sale of minority stake to raise cash

The reports have sparked concern from the co-op sector – and led to renewed calls for reforms which would make it easier for mutuals to raise capital

Retailer John Lewis Partnership is reportedly considering an end to 100% staff ownership after posting a £234m loss as the economic crisis continues to dog the high street.

The Sunday Times said the business – which operates the John Lewis department stores and Waitrose supermarkets – is “in the early stages of a plan to change the retailer’s mutual structure”, in a bid to raise between £1bn and £2bn in new investment.

The plan would sell a minority stake in the business, so that the Partnership Trust retains control, the reports add. But the move is likely to prove controversial, and would have to be approved by a two-thirds majority on the Partnership council, a group of around 60 staff.

A statement from the John Lewis Partnership said: “We’ve always said we would seek partnerships to help fund our transformation and exciting growth plans. We’ve done this with Ocado in the past and now with abrdn. Our Partners, who own the business, will be the first to hear about any developments.”

The Sunday Times quoted “senior sources” at John Lewis as saying the priority would be to keep majority control for the employees, and that any outside investor would have to share the Partnership’s values.

The move would overcome an obstacle to raising capital which stems from John Lewis’s mutual status, which prevents it raising equity from staff. Its borrowing options are said to be limited given the £1.7bn debt it is carrying.

The Co-op Party branded the reports “deeply worrying”, with chair Jim McMahon MP saying: “Given our ambition to grow the co-operative and mutual sector, it is deeply disturbing to hear John Lewis plans to walk away from its historic fully employee-owned status.”

Referring to the Co-operatives, Mutuals and Friendly Societies private members’ bill from his Party colleague Sir Mark Hendrick MP, designed to make it easier for the sector to raise capital, McMahon added: “With legislative proposals already available that could ensure this does not happen, the government should support these changes as a matter of urgency.”

Labour/Co-op MP Gareth Thomas, who chairs the All-Party Parliamentary Group on Mutuals, said the situation is further evidence of the need for reform in the mutual sector.

He tweeted: “Mutuals shouldn’t have to stop being mutuals to be able to access the cash they need to expand, modernise or offer new services – high time the Treasury addressed this issue urgently.“


Referring to the thwarted attempt to sell and demutualise of insurer LV+, Mr Thomas added: “First up was Liverpool Victoria, now John Lewis; both needing an injection of capital and the Treasury won’t make sensible legal changes to introduce what’s called ’permanent capital’ to enable access to new funding without having to change from being a mutual”.

Retail expert Graham Soult tweeted: “This seems a supremely bad idea, if true. The way to make the John Lewis Partnership successful is to to cherish, harness and be inspired by what makes it unique – not to constantly chip away at those features in a way that makes the business less distinctive and more boring.”


And John Hawksworth, former chief economist at PcW UK, posted: “Terribly short-sighted idea – demutualisation destroyed the building societies that tried it and would probably do the same for John Lewis, once the epitome of the good employer in the UK consumer services sector. Of course they face challenges but this is the wrong road to take.”


Sector think tank Mutuo branded the reports “shocking” and echoed the Co-op Party’s point about the disadvantages mutuals face in raising investment capital.

“It doesn’t need to be like this,” said Mutuo in a post on its website. “Small changes to legislation can fix this imbalance permanently. Co-operatives and mutuals should be able to issue investment capital that does not demutualise them or alter their core business purpose. Maintaining one vote per member and separating investors from control defuses the risk of external capital in mutuals.”

It added: “In the UK, since 2013, building societies have been able to issue core capital deferred shares, from Nationwide to Ecology Building Societies, over £1.3bn has been invested to strengthen the sector.

“In Australia, new legislation created Mutual Capital Instruments (MCIs) for the sector, permitting nearly $400m of new investment already, enabling mutuals to fulfil their cooperative purpose whilst attracting sustainable investment from pension funds and others. MCIs work for all companies with a mutual constitution – John Lewis please note.

“Across the world, Rabobank has similarly raised over €8bn and Desjardins Group in Canada over $4bn CA. These capital instruments are designed to fit the nations and sectors they are issued from. It works. There is a market for it, and it is the future for socially active investment in co-operatives and mutuals.

“Yet in the UK, there has been stalled progress on developing these instruments. Government has shown no urgency in dealing with the remaining sector and now we have the spectre of a possible demutualisation at John Lewis.”