The growth of employee owned businesses in Scotland

The report examines the growth performance and growth dynamics of 12 Scottish employee owned businesses (EOBs) compared to a peer group of companies which have conventional ownership structures.

The methodology consisted of two phases: phase one comprised interviews conducted with the managing director and one employee in 10 of the 12 participating EOBs; and phase two involved a comparison of financial data (turnover, number of employees, pre-tax profit, percentage profit margin, and return on capital employed) provided by 10 of the EOBs with that of a selection of their conventionally owned peers.

The report found that, in terms of the EOBs investigated, their mean and median annual percentage growth of turnover, numbers employed, sales, return on capital and profit margin was mostly positive, and when each EOB was compared to around 10 peers matched by size and business sector, the performance of EOBs was generally superior. It was noted that EOBs with combined ownership had the highest turnover, paid the highest salaries, had the highest profits before taxes and had the highest value added index. The value added index, which crudely measures contribution to the Scottish economy, was marginally higher for EOBs than their peers. The major growth bottlenecks reported by participating EOBs were recruitment and access to finance, however no evidence was found to suggest that recruitment issues were a result of the business’ EOB status, and was more likely to be due to an issue in their respective commercial sector.

The report sets out a series of evidence based policy recommendations in terms of: raising understanding and awareness of EOBs and high growth EOBs; reducing barriers to becoming an EOB; providing better resources for EOBs; financing for EOBs; geographical aspects of support; identifying and disseminating lessons from EOBs; and data collection.