Co-owned Firms Can Help Economy
12 May 2009
Ivan Broussine: Co-owned firms can be a kick-start for a safer Scots economy
IN 1826, one of the founding fathers of the co-operative movement, Robert Owen, argued that, if joining forces in times of war could increase the power of the individual a thousandfold, then surely collaboration in peacetime was equally beneficial to everyone?
More than 180 years on, Owen's words have a particular currency. While the world may not be at war, we are in the grip of a global recession that is changing the way people do business.
Unprecedented financial turmoil and the collapse of high-profile corporation have arguably strengthened the case for more sustainable, open and equitable forms of enterprise.
Could co-operative and co-owned business models offer a solution? At Co-operative Development Scotland (CDS), we strongly believe this is the case, and that there has never been a better time for Scotland to capitalise on these proven, but under-represented models.
Scotland's 500 co-operative and co-owned businesses have a combined annual turnover of just under £5 billion; £22 billion of assets; 27,000 employees and more than 2.1 million members. These collaborative businesses account for roughly 4.6 per cent of Scotland's GDP.
This performance is dwarfed by the scale of the sector in Finland, Switzerland and Sweden, where co-operative and co-ownership trading contribute 21, 16 and 13 per cent respectively of their total GDP.
This raises an important question: if Scotland could increase the contribution of these collaborative businesses, even by 1 per cent, how greatly would our economy benefit?
This is the issue CDS aims to address, by supporting the remit of Scottish Enterprise, Highlands & Islands Enterprise and Business Gateway across Scotland; by collaborating ourselves as an organisation with key business, advisory and government partners; and by focusing on priority growth industries, including food and drink, renewable energy, forestry and tourism.
There is strong evidence to suggest co-operative business models have a key role to play in Scotland's growth. Employee-owned businesses, for example, are 5 per cent more productive on average and show a 20 per cent greater survival rate than other business models. They are also generally more deeply rooted in their communities, and, because the member-owners share in the company's success, more entrepreneurial.
For example, Aberdeen-based Woollard & Henry, which makes machinery for the paper industry, has increased its turnover by more than 400 per cent since the business was sold to its employees six years ago.
In Inverness, the homecare provider Highland Home Care has doubled sales to about £2.5m and increased its headcount by 50 per cent since its employee buy-out in 2004.
There are huge opportunities for the public sector to repeat this success and transfer services such as homecare, nursing, dentistry and childcare to sustainable co-operative and employee-owned businesses.
In Scotland's food and drink sector, there is another untapped opportunity, through co-operation and collaboration, to build an industry of real scale and strength.
Strategic government funding could also play a critical role in helping communities establish renewable energy co-operatives. Supporting these initiatives would in turn help local and national government meet carbon emission targets.
It is worth noting that 4,500 of the 29,000 co-operatives in the US are utilities, generating and delivering electricity, water and phone services. Perhaps there is an opportunity here to reopen the debate about utility ownership in Britain.
Co-operation is undoubtedly a global phenomenon - and it all started in Scotland. Contrary to popular belief, it wasn't the Rochdale Pioneers who forged the first co-op in 1844, but a small group of weavers in Fenwick, Ayrshire, who started buying oatmeal in bulk for resale to members of their society in 1769.
Then in 1800, Robert Owen began a new era of co-operative working after taking ownership of the New Lanark cotton mills in South Lanarkshire.
It was obvious then that, by collaborating to reduce risk, the members of a co-operative could share in the benefits of focusing on long-term value rather than short-term gain.
The same principles hold true today.
* Ivan Broussine is the advisory board chairman of Co-operative Development Scotland.
