Co-operative and Mutual Businesses

Marion Fellows Excerpts

Thursday 27th June 2019 Commons Chamber

[Marion Fellows (Motherwell and Wishaw) (SNP)]

As ever, it is a real pleasure to follow the hon. Member for Strangford (Jim Shannon). I congratulate the hon. Members for Harrow West (Gareth Thomas) and for Wycombe (Mr Baker) on securing this important debate, and thank all Members who have contributed to it.

I should declare an interest, as a member of a credit union, and, indeed, should declare an interest in the Auchrannie Resort, which was referred to by my hon. Friends the Members for Argyll and Bute (Brendan O’Hara) and for North Ayrshire and Arran (Patricia Gibson). As a delighted former customer, I have to say that it is an amazing venture.

The Rochdale pioneers have been mentioned frequently this afternoon, and I feel that I would be failing in my duty if I did not point out that they were inspired by the work of Robert Owen of New Lanark, who set up the village store in 1813 for the benefit of his community, and used the profits to fund educational projects. He thus inspired the co-operative movement across Rochdale, and look where that has brought us!

There are a few Members scattered around the Chamber—or maybe not—who will be able to recite their mother’s, or their grandmother's, co-operative dividend number, such as, in my case, 4308. I must declare another interest, as my father was a milkman who worked for the Kilmarnock Equitable Co-operative Society. However, things have moved on considerably in the co-operative and mutual movement since I was but a girl. There are a number of useful and well-meaning co-operatives in my constituency, which help my constituents enormously. They include Forgewood and Garrion People’s Housing Co-operatives, Bridges Housing Association, three credit unions, Motherwell United Services Club, Clyde Supporters Trust and the Motherwell FC supporters club. I am particularly interested in the last-named, as I have just purchased my season ticket, and look forward to supporting Motherwell in a very successful season.

I am very grateful to Co-operatives UK and the Employee Ownership Association for the work that they do in raising awareness of the benefits of co-operatives and mutuals. Co-operatives UK’s 2018 annual report shows that there were 7,226 independent co-ops operating across the UK, with a combined turnover of £36.1 billion, an increase of more than £800 million on 2017. They employed 235,000 people, and there were 13.1 million members of co-operatives overall. As we all know, those numbers are increasing. The data indicates that co-ops of all shapes and sizes are thriving throughout the economy. Exciting new co-op clusters are emerging in industries such as digital and creative, in social care and in the community ownership of land, assets and enterprise, while they remain strong and continue to innovate in areas of traditional strength such as retail, wholesale, housing and agriculture.

The co-op economy in the UK is diverse, well-established and growing, but it is small by international comparisons. Globally, co-ops are a significant force, with a combined turnover of more than US$2.1 trillion and 1 billion members. The UK lags behind most OECD countries in the scale and impact of our co-op sector. Germany’s is four times the size of ours, while in France it is six times larger. According to Co-operatives UK, and as has already been mentioned, there are unnecessary barriers preventing the use and spread of this type of organisation, especially in England.

The corporate frameworks for co-ops are not as user-friendly as they should be. The registry function for co-ops, under the aegis of the FCA, can be cumbersome and is not linked into the increasingly important digital nexus between Companies House and HMRC upon which so many improvements for businesses, such as single filing and Making Tax Digital, are predicated. Also, co-op law is in need of both routine maintenance and strategic reform. That can add to negative perceptions about co-op options.

There are examples where the operating environment for co-ops is more challenging than for other models, including banks not understanding legal forms, and difficulties and unwarranted disadvantages in procurement —private and public—due diligence and credit scoring, adding to negative perceptions about co-op options. There can be some distinct challenges for co-ops in raising start-up and growth capital that go beyond those experienced by businesses generally, although that applies more to some types of co-op in some circumstances than to others.

In Scotland, with approximately 7,000 employee-owners generating a combined turnover of £940 million, the appetite for employee ownership has never been greater. As my hon. Friend the Member for Argyll and Bute said, in the last five years the number of employee and worker-owned businesses operating in Scotland has trebled and this past year Scottish Enterprise has been working on a deal a month on average.

Employee ownership gives employees a meaningful stake in their organisation, together with a genuine say in how it is run. It roots business in Scotland, drives performance and delivers economic wellbeing. In moving to a co-operative model, owners, the business, and the employees can benefit from the following: a competitive price and guaranteed exit for the owners at their own pace, which is particularly useful for SMEs; the safeguarding of jobs and improved employee engagement; safeguarding the future of the business; ownership and leadership transfer at low risk; enhanced employee engagement, as we have heard; and increased productivity and innovation while attracting and retaining high-quality talent.

While Westminster descends further into chaos, the Scottish Government are racing ahead with support to achieve a fivefold increase in employee and worker-owned businesses by 2030. Scotland aims to become a world leader in employee ownership and other co-operative models. The Scottish Government aim to increase the number of employee-owned and worker-owned businesses to 500 by 2030 through the new Scotland for EO industry leadership group backed by the Scottish Government and co-chaired by Jamie Hepburn, Minister for Business, Fair Work and Skills. Co-operative Development Scotland, a dedicated team within Scottish Enterprise, has a practical remit to promote awareness of employee ownership and other co-operative models and provide advice to businesses considering adopting these models. Scottish Enterprise is running a series of workshops explaining employee ownership to build awareness and demand for this inclusive business model.

Any firm can submit an inquiry about moving to employee ownership and Scottish Enterprise provides up to three days of free support. Where employee ownership is identified as a potential exit solution for business owners, it will undertake an employee ownership feasibility study. Scottish Enterprise will then provide a report examining potential ownership structures, governance, management, funding and how a transition would occur.

The biggest issue facing co-operatives and mutuals in Scotland and across the UK is a Tory no-deal Brexit, which could slow down exports, lead to a hike in interest rates and cost our economy up to 100,000 jobs according to the Fraser of Allander Institute and the Bank of England. Under no deal, a Treasury analysis suggests exports would decrease by 15% and warns that disruption to cross-channel trade could lead to delays in UK food supply, 30% of which comes from the EU. The Bank of England has warned that crashing out of the EU without a deal would be worse than the 2008 financial crisis. The irresponsibility of the Tories is on full display with the claim of the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) that there could be a temporary “standstill” in the current trade arrangements with the EU while a new trade agreement is struck, and that premise being rejected by two Brexiteer Cabinet Ministers. All these things will impact negatively on co-operatives and mutuals and inhibit their productivity and contribution to our economy.

In conclusion, I ask the Minister whether he agrees that we should focus on what the UK Government can do to support the voluntary expansion of employee and worker ownership through both start-ups and conversions using worker co-ops and employee ownership trusts. Will the Minister address the biggest barriers to awareness, understanding and available advice and support, as evidence shows that when entrepreneurs and businesses are given the right information in the proper context with access to expert help, they are more likely to choose employee and worker ownership?

In this matter, the UK Government can learn a lot from the success of the Scottish Government in making employee ownership conversions a mainstream option of ownership succession among SMEs. I again urge the Minister to look at the good work being done in Scotland on this and to follow suit.