Co‑Operatives Unleashed

CO-OPERATIVES UNLEASHED DOUBLING THE SIZE OF THE UK’S CO‑OPERATIVE SECTOR NEW ECONOMICS FOUNDATION CO-OPERATIVES UNLEASHED DOUBLING THE SIZE OF THE UK’S CO‑OPERATIVE SECTOR CONTENTS EXECUTIVE SUMMARY 2 1. OWNING THE FUTURE 6 2. THE CO-OPERATIVE APPROACH: A DIFFERENT FORM OF ENTERPRISE 8 3. CO-OPERATIVES AS SYMPTOMS AND AGENTS OF SYSTEM CHANGE 11 4. THE CO-OPERATIVE ADVANTAGE 12 5. THE CO-OPERATIVE ECONOMY TODAY 14 6. THE UK IN CONTEXT: LAGGING BEHIND 17 7. THE IMPERATIVE OF NOW: THE OPPORTUNITIES AND CHALLENGES FACING CO-OPERATIVES 18 8. CASE STUDIES 23 9. THE BARRIERS TO CO-OPERATIVE EXPANSION 27 10. THE CO-OPERATIVE ECONOMY BY 2030 30 11. POLICY RECOMMENDATIONS 33 ENDNOTES 44 BIBLIOGRAPHY 45 NEW ECONOMICS FOUNDATION CO-OPERATIVES UNLEASHED DOUBLING THE SIZE OF THE UK’S CO-OPERATIVE SECTOR EXECUTIVE Now, more than half of UK company SUMMARY equity is owned abroad and only just over 12% by individuals. The interests of those who own Britain’s businesses For 40 years, the economy are often misaligned with those of has been a one-way- other stakeholders, such as employees, street. Assets and equity customers, service users and local communities. And even were they have flowed upwards are better aligned, a concentration of and outwards, and with shareholding and the distant power of them wealth. Margaret capital markets hollows out the agency of individual shareholders. Thatcher promised a world ‘where owning A different kind of business and, as a result, a different kind of economy shares is as common is possible, but it will not happen as having a car’. But by accident. Co‑operatives are both journey and destination in this quest. the grand promise of a They are a vector for democratic share-owning democracy, change in the economy, and a more and with it broad-based democratically‑owned economic model that distributes wealth and is economic power, has viable today. And yet a lack of policy crumbled. and support, and a hostile economic environment for co‑operation in the UK, holds them back. This report is about doubling the size of the UK’s co‑op sector. It is also about how enterprise can serve the interests of the people it employs and those in the communities around them. And it is about how doing business can increase economic democracy, and how the wealth created can be more broadly and equitably shared. BROKEN ECONOMY By most measures, the 40‑year‑old economic model, ushered in by Margaret Thatcher after her election in 1979, is broken: growth is anaemic; wages and productivity are stagnant or falling; inequality is stark; investment is low; consumer debt is high and crippling; asset bubbles are frequent. The flaws in the neoliberal model came to a head 10 years ago during the great financial crisis and resulting economic crash. Since then, profound structural changes have been few 2 NEW ECONOMICS FOUNDATION CO-OPERATIVES UNLEASHED DOUBLING THE SIZE OF THE UK’S CO-OPERATIVE SECTOR and far between. Instead the broken or environmental goal by pooling the economy has lumbered on zombie‑ resources of a defined group of people. like, leading to greater inequality and a growing political tension between a Co‑operatives exist to share risk, power relatively narrow, elite group of winners and reward. They are therefore more and those whose living standards have democratic and accountable forms of stagnated. business that, again by nature, cannot sell equity on capital markets and so are beyond the influence of the OWNERSHIP MATTERS shareholding conglomerates. Recent This economic malaise and growing studies have shown them to be more sense of injustice is related to the enduring and resilient in the face of changing patterns of company market disruption, more profitable, ownership and control because who more productive, happier and longer‑ owns enterprise determines how the lasting than non‑co‑operative forms of wealth businesses create is shared. enterprise. Powerful, distant shareholders have presided over a time when DOUBLING THE SIZE OF unprecedented levels of wealth CO-OPERATIVES IN THE UK created have flowed in their direction while employees and others have If co‑operatives are better businesses experienced a declining share. that can help create a better economy, society and environment, why have In addition, ownership shapes they not thrived in the UK? And purpose. Creating an economy that why have they thrived elsewhere? addresses the real‑world challenges To achieve the aim of doubling the we face, such as an ageing society or turnover of the UK co‑operative sector climate change, and produces goods by 2030, we must address these two and services designed to meet these fundamental questions. challenges, is immeasurably more difficult if control lies in the hands of The answer is not one of rocket‑ powerful shareholding conglomerates science complexity. Our research whose habitat is capital markets. The finds that