New Economics Foundation: Co-Operatives Unleashed

CO‑OPERATIVES
UNLEASHED
DOUBLING THE SIZE OF THE
UK’S CO‑OPERATIVE SECTOR
NEW ECONOMICS FOUNDATION CO‑OPERATIVES UNLEASHED
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
ENDNOTES44
BIBLIOGRAPHY45
NEW ECONOMICS FOUNDATION CO-OPERATIVES UNLEASHED
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
capital markets hollows out the agency
them wealth. Margaret 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
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
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
the next three years. If just 5% of these 2. 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
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. for the sector and to make the case for
Over time – like a beating heart in co-operative approaches in the UK
the economy – these funds would economy and wider society.
reach a tipping point, at which time
employees could opt to take various NEF was asked to take undertake
forms of control over the running of an independent examination of the
the business. policy framework required to meet the
challenge of doubling the size in terms
If this sounds radical, then it is only of turnover of the UK co-operative
as radical as John Lewis because, in sector. We combined a quantitative
effect, the Inclusive Ownership Fund analysis with a review of relevant
would create more businesses as literature. We also conducted detailed
employee-owned partnerships sharing interviews with people across the
the wealth they create and involving sector and sought their views through
employees and other stakeholders in an online survey, which more than 70
decision making and, in particular, in people completed.
determining purpose.
5
1. OWNING THE The UK has the richest region in

FUTURE Europe – inner London – but most
other areas are now poorer than the
European average, with poverty rising.
Our economy is marked The UK’s productivity performance has
by deep fissures and been abject for a decade, while finance
longstanding structural remains overmighty and too distant
from production.
problems. In the long
wake of the cataclysmic Young people for the first time are set
to earn less over their lifetime than
financial crisis of a decade the generation before them. The basic
ago, UK employees building blocks of life, from housing
have endured the most to education to transport, are costly
and inadequate for many, driving
persistent stagnation in destabilising levels of indebtedness.
earnings for 150 years. And in our era of hyper-globalisation,
value added has shifted from labour
Growth in the economy to capital, leaving many places and
has not benefited the communities of people behind as
majority of people and institutions of collective agency have
been hollowed out and democratic
large parts of the country power in the economy weakened.
have yet to see a recovery. Overarching and reflecting this, we
are operating beyond the planet’s
ecological limits as we move deeper
into the Anthropocene, our human-
made era of deepening environmental
crisis. Unsustainable, inequitable and
undemocratic, our economic model is
broken.
Addressing these problems will require

more than tinkering. We will need to
transform the economic institutions
that generate today’s unequal,
unsustainable and dysfunctional
economic outcomes, such as how firms
are owned and governed. Central to
this must therefore be a 21st century
enterprise agenda that democratises
the ownership and control of business.
This is because how businesses are
owned – who has distributional and
control rights within the firm and
also who captures the value they add
– vitally shapes how they operate,
in whose interests, over what time
horizon, and how they distribute
their profits. In turn this determines
the nature of enterprise and the
distribution of economic power and
reward in society.
6
Crucially, though there are many the UK’s dysfunctional land market. If
purposeful businesses in the UK, our capital was broadly owned, this would
economy faces structural challenges be less of a problem. However, the
that are rooted in the dominance wealthiest 10% of households own
of private, investor-led, extractive 45% of the nation’s wealth, five times
models of business ownership and more than the bottom half, and almost
management: the short-termism in 70% of financial wealth, including
decision-making it engenders, and its stocks and shares (ONS 2018a). The
relationship to our poor productivity narrow ownership of economic assets,
and investment performance; the including business equity, in a time
lack of control most of us have over of rising capital income is therefore
those decisions, despite the UK’s weak likely to drive rising inequality without
record on management performance; redistribution of ownership.
and the inequality and insecurity it
promotes, including in the stewardship At the heart of any enduring economic
of common but finite natural resources transformation must therefore be the
(Co‑operative Party 2017; Labour development of a new architecture
Party 2017). As Marjorie Kelly puts it, of democratic ownership. Piecemeal
‘ownership is the gravitational field reform that leaves current models
that holds our economy in its orbit, of ownership and the distribution of
locking us all into behaviours that economic assets untouched will leave
lead to financial excess and ecological the fundamental values and operation
overshoot’ (Kelly 2012). of our economic system unchallenged.
In place of extractive, disconnected and
The primacy of shareholders in our short-termist forms of ownership, we
largest companies excludes workers have to build forms of ownership that
and consumers from exercising are distributive by design, generative
corporate governance rights and in purpose, democratic in orientation,
incentivises short-termist and and have a sense of connection to place
extractive business behaviour. Though (Raworth 2016).
businesses are institutions that bring
together capital and labour for the There is no single step that can
purpose of production, involving achieve this. What is required is a
political relationships of control pluralistic and proactive strategy to
and the exercise of authority, capital scale alternative models of ownership
is sovereign and labour without that can reorientate enterprise towards
governance rights in our dominant the common good, shape production
business models. Unsurprisingly toward democratic needs, stem
then, the UK comes near the bottom financial leakage and build a future
of OECD economies in terms of the of shared economic plenty by sharing
extent to which patterns of ownership the rewards of our collective economic
and business forms support economic endeavours. Co‑operatives – a tried
democracy (Cumbers 2016).1 and tested means of democratising
and equitably sharing the benefits of
At the same time the distribution enterprise – must be at the heart of
and nature of business ownership is this.
a critical factor in inequality. Capital’s
share of national income has risen
over time, and is likely to rise further,
driven by trends such as increasing
automation, the rise of platform
winner-take-all ‘superstar firms’, and
7
2. THE CO‑OPERATIVE From their origins as a form of mutual

APPROACH: A self-help in response to the hardships
and exploitation of the Industrial
DIFFERENT FORM OF Revolution, co‑operatives have applied
ENTERPRISE democratic, collaborative processes
to economic organisation. They are
The International owned and democratically run by
the people who work and use them.
Co‑operative Alliance Their ownership structure aims to
defines a co‑operative ensure people – whether producers
or consumers – have a genuine,
as an ‘autonomous democratic stake in their enterprise,
association of persons and share in the wealth they create.
united voluntarily to meet By putting genuine control in the
hands of workers or consumers,
their common economic, not the providers of capital, with
social, and cultural needs formal equality among members in
terms of economic decision making,
and aspirations through
co‑operatives embody a different vision
a jointly-owned and of how power should be organised
democratically-controlled and used in economic activity, one that
institutionalises justice in production
enterprise’ (ICA 2018). As (Hsieh 2007).
such, they are a form of
From their emergence in Rochdale in
enterprise in common, 1844, co‑operatives have been based
rooting ownership, on shared values, driving co‑operation
control and benefits to meet common needs. These values
remain central to co‑operation today:
with the members and self-help, self-responsibility, democracy,
beneficiaries of the equality, equity and solidarity. The
co‑operative, not external seven foundational principles of the
co‑operative movement provide
investors. guidelines for practical action to
realise those values: voluntary, open
ownership; democratic owner control;
owner economic participation;
autonomy and independence;
education, training and information;
co-operation among co‑operatives; and
concern for the community.
Co‑operative membership is voluntary

and open to anyone who can benefit.
Democratic control rests with the
co‑operative’s members based on one
member one vote, regardless of capital
contribution, and there are limited
returns on capital. An emphasis is
placed – cultural and operational –
on co‑operative autonomy and the
collective development of the capacity
of ordinary people independent of both
8
capital and the state. Co‑operatives a co‑operative, compared to the

also seek to deepen wider co‑operative transactional and more fluid financial
culture, stressing the importance of participation of a shareholder in a
non-market values as well of different company, as Labour’s independent
values for acting in markets than profit Alternative Models of Ownership
maximisation, through education report argued (2017). Another related
among co‑operators and the wider difference is that while shareholders
community. own the entirety of the value of
the company, the membership of
Co‑operatives are consequently a co‑operative only has a shared
radically distinct from capitalist claim via common ownership, with
firms in organisation and purpose, a core part of the underlying captial
producing very different outcomes. remaining locked and not claimable by
They are not simply a nicer form of the members. Members consequently
economic organisation. The right of give up an element of influence
capital is replaced by the sovereignty and financial gain for the benefit
of collective membership. They are of the membership collective. This
owned differently, governed differently, reflects the differing purposes of the
and operate differently; their risk is organisations: a company exists for
shared differently and the rewards are the private benefit of its shareholders,
distributed differently. whereas a co‑operative is trading for
the benefit of its members (Malleson
Co‑operatives exist to serve and 2012). The co‑operative is a dynamic
service the needs of their members. self-help mechanism enabling people
Direct control and ownership lies to collectively meet their shared needs
with the members and beneficiaries in a broader social context.
of the co‑operative. Members of
a co‑operative are all equal and As a form of common democratic
determine democratically the ownership, any surplus generated by
co‑operative’s policies and practices. the co‑operative is returned to the
This contrasts with the membership co‑op’s members through dividends or
of a company, where control rights lower prices, or otherwise reinvested
are in proportion to the number of in the co‑op, held in reserves, or used
shares owned and shareholders are for some other social purpose, all in
assigned first and overriding priority accordance with the wishes of the
in the governance of the business over members. This reflects their differing
other stakeholders, at least in Anglo- purpose: to provide for the needs of
American corporate governance. their members rather than maximise
profit for external shareholders,
Although both a co‑operative and embedding the principle of an
a company are enterprises, in a economy that puts people before
co‑operative people come together profit in their organisational fabric. As
as equals, and strive collectively and such, they are fundamentally social in
collaboratively to achieve the business orientation, a form of ‘enterprise for the
aim together; whereas a company is a common good’ (Alcock and Mills 2017).
mechanism for operating a business
whose ownership and control is open In an era of often deliberately rootless
to whoever is able and willing to ownership – as capital seeks to cut
acquire it regardless of their objectives costs and exposure to redistributional
or incentives (Alcock and Mills 2017). obligations (ie taxation) – and sharp
economic inequalities of place,
Membership is consequently a co‑operatives are mostly anchored
more committed relationship in in their localities. They act to serve
9
their members and whatever profit is in UK law that form part of the sector,
generated is retained in the locality or the critical defining characteristic of
among members; they generate and co‑operatives is that they are, in the
keep wealth in communities, whether words of Co‑operatives UK, ‘run not
geographic or membership-based. In by institutional investors or distant
doing so, by pooling talent, resources shareholders, but by their members.
and interests together for the benefit People like you and me – customers,
for the membership, rather than employees, residents, farmers, artists,
external investor-owners, co‑operatives taxi drivers’.2 (Co‑operatives UK
are ‘a direct manifestation of socialist 2017c). Whatever the co‑operative
progression’ (Hunt and Willets 2017). form, the objective remains the same:
to capture the value added by doing
The legal and institutional framework business within a defined community
of co‑operatives consequently rather than opening it up for extraction.
make them purposeful by design,
established to serve specific needs There are therefore strong arguments
and populations, generating beneficial for a large and broad-based
social and economic outcomes in the co‑operative sector. Nevertheless,
process. There are typically five types of because it has received so little
co‑operative in terms of membership: attention and support, the UK
co‑operative sector across this whole
1. worker and freelance co‑operatives, spectrum remains small. Much more
with a controlling majority in the incentive, support and encouragement
hands of the co‑operatives workers; is therefore needed now for those
wanting to establish or transform their
2. consumer co‑operatives, where business as a fully-fledged, wholly
membership is based on the democratic entity – the kind that many
customers of the co‑operative; in the current movement have told us
they consider to be a true co‑operative.
3. producer and enterprise But we argue that these interests will
co‑operatives, such as in farming, also be served by implementing a
where independent producers – policy agenda that also seeks a more
usually small and micro businesses gentle transition across the whole
– come together as members to form economy towards greater democracy
a co‑operative, reducing their shared and participation in firms – not just
fixed costs, participating in R&D, co‑operatives – of all shapes and sizes.
investing in infrastructure, capturing These are not mutually exclusive, but
more value-added in supply chains, mutually reinforcing strategies.
and improving negotiating positions
with other companies;
4. community co‑operatives, where

