Business ownership matters

The Welsh Government has today announced that the number of employee-owned businesses has hit 100.

This caught my eye because the announcement is a mix of good news and hubris.

The good news is that the number of employee-owned businesses has increased.

Business ownership is critical to Wales’s longer-term economic success. Put simply, locally-owned businesses – and especially those with some form of co-operative ownership – tend to keep profits or surpluses in the area, whereas those owned by shareholders or private interests tend to siphon them off elsewhere. They are less likely to relocate to a cheaper part of the world, and their employees tend to be happier and more productive too. Given the long tradition of profits vanishing over the Welsh border, more employee-owned businesses are exactly what the Welsh economy and labour force needs. So three cheers for all involved.

The hubris is – is that all?

One hundred business sounds great but is in truth a drop in the ocean. These employee-owned enterprises account for less than 0.1% of all Welsh businesses that are registered for VAT or PAYE. Being an employee-owned business must be a lonely gig – at an average of 5 per local authority area, there are simply not enough to network or do business with. And at a macro-scale, the number of employee-owned businesses falls far short of being able to shift the economic dial.

Now political parties in Wales are in manifesto mode, growing the number of employee- and other locally-owned businesses should be at the heart of plans for the next five years. This will need not only more challenging targets, but also a shift in culture.

Too often, non-standard forms of enterprise, including employee-owned entities, co-operatives and mutuals, are not seen as serious businesses. They’re regarded as a soft touch, lacking business acumen and surviving on grants rather than trading. Tell that to John Lewis, CleanTech or Arup!

Wales is one of the few parts of the UK to experience a fall in the number of VAT/PAYE registered businesses in the last two years – there not only need to be more businesses full stop, they need to be businesses that are rooted in Wales through their ownership structure.