It was great to read this week of the Entertainer (incidentally, the shop where my middle son always bought his Star Wars toys) moving into employee ownership. Gary Grant and his wife Christine had clearly looked at a number of succession options, and had decided that selling the business to an employee ownership trust (EOT) was the most compelling.

This is understandable - as an option, the EOT has much to recommend it. It offers business owners the chance to put the business in the hands of the workforce who have helped create it, protecting the culture and ethos of the company in a way that sale to private equity or a competitor could never do. It also offers business owners a tax-efficient route out; a sale to an EOT is free of capital gains tax, provided you tick the relevant legal boxes. Often this unfolds over time, and business owners can stay around (albeit in a different capacity) if they want to. Workers can get a tangible benefit from their involvement (a tax-free bonus).

There are some critical things to get right, including an independent valuation of the business (the EOT mustn't pay over the odds, or the tax break could be lost) and sorting out a trustee for the shares held by the EOT, often a company (a ‘corporate trustee’) to protect the individuals involved. But employee ownership has been shown to have measurable benefits - higher productivity, lower absenteeism and sickness rates, and greater resilience to variations in the market, to name but three.

All of which is interesting in the context of the high street and the challenges faced by the retail sector. Could employee ownership - and the benefits that it unlocks - make a real contribution to the sustainability of the Entertainer, and other businesses like it? Gary and Christine Grant certainly think so… maybe it's time for other businesses to have a look at employee ownership and see.

For more information

For more information about employee ownership, please contact me.