members are typically a group of
people with a defined common
interest;
5. and multi-stakeholder co‑operatives,

where members typically represent
more than one co‑operative group,
such as workers, consumers, service
users or producers.
While there are a variety of legal forms
10
3. CO‑OPERATIVES The co‑operative model – with its

AS SYMPTOMS AND differing ownership and governance
model generating different outcomes
AGENTS OF SYSTEM – should be ubiquitous in an economy
CHANGE that is successful at democratising
ownership and sustaining purposeful
Overcoming our deep, enterprise at scale. A growing co‑op
sector would be one of many factors
structural economic that could catalyse systemic change.
challenges will require But a flourishing sector will also
be a symptom of a different type
systemic solutions, of economy emerging, one where
because our poor thriving businesses are organised so
outcomes are rooted they address deep democratic deficits
generated by current patterns of
in how we currently ownership, and operate with values of
organise the economy participation and community control,
while placing a primacy on social and
and its institutions.
ecological goals.
If more people are to
benefit from economic Co‑operative flourishing in a more
democratic, equitable, sustainable
production, then economy would advance what
economic power and Raymond Williams called ‘the long
revolution’ – the difficult and ongoing
control must rest more struggle to build a society defined
equally, requiring by democratic, open and purposeful
measures to redistribute relationships, where hierarchies of
power and illegitimate authority are
ownership and control in replaced with values of co‑operation,
society and, ultimately, dignity and solidarity in an equitable,
capital. democratic and sustainable economy.
Scaling democratic forms of ownership
through co‑operative expansion is
critical to that endeavour.
11
4. THE CO‑OPERATIVE The geographic range of evidence is

ADVANTAGE striking. The productivity bonus of
co‑operatives has been confirmed in
the USA (Kruse, Freeman and Blasi
The co‑operative 2010; Pencavel and Craig 1994), France
advantage derived (Fakhfakh et al 2012), Spain (Bayo-
from its organisational Moriones, Galilea-Salvatierra and De
Cerio 2003), Italy (Maietta and Sena
form is considerable. 2008) and Germany (Cable and FitzRoy
Wide-ranging evidence 1980), among others.
suggests that productivity Studies in the UK, meanwhile, have
in co‑ops is at least found that co‑operatives, mutuals and
as high if not higher employee-owned enterprises with 75
employees or fewer are outperforming
than ‘conventional’ conventional businesses, creating
firms, primarily due to higher profits (both gross and per
employee) than non-employee owned
improved motivation businesses (Welsh Co‑operative and
through a sense of Mutuals Commission 2016). They are
collective ownership also more resilient. More than 90% of
co‑operatives survive their first three
and profit-sharing, and years of operation compared with 65%
more effective internal of conventional businesses (ibid). The
evidence suggests that the co‑operative
coordination due to model not only offers all of the
higher levels of trust systemic benefits of widening and
and the better use of deepening the ownership and control
of free enterprise, but is also durable
employee know-how. and highly economically viable.
There is also evidence that even

relatively diluted forms of employee
ownership brings business benefits.
Publicly listed companies quoted
on the London Stock Exchange or
AIM that have 3% or more of their
equity capital under employee control
outperform the wider FTSE all share.3
Crucially, the co‑operative model

generates genuine social, economic
and political benefits for its members,
particularly compared to conventional
businesses. Co‑operatives have been
found to have far lower levels of staff
turnover compared with the average,
lower pay inequality within the firm,
and lower absenteeism rates (Mayo ed.
2015). Workers in co‑operatives report
much higher levels of job satisfaction
and economic well-being than those in
privately owned firms, as well as higher
12
rates of engagement and productivity co‑operative federation, where small

(Mayo ed. 2015; Freeman et al 2010). to medium sized co‑operatives share
functions under an umbrella structure.
Strikingly, in an era of unaccountable
corporate power and the facilitation
by footloose capital of grand-scale
tax avoidance, the five largest
co‑operatives paid 50% more corporate
tax than Amazon, Facebook, Apple,
eBay and Starbucks combined
(Co‑operatives UK 2016). And in an
often extractive global economic system
co‑operatives can localise finance. One
2011 study found that employees of
John Lewis spent between 20% and
25% of their partnership bonus (18%
of annual salary in that year) within the
same local authority area as the shop in
which they worked (NEFC 2011).
This is not to say co‑operatives do

not contain trade-offs. Co‑operatives
are not suited to all industries or
businesses. In particular, sectors
involving high capital intensity are
sometimes less suitable, due to the
higher cost and risks that members
would bear. In these cases, other
models of democratic governance
and ownership are likely to be more
appropriate. The growing complexity
and size also typically require
more focus and work to maintain
co‑operative governance and
democratic processes.4 .
Membership can also be demanding.

Participation takes time, sustaining
a rich democratic life requires effort
and resource, and being an active
member takes commitment. Nor do
co‑operatives dissolve the hierarchies
of complex organisations or the
potential tensions of the workplace.
However, they are at least better
legitimated and negotiated through
the democratic structure of co‑ops, and
the sharing of formal decision-making
powers. And it is exactly the democratic
costs that underpin the benefits of
co‑operativism. Moreover, while scale
can potentially be an issue, this can
be addressed through networking and
13
5. THE CO‑OPERATIVE The majority of co‑operatives are

ECONOMY TODAY small scale, with only 41 of the
6,000 qualifying as medium or large
businesses.
The UK’s co‑operative
economy is significant The co‑operative economy had a
combined turnover of around £35
and spread across all billion, up from £34.8 billion in 2014
regions and nations of (Co‑operatives UK 2017a). By far the
the UK. In 2017 there biggest sector in these terms is retail –
some £23 billion – which includes the
were around 6,000 Co-operative Group and John Lewis.
co‑operatives, with 13.6
million members and just
over 226,000 employees
and 118,000 workers and
freelancers working in
co‑operatives.
Number of co‑ops by ownership type

NUMBER OF CO-OPS BY OWNERSHIP TYPE
8.9%, Enterprises
7.8%, Workers
3.9%, Self‑employed
18.0%, Community of Interest
3.9%, Multi‑stakeholder
2.8%, Tenants
Other
0.4%, Co‑operatives
53.8%, Consumers
0.4%, Employee Trust
14
CO-OP TURNOVER BY INDUSTRY
Industry Turnover £ % of all co‑ops

Retail trade, except of motor vehicles and
23300677278 66.98%
motorcycles
Crop and animal production, hunting and
7096975170 20.40%
related service activities
Wholesale trade, except of motor vehicles
1738553993 5.00%
and motorcycles
Real estate activities 831586944 2.39%
Sports activities and amusement and
603308054 1.73%
recreation activities
Activities of membership organisations 431838383 1.24%
Education 283248185 0.81%
Human health activities 62518894 0.18%
Other professional, scientific and technical
56682958 0.16%
activities
Manufacture of food products 55826268 0.16%
However, while the sector is Group, the broad range of entities

measurably larger in terms of turnover that make up the UK co‑operative
in 2018 than it was in 2010, since sector accounts for less than 1% of UK
around 2014 growth has stalled. business turnover.
Currently, including John Lewis
Partnership and the Co‑operative
Trends in turnover
£40,000,000,000
£35,000,000,000
£30,000,000,000
£25,000,000,000
£20,000,000,000
£15,000,000,000
£10,000,000,000
£5,000,000,000
£‑
2010 2011 2012 2013 2014 2015 2016 2017
All other co‑ops Co‑operative Group John Lewis
15
Other notable areas of strength of other enterprises (largely driven by

included education (325 with a big agricultural co‑ops) but this has
turnover of £409.3m), manufacturing been slowly contracting since 2014.
(75 with a turnover of £264.1m), health Consumer co‑ops are still important,
and social care (97 with a turnover even discounting the Co‑operative
of £131.1m), and professional and Group, and their turnover has been
legal services (151 with a turnover of relatively stable over the course of
£101.5m) (Co‑operatives UK 2017a). the decade. Removing John Lewis
Excluding the Co‑operative Group massively shrinks the impact of
and John Lewis shows the importance employee trusts.
TRENDS IN TURNOVER
Turnover excluding T he Co‑op Group and John Lewis
£10bn
£9bn
£8bn
£7bn
Co‑operatives
£6bn Community of Interest
Consumers
£5bn Employee Trust
Enterprises
£4bn Multi‑stakeholder
Self‑employed
£3bn
Tenants
£2bn Workers
£1bn
0
2010 2011 2012 2013 2014 2015 2016 2017
16
6. THE UK IN CONTEXT: In the EU, where the income for

LAGGING BEHIND the sector is €1.3 trillion each year,
people are twice as likely (20% of EU
citizens) to be a member of at least
Despite the benefits of one co‑operative than a shareholder
co‑operatives, the UK in a listed company (11% of EU
has disproportionately citizens) (Hunt and Willets 2017). In
eleven countries in the EU, including
fewer co‑operatives Germany, France, Italy, Spain, Denmark
and mutuals than most and Sweden, co‑ops and mutuals are
worth a per capita income of over
other OECD countries €2,000 per citizen each each, compared
(Ownership Commission to between €350-2,000 in the UK (ibid).
2012). Germany has a
The bigger size of co‑operativism
co‑operative sector four in other European economies and
times the size of the the evidence of the success and
viability of the co‑operative as a
UK’s as a proportion model of enterprise both in the UK
of GDP and France six and internationally, suggest that their
times (ibid), while in the relative rarity in the UK is not due to
their ineffectiveness as a business form,
Netherlands, Finland, but a result of contingent factors and
Sweden and New barriers that can be addressed. It is no
accident that co‑operatives are more
Zealand co‑operatives prolific in countries where policy has
amount to between 5 and provided them with incentives and
10% of GDP compared to made their creation a priority.
2% in the UK (McCarthy
2018).
17
7. THE IMPERATIVE • Automation and ownership –

