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Co-operatives Inspire Staff Loyalty And Build Businesses For The Long-Term

By June 23, 2014 No Comments
Co-operatives Inspire Staff Loyalty And Build Businesses For The Long-Term

co-operatives Ask any passerby to name a co-operative business and the John Lewis Partnership is one of the names most likely to pass their lips. The group, which owns major retailers Waitrose and John Lewis, is famous for having 91,000 permanent members of staff who are known collectively as partners, all of whom receive an annual bonus that is a percentage of that year’s profits. But, chances are, the average man or woman in the street won’t realise just how commonplace co-operatives are otherwise, or how many successful smaller co-ops exist in their area, feeding the local economy.

So, what exactly is a co-operative? Put simply, they’re businesses owned and run by their members who may be customers, employees, or local residents. These individuals also have a say in how the enterprise is run, and a share in its profits. And the co-operative movement is very healthy, with businesses springing up in sectors ranging from healthcare to housing, and farms to community-owned shops, as well as more familiar areas such as funeral services. The work of co-operatives is being celebrated at present as part of Co-operatives Fortnight, an event running from June 21 to July 5, highlighting that it isn’t just big organisations that operate on this democratically-controlled basis. Umbrella body Co-operatives UK estimates that:

  • There are more than 14,000 co-operative outlets in Britain, contributing over £35 billion to the UK economy each year.
  • Co-operatives are owned by 15.4 million people – that’s about one in four people in Britain being involved.
  • For every pound spent in a co-operative, an additional 40 pence is generated for the local economy in the form of payments to suppliers, dividends to customers, and staff wages.
  • They’re very popular. More than half of people who were asked in a recent poll said that they trusted co-operative businesses, as compared with just seven per cent who said the same of PLCs.

The co-operative sector has continued to grow even through the economically lean years of late. There has been a 20 per cent increase in numbers since the beginning of the credit crunch, according to Co-operatives UK. In particular, co-operatives operating in sectors that have seen a fall in consumer trust in recent years – food retailers and energy companies being prime examples – are thriving, as people look for alternatives away from mainstream providers. One example is The People’s Supermarket, a sustainable food retailer that has operated in Bloomsbury, central London, since 2010, supplying much of its produce direct from farmers. People pay £25 a year to become members, and are also expected to give four hours a month as volunteers in the business, in exchange for which they get 20 per cent off their shopping. The success of its first branch has prompted those running the supermarket to start looking for other locations in the capital and elsewhere in the UK. The Plymouth Energy Community is another co-operative run by local people to help residents in the city in the South West to secure lower prices for gas and electricity, and even to generate their own energy.

Fans of this type of business point out that because workers in co-operatives are more invested and involved in the company they’re more likely to be loyal – and to work harder during difficult times – than those in ordinary firms. Motivation among employees tends to be high, staff retention is good, and relationships with customers and suppliers are often more secure and long-lasting. Operations of this type often think longer-term than investor-led firms. And co-ops are also more resilient than their conventional peers both to changes in the economy, as recent experience has shown, and to business failure. A huge 98 per cent of co-ops are still in operation after three years, compared with 65 per cent of all businesses.

Some co-operatives come into being when a boss decides to retire, and he or she opts to sell the business to the existing staff. This type of transition to employee ownership sometimes involves the workforce putting up some personal funds to buy shares, though more often they’re bought on the employees’ behalf by a trust financed by contributions from the company itself, or via a business loan that’s then repaid by the SME. Business owners who are considering this type of sale to their workforce – or employees who want to buy a company that’s under threat of closure – can get more information on the legal process from the Employee Ownership Association’s website.

In many respects, co-ops are the ultimate in local businesses. Not only do they generate money that more readily ‘sticks’ in an area, but research also shows that they create jobs that are less likely to leave the vicinity when a business succeeds. They develop and build local supply chains, and can also significantly aid regional regeneration. This last point is emphasised by the Plunkett Foundation, an organisation that specialises in supporting rural co-ops and social enterprises, and it reports a growing tendency for local communities in the countryside to work together to save local pubs and shops from closure by running them on a co-operative basis.

Of course, the co-operative model isn’t for every business, but many SMEs could learn something from how these particular types of enterprise operate. As Ed Mayo, the Secretary General of Co-operatives UK, has said: “Every business would be better if they were more co-operative, rather than necessarily going all the way to being a co-operative. Our research has shown that the cost of low co-operation for business – where staff aren’t fully engaged – is in excess of £34 billion. If we could all be more co-operative, UK business as a whole could be more productive.”
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