SoGlos has spotted a rising trend in Gloucestershire, with an increasing number of county business owners deciding their staff are best-suited to take over their companies – a route taken by the likes of John Lewis, Unipart and Richer Sounds.
Back in 2012, it was the then chancellor, George Osborne, who championed employee ownership as a good route for business owners – and it looks like the idea is catching on.
Two years ago, fast-growing Paperback Shop in the Cotswolds made the move and this year is heading towards a £50 million-plus turnover.
Now Q&M Limited, a Gloucestershire-based specialist in zinc, copper, steel, aluminium and lead roofing, cladding, has done the same.
Founders and owners, Paul Quarry and David Eeles, had seen the business enjoy near year-on-year growth over its 30-year history were ready to move on. They had even received an offer for their thriving business, which employs 26 staff.
‘We went as far as Heads of Terms, and then decided it was not the best route for the business or the staff – who are very skilled at what they do. We thought the business had more potential in it yet,’ said Mr Quarry.
After a re-think the pair instead chose to make Q&M an Employee Ownership Trust – an arrangement that comes into force at the end of March 2021.
Chris Wills, from Cheltenham law firm Willans LLP, said: ‘Employee ownership trusts are becoming increasingly popular, particularly for savvy business owners looking for an exit or a way to free up some capital whilst retaining a stake in the business they have often nurtured and grown over many years.
‘From what our clients have experienced, enabling employees to buy controlling shares in the business has empowered them, and this increased motivation and engagement which has in turn, benefitted the business.
‘On the other hand, the selling shareholders take some risk in that they won’t be paid at the point of sale, it will take time for them to be paid out.
‘Also, if the company’s performance improves after the sale, they may miss out on the increase in the value of the shares.’
Tom Woodcock, a partner at Gloucestershire-headquartered accountants Hazlewoods, said: ‘There are a number of reasons as to why you may want to consider employee ownership – for example, for fast-paced growth in a start-up venture, or as an attractive route for succession where there is no plan in place.
‘Careful structuring is required in order to qualify for the tax benefits when transitioning to an employee-owned business model.
‘The overarching benefit in succession terms being that, if structured correctly, no capital gains tax will be due when disposing of a controlling interest.
‘With the entrepreneurs’ relief lifetime limit having reduced to £1 million for disposals, employee ownership is becoming a more attractive option for a tax efficient exit and we are seeing many more businesses enquire with us as to how this could work for them.’
Mr Quarry, said: ‘The move gives Q & M control over its future and provides stability and growth.
‘This structure gives our 26 employees a financial stake in the business and a say in how the company will evolve and share in rewards. For clients it provides continuity and reassurance that the business will be here in Gloucestershire for many years to come.’
According to the Employee Ownership Association there are 470 employee-owned businesses in the UK and the number is growing – up by 50 per cent since 2017 and 100 new employee-owned businesses since June last year.
The association argues employee ownership delivers 4 per cent of UK GDP annually and enables more resilient regional economies.
By Andrew Merrell