OF NOW: THE rising inequality or a future of
shared plenty?
OPPORTUNITIES AND
CHALLENGES FACING The growing ability of machines
to substitute or augment human
CO‑OPERATIVES labour is likely to increase inequality
without a transformation in
As we enter a period patterns of economic ownership.
of disruption, of which This is because automation is
likely to accelerate the trend of
Brexit is only the start, capitals share of income rising over
the values and benefits time as capital is substituted for
of co‑operation are labour in the production process
(Karabarbounis and Neiman 2014).
needed more than ever. As capital is narrowly owned, if a
The social, economic growing share of income flows to
capital, this will increase inequality
and ecological forces
(Lawrence, Roberts, King 2017).
transforming society At the same time, technological
provide both an change is likely to boost the
income and power of people whose
opportunity and need skills complement technological
for the expansion of change further polarising the
co‑operatives, while also labour market. Reversing this
dynamic of divergence will require
containing substantial broadening ownership of capital
risks to the sector. to fairly distribute the benefits of
technological change. Co‑operatives
How society and the as a form of collective ownership
co‑operative economy can therefore play a crucial role in
chooses to shape and building a future of shared economic
plenty by helping democratise
respond to these trends capital.
will in part determine the
• The future of the platform
success of the sector. economy: surveillance capitalism
or ‘social-ist’ networks?
Industrial capitalism is giving way

to platform capitalism (Srnicek
2016) and what Shoshana Zuboff
calls ‘surveillance capitalism’ (2015).
This epochal shift is driven by a
set of networked technologies
– smartphones, mobile internet,
cloud computing, sensor and
locative technologies, computing
power – that enable the capture,
analysis and monetisation of mass
data, coupled to a financial system
seeking new sites of profit. The
platform monopolies leading this
18
process are transforming models is running out of steam. But

of production and consumption, alternative business models are
reshaping the traditional flourishing. Crucially, this includes
employment relationship, and a new generation of small and
financialising everyday life. In the medium-sized co‑operatives, from
process, they are reaping enormous creative industries to community
economic reward, underpinned by pubs, football supporter trusts to
their control of society’s data and the locally-owned energy schemes,
digital infrastructure. They occupy housing co‑ops to community
the commanding heights of the care (Co‑operative Party 2017).
contemporary economy. Without Consolidating and expanding this
reform, we risk ceding the future to surge of alternative enterprise is a
them. significant opportunity.
Yet an alternative world is possible • An ageing society – co‑operative

contained within the technological demand and the coming wave of
infrastructure and values of the business transition.
digital age: networked technologies
can enable us to co‑operate and The UK is an ageing society. The
collaborate more effectively than population aged 65 or over is
ever (Murray 2010); value is expected to grow by a third by 2030,
increasingly found in our common even as the working age population
data if we can harness it; and the stays essentially flat (Lawrence
growing real time ubiquity of digital 2016). This will drive demand for
information could help us plan more services such as health and social
justly and efficiently than the price care, areas that co‑operative models
mechanism in the decades ahead. have the potential to thrive in with
Co‑operatives have the potential to the right support. At the same time,
further spread these benefits. as the baby boomer generation
approaches retirement, it is likely
• Neoliberal exhaustion – a growth to trigger a wave of business exits,
model out of steam? marking a profound moment of
ownership transition. For example,
The perverse outcomes of a 63% of small business owners are
shareholder-driven model of over 50 and more than one in five
hyper-global capitalism have long are aged 61-70, with many of these
been noted; it is now increasingly businesses being sold in the coming
matched by a growing recognition of decade. Yet of those over 60, little
the exhaustion of our growth model. more than a third (36%) agree
Advanced economies are struggling that they have a clear succession
to break out of secular stagnation plan (BCMS 2016). Original NEF
and risk becoming trapped in a low analysis shows that 120,000 family
growth, low inflation, low interest businesses are likely to close or
rate equilibrium. They remain over- transfer ownership over the next
reliant on unsustainable levels of three years. To double the number of
debt to generate what (ecologically co‑ops in the UK within that time,
unsustainable) growth there is, only around 5% of them would need
while corporations are increasingly to opt for employee ownership. If the
financialised and short-termist right mechanisms are established
institutions (Keen 2017, Carney to incentivise existing businesses to
2016, Krippner 2012). In short, transform into co‑operatives, then
there is a sense that neoliberalism the decade ahead could provide
19
a key opportunity to shift the • Social care co‑ops, serving but also
landscape of enterprise. empowering people in need through
multi-stakeholder models that
• Ecological overshoot and the align the interests of care workers
impossibility of the present. and receivers. Due to demographic
trends, demand for care is expected
We are firmly in the Anthropocene, to grow significantly in the 2020s.
the geological era in which For example, the number of people
human activity is the dominant who will need daily physical
and destructive influence on assistance to wash, feed or clothe
the planet’s ecosystems. The themselves will double between
scale of compounding crises 2010 and 2030 to two million
already underway will require us people (Lawrence 2016). As seen in
to transform how we produce countries such as the Netherlands,
and consume. The status quo where co‑operatives provide an
is unsustainable; with multiple important role in the provision of
planetary boundaries already social care through the Buurtzorg
exceeded by our actions, we system, there is a significant
have already entered an ‘unsafe’ opportunity to expand more humane
environmental operating space, forms of care provision in the
threatening the preconditions context of an ageing society via the
upon which society can flourish expansion of both user and worker
(Stockholm Resilience Centre 2015). care co‑operatives.
More democratic, equitable and
long-term orientated enterprises • Platform co‑ops, offering shared
such as co‑operatives are well suited ownership and collaboration
to providing the regenerative forms through digital platforms.
of enterprise we urgently need. Digitalisation is already enabling the
aggregating of dispersed workers
Social, economic and ecological trends onto digital platforms to provide
are set to make the 2020s a decade of goods and services. However, at
disruption. This is likely to drive the present, the platform provider
growth of a number of key sectors typically pushes the risk onto the
in which co‑operatives can thrive providers and users of the platform,
(National Co‑operative Development undermines the employment
Strategy 2017b): relationship and the rights that
go with it, and extract significant
• Freelancer co‑ops, where the amounts of value. If the technical,
self-employed come together to financial and legal infrastructure
provide mutual self-aid. The growth was developed to enable the
in self-employment appears to be development of co‑operative
an enduring trend. An estimated platforms, where users and workers
15.1% of the UK workforce is self- could co-ordinate efficiently but
employed, up from 12% in 2001 without an extractive and often
(ONS 2018b), and is expected to exploitative platform provider at the
grow in the coming decade (Dromey centre, co‑op platforms could thrive.
et al 2017). Networks of co‑operative
freelancers, pooling their resources • Professional and creative services
and skills, are ideally suited to co‑ops, where the co‑operative
provide the mutual self-help advantage is a competitive
that can deepen the security and advantage. Co‑operatives and
capabilities of the self-employed. mutuals have already developed
20
a successful if small niche in • Reshaping agriculture. As Brexit

professional services in the UK, such takes shape and the subsidy regime
as digital agencies, architecture and and supply chains shift, co-operation
accountancy (Co‑operatives UK between farms – already a strong
2017a). Given this employment- facet of agriculture in some UK
rich sector is expected set to expand regions and nations – can be a key
in the 2020s (Dromey et al 2017), way to reshape food production
there is an opportunity to increase and supply. Traditionally, smaller
the share of co‑operatives in a scale farms have always shared
growing sector. This is particularly machinery and other common
the case because the comparative functions, but greater collaboration
advantage of co‑operatives is in the production of social and
typically most pronounced in environmental goods as well as in
employment intensive, as opposed providing supply at volume could
to capital intensive sectors, making significantly help increase resilience
them well suited to the high-skilled, in post-Brexit agriculture. Also,
human-focused provision of services linked to more co-operation in
(Borzaga et al 2011). digital platforms, individual farms
can access markets in new ways as
• Co‑operatives participating in some fishing communities such as St
public services, as they are moved Ives already are, bypassing some of
from private to public sector in the traditional market gatekeepers.
the wake of the Carillion collapse.
The experiment of the widespread Others sectors that exemplify a
outsourcing of public goods co‑operative fit include childcare
and services to democratically and education, banking, renewable
unaccountable, financially energy, creative industries, tourism,
overleveraged large private sector and transport, all of which are likely
actors who rely on public contracts to see growth in the decade ahead,
to function has failed. Carillion’s offering opportunities for significant
entry into receivership and the co‑operatisation (Co‑operatives UK
uncertain position of several other 2017a).
firms exposes a business model that
is not fit for purpose: over extended, A durable expansion of the
unsustainably indebted, poor value co‑operative economy is likely to be
for money, opaque and barely driven by growth in these sectors by
accountable to the public. In its three types of co‑operative.
wake, there is a growing momentum
to reclaim the public realm, with • First, the development of more
many local authorities looking to medium and large co‑ops that can
inhouse public services and growing operate at scale.
calls government departments
and agencies to do the same • Second, through the proliferation
(Walker and Tizard 2018). Many of smaller and more locally rooted
public institutions will look first to co‑ops in these sectors, whether
bring public services back under through encouraging new start-
public control and accountability. ups, growing existing micro
But co‑operatives could play an co‑operatives, or transitioning
important role alongside this in existing businesses to the
providing goods and services to the co‑operative model. Often these
public sector – as has been the case will share back-office services and
in Preston for instance. other networked facilitation, such
21
as website hosting, that can also be

provided co-operatively.
• Third, if the sector does grow

effectively, co‑operatives that
provide infrastructural services to
other co‑ops, including back-office
functions, advice and training, could
be a source of future growth. ‘Co‑op
of co‑ops’ networks are most likely
to operate and deepen co‑operative
footprints at the regional level.
Growth in turn is likely to be driven

by a combination of the expansion of
existing co‑ops of various sizes, the
establishment of new co‑operative
businesses and the conversion of
existing businesses into co‑operatives.
Taken together, there are a wide
range of sectors well-suited to
co‑operatisation that are expected to
grow significantly in the 2020s and are
ideally placed to drive an ambitious
project of co‑operative expansion.
22
8. CASE STUDIES In that time, Mondragon has