co‑operatives and the new economy mission becomes more wider cause of democratising and achievable if the power to determine more evenly spreading the benefits the direction and strategy of business is of enterprise are held back due to in the hands of those with an interest an absence of legislation and policy, in addressing today’s challenges and institutional support, advice, incentive who live in the communities directly and promotion. With an economy affected. that does nothing to help co‑ops thrive and everything to create a hostile environment for models of THE CO-OPERATIVE ADVANTAGE co‑operation, it is unsurprising that the Co‑operatives are at heart free UK has one of the smallest sectors of enterprises. In the countries in which any country. they have thrived, they are often rooted in resistance to oppressive In those places where there is government or the march of a market a more significant co‑operative economy that is prejudiced in favour of ecosystem (Italy, France, Canada, an extractive and financialised model. USA, Costa Rica), there is also – to Co‑ops are by nature organisations varying degrees – a corresponding with a purpose, and are very often ecosystem of policy and an institutional established to achieve a specific social architecture that helps develop and 3 NEW ECONOMICS FOUNDATION CO-OPERATIVES UNLEASHED DOUBLING THE SIZE OF THE UK’S CO-OPERATIVE SECTOR shelter the co‑operative economy. size. We therefore recommend that In the UK this has not hitherto been the Co‑operative Party, which has the case. However, there are signs of commissioned this research and improvement in Wales and Scotland, which exists to promote the cause where non‑statutory agencies have of co‑operation in policymaking, been established – at a very modest sets its sights not only on a doubling level of investment – to encourage of turnover, but also on a profound the uptake of co‑operatives. Though transformation in business ownership. relatively young, they show significant success. POLICY RECOMMENDATIONS One area of focus in Scotland has been Based on the findings of our research, on ‘business succession’; the moment we recommend a cohesive programme in the development of an enterprise of law, policy and institutional when an owner or founder seeks to arrangements, including a right to move on, often because of retirement. own for employees, a Co‑operative By promoting more democratic Economy Act and a new, statutory forms of ownership at this moment, Co‑operatives Development Agency for Co‑operative Development Scotland England and Northern Ireland. has had significant success in moving businesses towards the co‑op model. We have organised our programme of recommendations into five interlocking New NEF research, published here for steps: the first time, suggests that there are around 120,000 family‑run small and 1. A new legal framework for medium enterprises in the UK expected co‑operatives. to undergo a transfer of ownership in 2. the next three years. If just 5% of these Finance that serves the co‑operative businesses were supported to make the agenda. transition to employee ownership or 3. Deepening co‑operative one of the other mutual or co‑operative capabilities through a Co‑operative models available in the UK, then the Development Agency. number of entities in the sector would double. 4. Transforming business ownership. But doubling the number of co‑ops 5. Accelerating community wealth does not equate to doubling turnover. building initiatives. The UK co‑operative sector currently accounts for roughly 1% of business We firmly recommend that all five turnover, but around half of this steps are taken up with gusto by is achieved by two businesses: the policymakers. It is probable that some Co‑operative Group and the John form of doubling of UK co‑operatives Lewis Partnership. could be achieved with a more modest programme. But growth in To double turnover requires further co‑operation and the democratisation effort and almost certainly a cohesive of business will likely stall unless web of legislation, support and we transform the hostile economic promotion. Creating this will in environment into one that is conducive. turn almost certainly lead to the development of a co‑operative sector To this end, we also recommend a that, perhaps even before 2030, will ‘heartbeat’ policy we call an Inclusive be more than double its current Ownership Fund, which would either 4 NEW ECONOMICS FOUNDATION CO-OPERATIVES UNLEASHED DOUBLING THE SIZE OF THE UK’S CO-OPERATIVE SECTOR compel or strongly incentivise (or both) This report was commissioned by all shareholder‑ or larger privately‑ the Co‑operative Party, which was owned businesses to deposit a small, established by co‑operative societies annual share of profits in the form of and works to provide a political voice equity into a worker‑controlled fund.

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