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Shift in work ownership

More EOTs due as worker demands change

Carole Leslie

Carole Leslie: exceptional year

Tax efficient employee ownership trusts are on the rise as more workers demand a stake in the business they work for.

Ownership Associates, based in Stirling, believes it could beat last year’s record of 11 deals in Scotland with six so far this year and a number in the pipeline.

Deals completed in 2019 included two EOTs in Shetland with pharmaceutical consultancy ESPL and Laurence Odie Knitwear, Fife-based engineering firm GS Brown, demolition firm Safedem and internet marketing firm Buzzbase in Dundee, East Kilbride-based engineering consultancy Grossart Associates and the Scottish Gallery in Edinburgh.

Ownership Associates founder Carole Leslie said: “Last year was an exceptional year of activity.  Having said that, 2020 is looking really strong with six deals over the line and a number more in transition stage. 

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“We also have a pipeline of more than 20 businesses all at different stages in their plans. We can see this decade being one in which employee ownership is even more prominent as a route to succession via a model that provides sustainability and delivers business success that rewards the very people who create that success, the employees.”

EOTs were introduced in 2014, with the aim of fostering employee ownership while providing capital gains tax (CGT) advantages to business owners and income tax breaks to employees. 

There are about 90 Scotland-headquartered employee-owned companies.

Ms Leslie said: “Industry research shows that employee ownership is growing faster in Scotland than anywhere else in the UK outside London.

“Covid-19 and recent changes to the tax regime are making EOTs increasingly attractive to business owners when they are considering an exit. 

“Merger and acquisition activity has suffered since the onset of the pandemic, while changes to the tax regime announced in the Budget earlier this year reduced Entrepreneurs’ Relief meaning a sale to an EOT, which is already free of Capital Gains Tax, has become even more beneficial.

“What we’re continuing to see is that it’s often the case that a business owner doesn’t want to see the business in the hands of a competitor, preferring to protect local employment and loyal staff. 

“From a strategic point of view, employee-owned businesses generally outperform more conventionally structured firms on just about every business measure.”

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