consistently recorded significantly
MONDRAGON: THE higher labour productivity than
CO‑OPERATIVE FORM AT SCALE conventional Spanish firms, with
its growth outpacing the average of
Mondragon, arguably Spanish companies (Malleson 2012).
the world’s leading Its success attests to the economy
co‑operative group, viability, indeed vitality, of the
was established in co‑operative model at scale. This has
been achieved alongside delivering the
the Basque country in broader social gains associated with
1956 to provide local co‑operativism. Wages are more equal
than comparable capitalist firms, with
employment. Since then, salary ratios between the lowest and
it has grown to become highest paid workers of 1:6 compared
the tenth largest business to an average of 1:129 for a FTSE 100
company (Young Foundation 2017).
group and the fourth Democratic participation and decision-
largest employer in Spain, making power, from the strategic
to the everyday, is also higher than
with more than 260
‘conventional firms’. The Mondragon
different companies and complex has also exhibited far greater
subsidiaries, over 75,000 resilience in terms of retaining
and expanding employment than
workers in 35 countries, conventional Spanish firms (Malleson
and annual revenues of 2012).
over €12 billion (Young The success of Mondragon
Foundation 2017). demonstrates the economic viability of
industrial co‑operativism at scale, with
valuable lessons and challenges to be
learnt from its experience.
First, the creation of a co‑operative

bank – the Caja Laboral (CL) – in
1959 is generally regarded as critical
to Mondragons later success (ibid).
Structured as a co‑op of co‑ops,
CL enables the co‑operatives of
the Mondragon group to pool their
resources to finance development.
This has enabled the group to fund
expansion without entanglement
with forms of finance that would put
pressure on co‑operative ownership
and governance. The CL also has
a business unit – the Empresarial
division – whose purpose is to support
co‑operative business development,
with tailored support and expertise on
hand.
23
Second, the internal structure of densest co‑operative economies. The

the group ensures a high level of 8,000 or so co‑ops of Emilia Romagna
internal investment, to sustain and produce 40% of the region’s GDP
grow Mondragon. This is achieved by and a quarter of the population either
requiring that 10% of the surplus of work for or belong to a co‑operative
a Mondragon group co‑operative is (Malleson 2012). The region is the apex
given to charities, 45% is mandated of Italy’s vibrant co‑operative economy
to go to Mondragon’s collective that is among the largest and most
reserve for co‑operative specific successful in Europe. A number of
financing, and 45% go into individual factors underpin this.
members’ capital accounts, that divorce
membership rights from property and First, under the umbrella of La Lega
income rights (Young Foundation (the National League of Co‑operatives),
2017). an enabling co‑operative network
operates to provide mutual support,
Third, it has constitutionalised problem solving, training, and general
democratic structures such as the support for the establishment and
Governing Council and the Social expansion of co‑operatives.
Council, which enable employees to
act as both workers and co-owners, Second, supportive government policy
sharing formal decision-making has bolstered Italian co‑operativism.
powers. This has included: tax reliefs on
income that is deposited in a co‑op’s
This are nevertheless substantial indivisible reserve, a supportive
challenges to the Mondragon public procurement environment that
model, not least the threat of privileges co‑ops for certain public
co‑operative degeneration. Due contracts; targeted and specialist forms
to rapid expansion and growing of financial support, first through the
internationalisation, for a period in National Institute of Co‑operative
the 2000s, a majority of employees Credit and today with the National
were non-members, particularly in Labour Bank; and a legislative
non-Spanish subsidiaries, threatening framework that requires co‑ops to
the co‑operative status of the significantly re-invest their surpluses,
enterprise. A subsequent effort to forbids sell-offs, and requires co‑ops
re-democratise the firm has increased to contribute 3% of their profits to
employee membership to 81% (Young a development fund that finances
Foundation 2017). Nonetheless, it wider co‑op development and worker
does suggest the potential pressure takeovers. The 1985 Marcora Law
that globalisation and competition can allows workers to capitalise buyouts
place on co‑operatives. Overall though, of their company if it is closing by
the success of Mondragon underscores bringing forward two years of their
that co‑operatives can be successful, benefits payment and has helped
large-scale enterprises with the right create more than 250 worker-owned
institutional underpinnings. co‑operatives in the past 30 years
(Duda 2016). Taken together, these
ITALIAN CO‑OPERATIVISM: measures ensure co‑operative wealth
CULTURE, NETWORKS AND is not transferred out of the sector, and
CO‑OPERATIVE SUCCESS more positively, support the steady
growth of co‑ops.
It is a striking fact that one of the
richest and most equal regions of Italy’s political culture has helped
Europe is also home to one of the drive the growth of its co‑operative
24
movement (Gann 2018). In particular, a paid the living wage. The council have
broad and deep socialist lifeworld that also helped establish two worker
existed outside of Italian capitalism, co‑operatives to fill procurement gaps.
bolstered by the active social Alongside this, concerted efforts have
presence of the Italian Communist been made to redirect spending to local
Party in many of the heartlands of businesses, including co‑operatives. For
Italian co‑operativism, was crucial to example, spending from the anchors
providing the institutional, cultural, with Preston-based organisations has
and political space and momentum for increased from 5% of total spend in
the development of co‑operativism. 2012/13 to 18.2% of total spend in
This suggests that a supportive 2016/17 (Todd/CLES 2017).
institutional framework is best enabled
and embedded by a broader political In partnership with the University of
culture conducive to co‑operation. If Central Lancashire and with support
culture and institutional support are in from the Centre for Local Economic
place, the Italian experience suggests Strategies (CLES) the council is
co‑operatives can thrive. expanding the co‑operative economy
through Preston’s Co‑operative
Network – supporting new and existing
THE PRESTON MODEL: THE
co‑operatives to grow and bid for
IMPORTANCE OF PLACE-BASED
contracts from anchor institutions.
INNOVATION
Efforts are also underway to build
In 2011, faced with among the largest up the co‑operative common wealth
central government cuts in the country, through the pooling of members’
and with a £700 million investment in capital and the storing of surpluses
a new shopping centre falling through, in reserves to support broader
the city of Preston embarked on an co‑operative development.
effort to reimagine its growth model.
Instead of relying on often footloose The council is in the process of
and extractive forms of inward establishing a Lancashire Community
investment to drive the local economy, Bank designed to lend to co‑operatives
the council – led by councillor and small businesses that currently
Matthew Brown – began pioneering a struggle to access finance, while it has
community wealth building strategy. At also supported the re-establishment of
the heart of this approach is an effort Guild Money, a city-wide credit union
to build a more inclusive, rooted and with 500 members.
democratic economy, drawing on the
collective strength of the local public The Preston Model is in its infancy,
sector, businesses and communities. yet highlights, in the face of austerity,
the vital partnership role innovative
Central to this has been an innovative local government can play in fostering
use of public procurement, which co‑operatives and a more rooted local
explicitly aims to develop the economy, not least through innovative
co‑operative sector. This began with the procurement policy and a supportive
identification of 12 major institutions local financial system.
that are geographically rooted in
Preston, ranging from the hospital to CO‑OPERATIVE DEVELOPMENT
the police to the university and city SCOTLAND: THE ROLE FOR A
council. The procurement strategies NURTURING STATE
of each of these was redesigned to
ensure that these institutions and Co‑operative Development Scotland,
their supply chains as far as possible a subsidiary of Scottish Enterprise,
exists to support new and existing
25
co‑operatives to grow and develop,

have either implemented or are
along with raising the profile of
planning to implement more flexible
co‑operatives as a viable business
working practices; seven in 10 EO
model. The Wales Co‑operative Centre
businesses report increased employer
fulfils a similar function in Wales. CDS’s
engagement; seven in 10 report input
record demonstrates the important
to decision-making; 56% have seen
role an innovative, proactive and
better employee performance to date
nurturing state can play to expand the
and the remainder expect to see this
co‑operative sector.
in future; and half already improved
productivity; two thirds of consortia
The body seeks to promote
and EO businesses have improved
co‑operatives and raise awareness,
knowledge-sharing wholly as a result
and increase the adoption and growth
of consortium working/EO, and half
of co‑op models. This includes the
have increased skills / knowledge partly
provision of technical support to
or wholly as a result in the change of
vendors considering an employee
business operation, while almost two-
buy-out, information sharing and
fifths had also seen new innovations
facilitation of introductions. Notably,
(Ekosgen 2015).
it is backed by a thicket of policies
to promote workplace innovation,
In short, CDS has already played a
engagement and collaboration, from
hugely positive role in supporting
the Scottish Business Pledge, to the
the co‑operative sector on a small
Community Right to Buy, to the
budget, with many positive social and
Scotland CAN DO framework to
economic spillovers. Moreover, the
support inclusive ownership. CDS
Wales Co‑operative Centre, which
estimates that for every pound spent
has supported the sector since its
supporting the organisation(totalling
foundation in 1986, also has a track
just over £5 million between 2009-
record in helping grow the Welsh
2016), it generates cumulative gross
co‑operative movement. A similar
value added ten times that, and has
institution tasked with proactively
a target for developing 350 new
nurturing co‑operatives in England and
co‑operatives in ten years.
Northern Ireland could play a vital role
in expanding the sector.
A review of the CDS’s impact by
Ekosgen suggests that a supportive,
entrepreneurial state encouraging
co‑operative and social enterprise
can make a real difference. The ‘return
on investment (RoI), based on total
actual spend of over the 2009/10 to
2014/15 period of £4.4m, is £4.4 to 1
for impacts to date, rising to £6.4m
to 1 if future forecast impacts are
realised’ (Ekosgen 2015). Across ‘the
148 CDS supported businesses since
2009 this generates total net additional
turnover of £54.2m and GVA of
£27.9m’. There are were also a range
of further social and economic benefits
from CDS intervention. For example,
partly as a result of working with the
CDS, 88% of businesses surveyed
26
9. THE BARRIERS These include:

