An interesting debate was opened by Labour’s MP for Neath, Christina Rees, in Parliament’s Westminster Hall last week on Italy’s “Marcora Law”. This is the legislation introduced there in 1985 to allow workers’ threatened with redundancy the option of exercising a right to purchase the company. Two government-administered funds provide the loan capital needed to the workers, and the law has been credited with saving 13,000 jobs in the years after the financial crisis.
There are two points to note here. First, although co-operative and worker ownership sector in the UK is a fraction of those in Europe and North America, it has been growing rapidly in the last few years, helped along by some recent changes to legislation. 250 new employee-owned business have been established since 2019, taking the total to 720 across the UK: a fraction of the 2m or so registered businesses in the UK, but including at least one very large employer, John Lewis Partnership, and with notable growth in manufacturing firms in particular.
Second, there is a potential here for a government outside the EU to do something radical with this. The original Marcora Law provided for significant government support to those wanting to move a threatened firm into employee ownership, with the Italian state offering to put in up to three times as much additional start up capital as the workers. The European Commission ruled that this was in breach of EU competition law, handing (in its view) an unfair advantage to worker-owned businesses relative to more conventional ownership. But the reality is that this was a clash of two very different conceptions of what a business is. The Commission took (and takes) a pure neoliberal view: that a business is there to benefit its shareholders only, and any one kind of shareholder – someone’s granny with share certificates; your ISA; Black Rock – is much the same as any other. There is, in this view, no case for offering cheap loans to any one type of business over another, solely on the basis of its form of ownership.
That, of course, radically reduces the appeal of worker ownership, and opens up the standard neoliberal objection. If you are employed by a company, you are exposed only to one kind of risk – that the business could fail, and you lose your job. But if you are not only an employee, but a shareholder in the company, you face two kinds of risk: if the business fails, you lose your job – and also whatever capital you have invested. It’s this double risk that tends to weigh heavily against worker buyouts, particularly where employees also face having to borrow money at standard commercial rates.
But there is another way to view a business. Instead of seeing a firm as operating solely for the benefit of its shareholders, we could view it as a social institution in its own right: that whatever a business does includes not only the profit it makes, but the quantity and quality of the work it generates, its impact – good or ill – on the environment, the other businesses and employment it sustains through its purchases, and so on. The evidence that worker ownership performs better on these broader measures of successes is clear: worker-owned firms tend to be more productive, tend to create and sustain more and better jobs, and tend to act as better stewards for the environment.
In this view of a firm as a social institution, government could become a necessary partner, acting as guardian of the broader interests of society alongside those of the workers and any additional shareholders. It would be natural for this additional partner to also take a stake and offer support to a company working in this way. This would be a breach of the neoliberal conception of the company, but would be far closer to the actual
Neoliberalism in law
United Kingdom company law doesn’t think like this. The last major change was the Companies Act 2006, enacted by the Labour government, which did create a weak requirement for directors to “have regard to” environmental and social impacts, but left the basics of shareholder supremacy in place, turning existing common law practice into hard legislation. And for as long as the UK was in the EU, this neoliberal bias reinforced by the EU’s own strict laws and regulations around competition and ownership. Steering around them was possible, but would be an additional hurdle for an economy like the UK if it sought to significantly boost worker ownership.
But outside of the EU, and now subject only to the loose constraints of the EU-UK Trade and Cooperation Agreement, a UK government has more freedom to intervene in the domestic economy. Support for worker ownership could be radically improved, and with the option for further support for specific areas and regions of the country. Cheap capital could be provided at scale for employee ownership schemes; and the opportunity for major expansion is there, too, with potentially thousands of viable small businesses facing closure or sale as their baby-boomer owners approach retirement: nearly two-thirds of UK small business owners are over 50, and two-thirds of them have no succession plan for their businesses. It’s the sort of thing that might appeal to the supposedly “Brexity Hezza” in No.10, but if the government’s response to Rees is any guide, they’ll let it slip. Time for Labour to seize the moment?