TO CO‑OPERATIVE • Finance: the difficulty co‑operatives
EXPANSION face in accessing effective affordable,
patient (ie the opposite of short-
An ambitious expansion term high-return) finance is a
critical inhibitor of the sector’s
of the co‑operative sector growth, whether it is financing
must address the barriers start-ups or expanding established
that have held back the enterprises. For example, almost
half of co‑operatives and mutuals
sector, while identifying have experienced difficulty accessing
what constructive steps finance (Welsh Co‑operative and
can be taken to support Mutuals Commission 2016). This
is partly due to the structure of a
expansion. There is broad co‑operative, which makes raising
consensus on the factors external equity finance difficult and
often excludes them from traditional
constraining co‑operative investment method including debt-
development. financed investment. However,
other European economies provide
a deeper and more effective range
of alternative sources of finance for
co‑operatives, whether through
direct public funding, legislation
to ensure the development of
common co‑operative development,
or support for innovative financial
instruments tailored to the local
co‑operative economy. The paucity
of long-term finance available in
the UK means that co‑operatives
risk under-investing, triggering
economic deterioration or potential
acquisition by firms better able
to access finance. It also inhibits
the formation and expansion of
co‑operative businesses. Conversely,
financial and regulatory innovation,
drawing on successful international
practice, suggests a supportive
financial ecosystem for co‑operatives
can be developed. It is important
to note though that while tax
measures and financial institutional
arrangements are not necessarily
conducive to co‑operative growth,
many of the solutions arguably lie
in non-governmental and co‑op to
co‑op action, which if there was a
groundswell in new co‑op activity
would likely create an impetus and
27
capacity to develop solutions to the lacks mandatory indivisible reserves

finance challenge co‑ops face. requirements that provide co‑ops
with a financial buffer and de-couple
• Regulatory challenges: resource dependency from a narrow
co‑operatives are democratic fish pool of members. At the same time,
swimming in a capitalist, acquisitive the lack of a statutory asset means
sea. The legal, regulatory, auditing that wealth generated in the co‑op
and financial institutions of the sector risks leaking out, with assets
UK economy are designed for leaving the movement and inhibiting
private companies, tailored to the development of co‑operative
their needs. By contrast, and as a wealth. It also removes the scope
result, co‑operatives operate under for potentially destabilising investor
a framework that disadvantages speculation.
them, burdening them with a
layer of rules and regulations that • The ‘know-how’ gap: another
equivalent conventional firms do major challenge is the absence of
not face. They also face hurdles in a broad common knowledge of
bidding for public contracts, with what co‑operatives are, how they
public procurement geared towards operate, and their advantages. One
major private companies. An manifestation of this is staffing
unequal playing field consequently difficulties – including issues around
places the sector at a competitive recruitment, retention and skills –
disadvantage and makes it easier which just over half of co‑operatives
for new enterprises to adopt surveyed for the the National
conventional business models. Co‑operative Development Strategy
Perhaps as important, the regulatory highlighted as an inhibitor of success
environment for co‑operatives in (2017b). There is also inadequate
the UK fares poorly in safeguarding support for co‑operative business
co‑operative degeneration relative planning or advice provision, for
to the most successful co‑operative financial management during
economies. This includes having different parts of the business life
no statutory asset lock to retain cycle, or for building democratic
co‑operative wealth in the co‑op governance and succession planning.
sector, or strengthening democratic Indeed, as the Welsh Co‑operative
practices, such as requiring a and Mutuals Commission
majority of employees or users concluded, the ‘provision of specialist
to be members. Societies are also business advice, support and
registered under the Financial mentoring that meets the specific
Conduct Authority, not Companies needs of co‑operatives’ is crucial to
House, which creates differing the prosperity of the sector, but too
and often more onerous duties for often is lacking (2016). Relatedly,
co‑operatives compared to other at points of business transition, for
businesses. example when a founder is deciding
whether to sell their business and
• Organisational durability: related to whom, the option to co‑operatise
to the regulatory and financial is little known and currently lacks
challenges co‑operatives face there adequate technical and financial
is the risk that key institutional support to make that a common
features of co‑operative economies option. Addressing what Schwartz
common to other European (2012) calls the ‘familiarity effect’
countries are missing in the UK. In – whereby due to awareness and
particular, the UK’s co‑op sector knowledge about how to start and
28
run a ‘conventional’ firm, this model

the most successful co‑operative
predominates – is important to
regions. As Robin Murray argued:
expanding the sector.
‘Radical co-operative development
depends on creating networks
• Membership: membership is a
and institutions that can mutually
source of massive strength to the
strengthen each other’ (2010). One
co‑operative movement, particularly
potential barrier to co‑operative
when the interests of members
expansion is therefore the need
align. However, there is also the risk
to develop the political, social
that it limits the pool of resources
and cultural forces needed to
available for co‑operatives to draw
popularise and embed a culture
upon, whether capital or labour, in
and institutional strategy that can
turn inhibiting the ability to either
ensure co‑operatives aren’t, in the
establish or grow the enterprise.
words of Raymond Williams, ‘simply
Much of this is the fault of capital
trading organisations isolated
or regulatory barriers, with
from any struggle for alternative
which we deal below. But some
social purposes’.5 More deeply
academics have also suggested
embedding co‑operatives in wider
that the nature of member-owners
social movements and communities
leads to under-investment due
will help give co‑ops the strong
to a ‘horizon problem’; members
cultural and social underpinnings
do not potentially want to invest
that have driven the most successful
beyond their expected membership
co‑operative economies elsewhere.
and a free-rider problem leads to
Finally, co‑operatives face an image
short-term investment decisions
problem, that they are an ethical
(Giannakas et al 2016). The
alternative but not especially
requirements of membership
effective business model, which
may also make co‑operatives
will need addressing to enable the
too demanding for some. An
co‑op model to achieve widespread
ambitious expansion of co‑operative
popularity and normalisation.
membership, while making active
membership as easy as possible
Addressing these barriers is
and reducing the transaction
fundamental to any ambitious
costs and burdens of co‑operation
agenda for the co‑operative economy.
(costs, financial and non-financial),
However, what exactly would
is therefore an important step
constitute ambition in this context and
toward co‑operative success.
how should it be defined?
Shared platform technologies and
co‑operative infrastructures offer
massive opportunities in this regard.
• Cultural isolation: the most

successful co‑operative ecologies
have grown out of broader social,
cultural and political movements
that have struggled for an economy
with fundamentally alternative
social and environmental purposes
beyond capital acquisition. It
is that connection to a vibrant
alternative economic lifeworld
that has sustained and scaled
29
10. THE Given this, it is encouraging to see a

CO‑OPERATIVE growing political commitment to the
sector’s expansion and the doubling of
ECONOMY BY 2030 the co‑operative economy by turnover
by 2030 (Co‑operative Party 2017).
Co‑operatives can play
In such a vision, there is scope for a
a critical role in building broad range of co-operative models,
a more democratic, but an imperative that all roads lead
sustainable society. in the same general direction, which is
towards the creation of a new economy
To have that effect, that puts people before profit. The
however, will require a reason co‑operatives offer the promise
significant expansion of of both journey and destination is
that their proliferation bakes in more
the sector in the 2020s. stakeholder control and better sharing
In turn, to expand the of the wealth created by enterprise into
the economy. The more of them there
co‑operative sector are, the closer to a new economy we
substantially will require edge.
the creation of a new At the same time, given that a defining
business and economic feature of the sector is putting member
culture, perhaps already experience and benefits above
corporate growth, it is important that a
underway in Scotland bundle of metrics are used to monitor
and Wales, but largely co‑operative expansion, not just
absent in England and turnover.
Northern Ireland. With this in mind, there are a number

of key metrics that a doubling of
the sector by 2030 can be measured
against:
• The number of co‑ops: from around

6,000 to more than 12,000.
• Turnover (co‑operative total and as

percentage of all business turnover):
£35.7bn to £71bn, from 1% to 2% of
turnover.
• Number of members: from 13.6

million to 26 million.
• Number of employees (and as

percentage of total employment):
226,000 people to 450,000; from
0.7% to 1.4%.
• Pre-tax profit (total and as

percentage of turnover).
30
• The number of co‑operative older companies such as Scot & Fyfe

champions (medium to large co‑op Ltd (CSD 2017), which was owned
business): from 41 to 80. by the Tough family and transitioned
to employee ownership and smaller
One place to start is with the potential companies such as Skye Instruments,
for business succession to boost owned by John and Gill Wilde6.
the number of co‑operatives. Both
Co‑operative Development Scotland NEF has independently analysed
and the Welsh Co‑operative Centre and estimated the proportion of UK
have identified that family-owned businesses that are family run and are
SMEs whose owners are looking likely to be transitioning ownership
to retire and have no clear plans in the next three years. The baseline
for succession could present an sample of businesses in the UK is taken
opportunity for worker co‑operatives. from the Annual Business Survey,
which gives counts of businesses by
Their work suggests families who own number of employees. The initial size
businesses are more likely to face issues band is 0-9 employees, so in order to
around business succession and to estimate how many of these do have
transfer ownership over to employees employees, the proportion of registered
as a way of prioritising business businesses with no employees in this
longevity and keeping jobs in the local size band is taken from the Business
areas. Examples includes larger and Population Estimate (52%).
0 to 9 10 to 49 50 to 249 Source
Baseline number of UK
UK business
businesses registered for 2,386,740 231,715 40,530
workbook
VAT/PAYE
Proportion of registered Business
UK businesses with 0-9 Population
52%
employees that have no Estimate,
employees Table 1
1 to 9 10 to 49 50 to 249
Adjusted baseline sample 1,152,846 231,715 40,530
To estimate what proportion of these 2016 on this subgroup are used, taken
SMEs are family businesses likely to from Institute for Family Business’ State
be facing business succession issues, of the Nation report (IFB 2017).7
results from the Small Business Survey
1 to 9 10 to 49 50 to 249 Source
% of private businesses BEIS SBS
75% 59% 47%
family firms 2016
% family firms anticipate

BEIS SBS
closure or transfer of 16% 11% 6%
2016
business
% family firms not BEIS SBS
76%
anticipating transfer to family 2016
Number of family businesses

could be open to employee 105744 11741 887
ownership
Total 118,372
31
This suggests that there are around internationally, while deepening and
120,000 family-run SMEs in the expanding the strengths, capabilities
UK likely to be facing a transfer of and culture of co‑operativism in the
ownership in the next three years. UK.
There are approximately 6,000 co‑ops
in the UK, so to double this number, If this is achieved in the coming years,
only 5% of these family businesses then the potential exists to profoundly
would need to be supported to use alter the trajectory of the co‑operative
a transition to employee ownership economy. In particular, an ambitious
as an option for business succession. institutional agenda could underpin
While this would clearly not constitute even bolder targets for success.
a doubling in turnover, if repeated over Doubling the sector is the core goal.8
successive three-year periods, it could
clearly set the UK on a path towards Beyond that though by the early
this measure of doubling by 2030. to mid-2030s we should aim for a
co‑operative economy where half
If achieved, this would constitute the the population enjoy the benefits
beginnings of a significant change of membership, employees of
in the economy, with a substantially co‑operatives represent 5% or more
broader co‑operative footprint in terms of the workforce, and turnover is
of employment, economic activity, equivalent to 10% of GDP. This would
and membership. Other indicators of be a bold stepchange, and provide a
success could include the densification powerful mechanism for cumulative,
of the co‑operative economy, including enduring economic transformation.
increasing the number of co‑operatives
working in networks, clusters and To do so will require an equivalently
federations, greater trade between bold reform agenda, to which we now
co‑operatives, and an increased turn.
reproduction rate among co‑operatives.
However, arguably a deeper measure

of success is not simply the doubling of
certain metrics, but the establishment
of a new and enduring legal, financial
and technical framework that can
enable the sector to enduringly
flourish. This will require embedding,
reinforcing and creating co‑operative-
specific institutions that have
underpinned co‑operative success
32
11. POLICY Instead, it should be because they

RECOMMENDATIONS are a form of purposeful, successful
enterprise that most effectively brings
together the ability and interests of
Significant co‑operative ordinary people backed by a supportive
expansion – beginning institutional, financial and legal
with at least doubling framework. Co‑operatives should
thrive, in other words, as a form of
the turnover of co‑ops economic organisational ‘common
in the UK by 2030 – will sense’.
not happen under the For an economy with free but
current legal, financial co‑operative enterprise at its heart,
and operational many of the specific policies and
approaches that are needed (outlined
arrangements, which below) would be at their most effective
inhibit the sector’s if set within a wider framework of
economic development and prosperity
development. Nor can that sought at heart to broaden
or should we expect democratic ownership and control.
co‑operativism to expand This would see small- and medium-
dramatically through sized enterprise as the primary
the force of ethical economic building block, networking
between businesses as essential
example and exceptional and, by extension, co-operation
effort, not least because and community wealth creation as
co‑operatives are key objectives. In this context, the
co‑operative model would no longer be
currently subject to exceptional; it would be foundational.
intense external pressures
NEF notes that for relatively little
due to their operating in investment, Co‑operative Development
a wider, extractive and Scotland and the Wales Co‑operative
Centre have made significant inroads.
dysfunctional economy.
CDS remains nevertheless a modest
player sitting inside a larger national
enterprise agency.
How much more could be achieved if

co‑operatives were given the undivided
attention of a better-resourced agency?
And how much more ambitious could
the cause of democratising businesses
be if we sought to inspire and
provide incentives for all firms to give
employees a stake?
To be certain that co‑operatives could

double in size and, perhaps more
profoundly, to create the conditions
33
for much more ambitious growth – a reserve via statutory underpinning.

new economy based on wealth-sharing An asset lock would enshrine the
enterprises and economic democracy, ‘disinterested distribution’ principle
no less – NEF recommends a five-step common in other European
programme.9 countries, which ensures that
there can never be a benefit from
‘cashing out’ via liquidating or
FIVE STEPS TO CREATING A
selling the co‑operative because
CO‑OPERATIVE EONOMY
the assets must be transferred to
Five interlocking steps can form another co‑operative. This ensures
part of such a strategy and so drive co‑operatively earned wealth stays
co‑operative expansion: within the co‑operative economy.
While the asset lock and indivisible
1. A new legal framework for reserve incentivise, reward and
co‑operatives utilise ‘common wealth creation’,
the process should be optional for
2. Finance that serves the co‑operatives, depending on their
co‑operative agenda circumstances.
3. Deepening co‑operative • Introduce a right to own to
capabilities through a support employee buyouts
Co‑operative Development and the co‑operatisation of
Agency existing businesses. This should
be underpinned by the legal
4. Transforming business ownership
framework, financial instruments
and institutional mechanisms
5. Accelerating community wealth
needed to allow for a negotiated
building initiatives
employee buyout between workers,
The foundational step is to develop exiting owners and the co‑operative
a legal framework tailored to the sector. Further details are set out in
specific needs of co‑operatives recommendation 4: transforming
and supportive of their future business ownership.
development. This must address the
• A duty to develop the diversity of
current disincentives to co‑operative
corporate form. The government
growth that exist in regulation and law,
must provide official recognition of
ensure co‑operative wealth is rooted
co‑operatives as inclusive business
in the wider co‑operative economy,
models, and introduce a new
and create the conditions for the
statutory duty to foster diversity
accumulation of co‑operative capital
of corporate forms to help enable
and commercial expansion.
a new culture of co‑operative
entrepreneurship, and broader
1. A CO‑OPERATIVE ECONOMY pluralism of ownership in the
ACT SHOULD ESTABLISH THE economy as a whole. This would
FOLLOWING: include amending the government’s
• Create a statutory underpinning impact assessment on new
for the creation of co‑operative legislation and regulation, to make
indivisible reserves and an asset sure that all legal forms are properly
lock. Co‑operatives should be considered and fairly treated, and
given the option of creating an asset to identify and remove burdensome
lock on co‑operative wealth and unintended consequences of
building up a common indivisible new government policy. To assist
34
the growth of diverse corporate Finally, while there are substantial

forms, reform should include a benefits to the co‑operative movement
requirement for the Competition to not having too narrow and singular
and Market Authority to review its a definition of what constitutes
competition policy with a view to a co‑operative, there may be an
fostering markets with different advantage in greater definition of
legal forms, not just focusing on the co‑operative endeavour in particular
size of market share among often sectors. Consideration should therefore
monocultural enterprise forms. It be given to whether greater definition
is noticeable that economies with in legislation is required for specific
significant co‑operative sectors forms of co‑operative enterprise; these
have statutory duties to promote might include in certain sectors or
them. For example, both the activities that require legal definition as
Italian and Spanish constitutions a condition for legal recognition, such
oblige the government to promote as housing or energy.
co‑operatives and underpin
supportive legislative frameworks. 2. BUILDING FINANCE THAT SERVES
THE CO‑OPERATIVE ENDEAVOUR
• A Co‑operative Development
Agency in statute. To strengthen The second step is to develop a
the development of the sector, range of financial instruments and
a Co‑operative Development institutions tailored to the needs of
Agency for England and Northern the co‑operative economy. Crucially,
Ireland should be established on a these must be capable of providing
statutory basis. This would mirror patient forms of capital without
the institutional support provided requiring control rights in exchange,
to co‑operatives in Scotland and enabling co‑operatives to continue to
Wales. We recommend that both employ capital in pursuit of enterprise,
Co‑operative Development Scotland rather than capital dictating and
and the Welsh Co‑operative Centre distorting their purpose. A range of
are given statutory underpinning, interventions can develop such an
which they currently lack. Further ecosystem.
details on the role the agency could
play are set out in recommendation • A National Investment Bank
three. should be established that
includes a mandate to supply
Legislation should also review areas patient risk capital specifically
where co‑operatives are currently at a to the co‑operative, mutual and
disadvantage compared to other types social enterprise sector. NEF, along
of business in legislation, regulation with many other organisations
and other areas, redressing this where and academics, has called for
appropriate. For instance, while the establishment of a National
people in the co‑operative movement Investment Bank with regional
have spoken to us favourably of the divisions to provide the productive
Mutuals Team at the Financial Conduct investment that the private sector
Authority, through which co‑operatives is failing to supply (Macfarlane
are registered, the disconnection 2016). A division of the bank should
between establishing a business via be tasked with tackling another
companies house and a co‑op via the market failure of the UK’s banking
FCA speaks to the disjointed nature of system: the failure to adequately
government’s current approach. finance co‑operative development.
This would require the development
35
of national and regional expertise SMEs through legislating for mutual

of the differing requirements of guarantee societies. We are missing
co‑operatives compared to other out: 8% of small businesses in
business forms. The focus would the EU used a mutual guarantee
most likely be on scaling already society to access finance, with a
medium to large co‑ops, financing portfolio of €80bn, while the OECD
substantial worker buyouts, and concluded that mutual guarantee
financing the co‑operatisation of schemes represent ‘a key policy tool
existing public assets, such as Royal to address the SME financing gap,
Bank of Scotland, if such an asset while limiting the burden on public
was transforming to a co‑operative finances’ (OECD 2013). To redress
governance and ownership model.10 this gap, legislation should create
The development of a co‑operative a definition of a mutual guarantee
financing wing of a National society and add mutual guarantees
Investment Bank should be part to the list of regulated activities as
of a broader strategy to ensure it set out in the Financial Services
is a ‘mission-oriented’ bank, with and Markets Act 2000, rather than
one such mission being expanding being considered – as they are under
alternative forms of business current legislation – as a commercial
ownership. In the absence of a insurer, which imposes significant
National Investment Bank being and inappropriate regulations,
established, consideration should be conditions and capital requirements.
given to establishing a public bank
focused on providing long-term • Introduce tax relief on profits
funding to the co‑operative and reinvested in asset-locked
social economy, learning from the indivisible reserves and on profits
successful Green Investment Bank paid into a co‑op development
prior to its ill-advised privatisation. fund to incentivise common
wealth creation. The UK should
• A new model for co‑operative adopt the model that is common
financing should be developed and successful in many European
to allow the provision of non- countries, in which co‑operatives
member investment, which receive a discount on corporation
provides capital in return tax if the eligible profits are paid
for a limited return but no into their asset locked indivisible
participation rights. It would be reserves, with a proportion paid into
similar to the co‑operative bond a national or regional co‑operative
investment market common in development fund established by the
leading co‑operative economies in sector or by the state, to support new
Europe. and growing co‑operatives. There
is broad and proven acceptance of
• Legislate for the creation of this model in terms of economic and
mutual guarantee societies, competition policy. For example,
ending the UK’s anomalous the European Court of Justice
position11. Mutual guarantee decision on 8 September 2011 was
societies are private guarantee decisive in supporting differential
institutions created by small and taxation regimes for co‑operatives
medium sized businesses who because of the distinctive ownership
benefit from mutual loan guarantees and social benefits of the model
and better access to finance. (Ibarra 2014). Even at a relatively
Critically, the UK is almost unique low level, a bold commitment
in Europe in terms of not supporting to incentivising common wealth
36
building could catapult the sector and as a network – to grow.

forward. Tax relief should be
accompanied by a requirement In Scotland and Wales existing
on co‑operatives to complete an institutions provide this function
independent co‑operative audit admirably already, but scaling
of their performance against the such efforts across the rest of the
co‑operative principles once every country is crucial. We therefore
five years, as a form of accountability. propose establishing a Co‑operative
Development Agency for England and
• Offer people facing one for Northern Ireland that would
unemployment or receiving in- seek to replicate and expand on the
work benefits the opportunity success of Co‑operative Development
to start a business using a ‘co- Scotland and the Welsh Co‑operative
operative enterprise grant’ and Centre across the rest of the country.
allowance to start a co-operatively In Scotland and Wales, given the
run business. The Co‑operative success of their development agencies
Development Agency would provide on a tight budget, we recommend
advice and support for business expanding their funding.
development. It will also require
holistic support, including ensuring The agency would provide a network
access to skills and retraining of support and capacity building
options, to support people to explore to co‑operatives large and small to
their co‑op options. facilitate networking, federating and
risk sharing among co‑operatives,
It is worth noting that most small and and act to increase familiarity with the
micro firms – whatever their structure co‑operative model. A central public
– struggle for finance, especially in agency is particularly well placed to
order to grow once established. If provide buyout support, support for
attractive forms of finance can be co‑operation between co‑ops, and
found for financing co‑ops, there is digital platform development. In
a strong case to say that many micro other areas, the need for a diverse,
firms will be actively incentivised to flexible, networked weave of things
change structures. A better ecology independent of politicians and the state
for financing co‑operative production is important; the agency should also
could act as an accelerator for existing seek to nurture, enable and partner
co‑ops and a pull for other business not take over all direction of co‑op
forms to co‑operatise. development.
A Co‑operative Development Agency

3. A CO‑OPERATIVE DEVELOPMENT
should operate at multiple levels:
AGENCY
nationally in England and Northern
The third step is to develop Ireland, co-ordinating with existing
and extend the capabilities of Welsh and Scottish equivalents, as well
the co‑operative movement by as providing tailored support to city
establishing a new Co‑operative regions, local government, combined
Development Agency. As we have authorities, and local co‑operative
seen, the most successful co‑operative ecosystems. Specific actions it could
regional economies are underpinned undertake or have responsibility for
by a thick ecosystem of institutions and include:
cultures that provide the information,
advice, expertise and support necessary • Facilitating knowledge exchange
for co‑operatives – both individually among co‑operatives by helping
37
co‑operatives share best practice and • Fund the development of

costs. This could include supporting a core co‑op API that could
the development of co‑operative provide the building blocks of a
clusters and federations, thickening common digital infrastructure.
networks of co‑operative support This would be a pivotal step to
and exchange. It could also promote enabling co‑operatives to use digital
peer support and mentoring technologies to operate at scale.
programmes based on sector-specific Benefits of digital connectivity
focus and provide pooled training, could include more meaningful
expanding on the excellent but membership participation in
currently limited activities provided governance, greater collaboration
through the Co‑operative College, within and between co‑operatives,
Co‑operatives UK, Plunkett, ABCUL, and better relationships with
Confederation of Co‑op Housing co‑operative customers and
and others. members. This would build on
existing developments. The Scottish
• Supporting co‑operative business Government’s Expert Advisory Panel
development: the agency could on the Collaborative Economy has
work with the sector, at differing recommended developing a digital
scales, to promote economic infrastructure for the common
co-operation between co‑ops. good, including a core co‑operative
This could include connecting API that could then be adopted.
up co‑operative supply chains The UK government has also set in
and helping to encourage inter motion the creation of a ‘Workertech
co‑operative trading, alongside Catalyst’ to the same effect. Building
providing support for co‑operative and deepening these through a
federation. dedicated co‑operative development
agency would accelerate the process.
• Enhancing the image
of co‑operatives. Young • Replicate, shelter and expand
communicators and creatives in successful co‑op models by
the co‑op movement should be providing an accessible co‑op
funded by the agency to promote replication service. This would
and modernise the image of the provide the required support
co‑operative model. While in many to enable the replication and
ways well suited to new start-ups, proliferation of successful
if the co‑operative sector is going co‑operative models. In doing
to expand it is crucial that attitudes so, it would help shelter new
to co‑operativism shift, and more co‑operatives by providing support
early businesses take on the model. with the core infrastructural
This will likely require changes in requirements, reducing costs in the
the broader infrastructure to make process. It could potentially develop
it easy to form and operate a co‑op, certain functions, such as auditing
but also a sustained effort to make or accounting capabilities, that
the co‑operative model more widely co‑operatives could join together
attractive. It is vital that strategies to to buy at a discounted price, further
promote co‑operatives are part of a assisting them. It could also support
grassroots economic development peer mentoring and other forms
strategy, with supportive of co-operation between co‑ops.
arrangements in place to help The agency should work with local
people explore and then develop government to reproduce successful
their co‑op options. co‑operative initiatives, for example
38
supporting city regions to develop boomer business owners reach the

and expand ride-sharing co‑op end of their careers and seek to pass
platforms or co‑op care networks. In on their business. With relatively
doing so, it should work within the little resource, Co‑operative
context of community development Development Scotland has
and place-based economic managed to persuade more than
strategies. 50 business owners to build greater
democracy and take steps towards
• Provide the technical support to co-operatising their businesses as
assist in worker buy-outs. This they look to move on. The Wales
should include providing workers Co‑operative Centre has had a
who are considering buying out similarly successful track record.
their company and transforming This approach, alongside the suite
it into a co‑operative (see next of advice and support available to
recommendation for further details) people at all stages in the cycle of
with professional business feasibility entrepreneurship, should be a core
studies for assessing the viability of strategy of the new Development
new worker co‑ops, as well as legal Agency.
and technical assistance during the
process. • Introduce a right to own to
support employee buyouts and
4. ACCELERATING THE the co‑operatisation of existing
‘CO‑OPERATISATION’ OF EXISTING businesses. This should be
BUSINESS underpinned by the legal framework,
financial instruments and
As the discussion of Co‑operative institutional mechanisms needed
Development Scotland above suggests, to allow for a negotiated employee
perhaps the greatest near-term buyout between workers, exiting
opportunity to increase the volume owners and the co‑operative sector.
and scale of the co‑operative sector in
the UK is through ‘co‑operatisation’ of -- New legislation should be
existing business. introduced, potentially as part
of the Co‑operative Economy
Without steps to accelerate new Act, that would give employees
models of ownership, it will be a statutory ‘right to request’
impossible to achieve a step-change employee ownership during
in the size of the co‑operative business succession, with the
economy. Private capital will remain potential to extend this to
the privileged actor within the firm, any point in the life cycle of a
while growing returns to capital will business.
increase inequality. Scaling democratic,
inclusive forms of ownership is -- To support the ability to do this
therefore crucial to addressing the effectively, an ‘early warning’
systemic problems of inequality and resource should be introduced,
ecological crisis confronting us. Two which would mean workforces
steps to democratise capital at scale are were informed in advance of
recommended: insolvency or disposal of a viable
business, allowing them to
• Prioritise promotion of assess the scope for acquisition
co‑operatives or more democratic and prepare a bid if appropriate.
options at point of business The Co‑operative Development
transition. The pace of business Agency would provide technical
transition is speeding up as baby-
39
assistance in this process. At present, local economies are

too often indifferent to people and
-- Employees should be able to place (Birley 2017), underpinned by
purchase part or all of the target extractive, distant and often footloose
business through a variety of ownership models that suck capital
ways: share capital purchases out of places under the guise of
made via their savings and/ inward investment. An alternative
or redundancy payments in approach is that of community wealth
the case of a potential business building, which seeks to embed
closure; advances of up to three co‑operative values of participation,
years of their cash transfer- social responsibility, reciprocity and
based and employer portions of democratic accountability in the
their unemployment insurance operation of the local economy. This
benefits, as in the successful will require radical, place-based
Marcora Law for worker buyouts enterprise strategies; literally, rooting
in Italy12; debt capital financing enterprise in a place within the context
from either the co‑operative fund of wealth-building orientated, spatial
within the National Investment industrial strategy. This would develop
Bank for large businesses or the democratic models of ownership and
network of co‑op development control, and increase the retention
funds for medium to small firms and circulation of wealth within local
secured on the projections of communities. A number of interlocking
future revenues of the business steps can help achieve this:
and/or on the collateral offered
through the assets acquired • Local authorities should be
from the target business. The required to produce place-based
co‑operative should have limited industrial strategies that seek
liability to protect workers from to retain and build wealth at
losing their personal assets in the the district or borough level.
case of business failure. These should interlock with
regional or city regions’ industrial
5. ANCHORING CO‑OPERATIVES strategies and fall within nationally-
WITHIN PLACE-BASED INDUSTRIAL described parameters, such as key
AND COMMUNITY WEALTH environmental limits. The local fund
BUILDING STRATEGIES of funds described above, and other
aspects of growing and investing
Finally, co‑operatives must be in the creation and retention of
supported to thrive in their local wealth, would develop in line
communities and localities as with these strategies. Co‑operatives
genuinely rooted businesses capable should be seen as a key aspect of
of retaining power and control within these strategies because of their
that place and returning value to innate capacity to hold wealth in
communities. This requires creating place (Birley 2017).
real life contexts across the UK where
people can come into contact with • A new approach for genuine
co‑op ideas and realise how they can and powerful place-based
be applied to their livelihood and localism with an economic focus.
community. Innovative place-based More strategic and place-based
community wealth building and community development strategies,
local industrial strategies are crucial co‑op option programmes and
to this and hence to co‑operative enterprise support; an ecosystem of
development. private business, co‑ops, community
40
groups and anchor institutions will with the community, social

all play their part. New powers to oriented enterprises and unions,
support this could include a new should work together to increase
community right to shape local the capacity of co‑ops and other
industrial and economic strategies; local businesses to bid for anchor
a new community right to list institution contracts. This could
and bid for an asset of economic include pre-market engagement to
value, and to share ownership provide training, advice, mentoring
of local developments; establish and meaningful feedback to help
more diversified measures of local prepare bids; supporting the
economic success than gross value formation of local consortia if larger
added (GVA). contracts require scale; and the
creation of local portals to enable
• Encourage local procurement co‑operatives, social enterprises
and commissioning strategies and SMEs to easily see available
to support, where appropriate, opportunities, and anchors and
co‑operatives and social larger businesses to understand the
enterprises. There remains a lively local market and more easily obtain
debate as to whether Brexit will quotes (Mayo 2017). The regional
allow for greater flexibility in socially Co‑operative Development Agency
oriented procurement (Guinan should support local authorities in
and Hanna 2017). Regardless, developing such community wealth
there is clearly a case for the more building strategies, in partnership
strategic use of procurement and with groups such as Co‑operatives
commissioning, beginning with UK.
using the spending and supply chain
footprint of local anchor institutions
CREATING AN UNDERLYING
to support local businesses and
CULTURE OF DEMOCRATIC
co‑operatives. As a first step, anchors
OWNERSHIP: THE INCLUSIVE
should commit to using local small
OWNERSHIP FUND
and medium sized businesses,
community sector, third sector, social It is no coincidence that the
enterprise and co‑operatives where co‑operative sector in the UK is
possible and appropriate. Contracts smaller, weaker and more atomised
above a certain value should require than in countries such as Italy, France,
bidders to demonstrate how they Canada, Costa Rica and even the US.
will use the local supply chain, While the sector itself has worked
and all other suppliers should be hard to preserve and promulgate the
encouraged to source locally where spirit of co-operation first pioneered
possible and to consider local in Rochdale, it has done so against
businesses and co‑operatives when a backdrop of ruthless, extractive,
sub-contracting. Larger procurement deregulated, neoliberal capitalism and
should be broken into smaller with little supporting legislation and
lots where possible, to enable and active promotion.
encourage local SME, third sector,
co‑operative and social enterprise As the political sun sets on neoliberal
participation. Where larger contracts economics and hyper-globalisation,
are unavoidable, there should and demand grows for greater wealth-
be a requirement on suppliers to building and sharing of value with
obtain quotes from co‑operatives, those that add it, there is a real need
social, community and local SME for policy that creates the kind of
enterprises (Wright 2016) enterprises that can fulfill this demand.
• Local authorities, in combination In addition to the five steps described

41
above, further policy is needed to a non-tradable stake. Partnership

create a deep economic heartbeat that stakes carry with them democratic
consistently and over time transfers the control rights over the management
ownership and control of businesses to and direction of the business. In many
workers and other key stakeholders. respects, our proposal for an Inclusive
Ownership Fund can be thought of as a
We call this an Inclusive Ownership John Lewis law.
Fund. Under this proposal, all
shareholder- or larger privately-owned An economic heartbeat of this sort
businesses would transfer a small would ensure that over time and in all
amount of profit each year in the businesses, the ownership and control
form of equity into a worker or wider of workers and other designated
stakeholder-owned trust. Once there, stakeholders, such as users of social
these shares would not be available for care, would grow. This could be
further sale. achieved by mandating the transfer of
the equity of firms into an Inclusive
In a world that presumes companies Ownership Fund, with formally
are owned privately or by distant designated stakeholders, annually
shareholders, this may sound far- and at a low level, or by incentivising
fetched. And yet even in the US this transfer through the business tax
(and for a while under Thatcherite system. Or both approaches could be
privatisation in the UK), through adopted: mandating at a low level and
Employee Stock Ownership Plans incentivising to allow some business to
(ESOPs) workers can be rewarded opt for a more rapid transfer.
in the form of shares which are
transferable and held in an ESOP trust When the fund reached a controlling
until the worker retires. level of ownership of a firm (or, in
the case of businesses succession,
ESOPs, however, while opening up proposed takeover or crisis, a lower
ownership to workers are not generally but significant level of ownership)
accompanied by control rights and the stakeholders controlling the fund
can also often be bought and sold. In could opt to assume control of the
the UK, many ESOPs, developed as business. But prior to that, steps could
a means of retaining worker control be built into the fund that would see
when local authorities were required to incremental improvements in worker
privatise services, merely went the way or wider stakeholder participation
of the wider share-owning democracy when the fund reached certain levels.
concept, with ownership eventually
conglomerating in the hands of a While for some, becoming a member
relatively small number of often distant of or setting up a full co‑operative
asset owners. While revived timidly and will be the answer to the questions
in dilute form under George Osborne posed by the dramatic scale of
through the introduction of Employee current economic injustice and lack of
Ownership Trusts, the concept of democracy, for many a greater share of
employee ownership has never taken the wealth created by a business, and
root in the UK, perhaps again because the opportunity to participate in its
of the hostility of the business and governance, will be enough.
economic environment.
While not strictly about greater co-
One exception is John Lewis operatisation, in the current economic
Partnership, which is owned by its context and with such deep economic
employees – or partners – through inequalities, the Inclusive Ownership
Fund demands political attention.
42
APPENDIX: NEF also asked organisations and

members of various co‑operative
INTERVIEWS AND networks to complete a survey looking
SURVEY at the barriers to and steps towards
doubling the size of UK co‑operatives.
NEF conducted a series of informal
interviews to explore with those 77 people responded. However, NEF
involved in the UK co‑operative sector had no control over the population
the barriers to growth and to discuss of the survey; it was taken by anyone
potential interventions. Alongside who received the link and wanted to
a literature review and the result of participate. Therefore, the results –
the survey, these underpinned our however significant – should only be
research, conclusions and helped steer viewed as broadly indicative of the
our thinking as we sought to develop preferences of existing people with the
recommendations. UK sector.
The following interviewees agreed to The results can be viewed at https://

be listed as having taken part: neweconomics.org/uploads/files/co-
op-survey1.pdf
• Russell Gill – Co‑operative Group
• Paul Gerrard – Co‑operative Group
• Ed Mayo – Co‑operatives UK
• James Wright – Co‑operatives UK
• Russell Marsh – Co‑operatives UK
• Simon Borkin – Co‑operatives UK
• Johnny Gordon-Farleigh – Stir to
Action
• Matt Parsons – Outlandish/Fixed
Abode
• Bob Cannell – Co‑operative Business
Consultants
• Sion Whellens – Calverts
• Ieva Padagaite – Blake House
• Dr Rob Jump – University of the
West of England
• Charlotte Christison – John Lewis
Partnership
• Deb Oxley – Employee Ownership
Association
• Sarah Deas – Co-operative
Development Scotland
• Adotey Bing-Pappoe – University of
Greenwich
43
ENDNOTES
1 The analysis is a composite of four different measures of economic democracy, of which the level
of collective, co‑operative and employee ownership and employee share ownership, and the
distribution of economic decision-making powers within an economy, are critical factors for a
country’s overall score.
2 See https://www.uk.coop/about/what-co-operative
3 See http://www.employeeownershipindex.co.uk/wiki/index.php5?title=Welcome_to_the_UK_
Employee_Ownership_Index
4 An interesting test will be whether Nisa remains a store-owner mutual following its takeover by
the Co‑op group, or whether incorporation into a larger scale entity will change its character.
5 This point, and the Williams quotation, was made in Tom Gann’s review of Labour’s Alternative
Models of Ownership document.
6 See http://www.kellogg.ox.ac.uk/wp-content/uploads/2015/11/Employee-ownership-defusing-
the-business-succession-time-bomb.pdf
7 The baseline numbers are first multiplied by the proportion of all UK businesses that self-report
as family firms; this includes businesses that have one single owner. This is then multiplied by
the proportion of UK family businesses that anticipate the full closure or transfer of ownership
of their businesses in the next three years. Finally, this is multiplied by the proportion of family
businesses anticipating a closure of ownership but who aren’t planning to transfer ownership to
another member of their family.
8 Crucially, there is growing political support for such a goal; for example with a commitment in
the Labour Party 2017 manifesto as well as the independent report commissioned by the Labour
Party examining the case for alternative models of ownership.
9 It is worth noting that the ILO Recommendation 193/2002 on the promotion of co‑operatives is
a key global policy influence on nation states and arguably one that puts a soft law obligation on
the UK to take action to develop the co‑operative sector. The strategy set out would help the UK
meet its obligation.
10 A specific investment remit for the investment bank would echo the Industrial Common
Ownership Act 1976, which gave seed-funding to the Industrial Common Ownership Movement,
which successfully financed more than 2,000 worker-owned co‑operatives.
11 The society acts as a guarantor on behalf of the SME, insuring and supporting businesses in their
engagement with financial institutions. Societies are typically co‑operative or mutual, with capital
provided by the member SMEs, who apply for a loan guarantee in the form of co‑operative or
mutual shares. Each member has equal voting rights and elects the society’s general assembly
and board. For banks the mutual guarantee provides a form of security on otherwise unsecured
enterprise lending. By lowering the risk, societies reduce the cost to members, increasing the
supply of capital to SMEs under a co‑operative framework.
12 Italy’s ‘Marcora Law’ provides funds and business support for employee buyouts, and has
generated an economic return of 6.8 times the capital invested by the funding mechanisms.
44
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48
49
WWW.NEWECONOMICS.ORG WRITTEN BY:
info@neweconomics.org Mathew Lawrence, Andrew Pendleton
+44 (0)20 7820 6300 @NEF and Sara Mahmoud
Registered charity number 1055254
COVER IMAGE BY:
Bonninstudio/Stocksy
Co‑operatives Unleashed is an
independent New Economics THANKS TO:
Foundation report commissioned Ed Mayo and Co-operatives UK
by the Co‑operative Party.

New Economics Foundation: Co-Operatives Unleashed

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CO‑OPERATIVES

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

9. THE BARRIERS TO CO‑OPERATIVE EXPANSION 27

10. THE CO‑OPERATIVE ECONOMY BY 2030 30

11. POLICY RECOMMENDATIONS 33

EXECUTIVE Now, more than half of UK company

This report is about doubling the size

The flaws in the neoliberal model

shelter the co‑operative economy. size. We therefore recommend that

compel or strongly incentivise (or both) This report was commissioned by

1. OWNING THE The UK has the richest region in

Addressing these problems will require

2. THE CO‑OPERATIVE From their origins as a form of mutual

Co‑operative membership is voluntary

capital and the state. Co‑operatives a co‑operative, compared to the

4. community co‑operatives, where

5. and multi-stakeholder co‑operatives,

While there are a variety of legal forms

3. CO‑OPERATIVES The co‑operative model – with its

4. THE CO‑OPERATIVE The geographic range of evidence is

There is also evidence that even

Crucially, the co‑operative model

rates of engagement and productivity co‑operative federation, where small

This is not to say co‑operatives do

Membership can also be demanding.

5. THE CO‑OPERATIVE The majority of co‑operatives are

Number of co‑ops by ownership type

0.4%, Employee Trust

CO-OP TURNOVER BY INDUSTRY

Industry Turnover £ % of all co‑ops

However, while the sector is Group, the broad range of entities

All other co‑ops Co‑operative Group John Lewis

Other notable areas of strength of other enterprises (largely driven by

6. THE UK IN CONTEXT: In the EU, where the income for

7. THE IMPERATIVE • Automation and ownership –

Industrial capitalism is giving way

process are transforming models is running out of steam. But

Yet an alternative world is possible • An ageing society – co‑operative

a successful if small niche in • Reshaping agriculture. As Brexit

as website hosting, that can also be

• Third, if the sector does grow

Growth in turn is likely to be driven

8. CASE STUDIES In that time, Mondragon has

First, the creation of a co‑operative

Second, the internal structure of densest co‑operative economies. The

co‑operatives to grow and develop,

9. THE BARRIERS These include:

capacity to develop solutions to the lacks mandatory indivisible reserves

run a ‘conventional’ firm, this model

• Cultural isolation: the most

10. THE Given this, it is encouraging to see a

Northern Ireland. With this in mind, there are a number

• The number of co‑ops: from around

• Turnover (co‑operative total and as

• Number of members: from 13.6

• Number of employees (and as

• Pre-tax profit (total and as

• The number of co‑operative older companies such as Scot & Fyfe

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

9. THE BARRIERS TO CO‑OPERATIVE EXPANSION 27

10. THE CO‑OPERATIVE ECONOMY BY 2030 30

11. POLICY RECOMMENDATIONS 33