Finding ways of keeping business in local hands

As director of Co-operative Development Scotland, SARAH DEAS headed to Shetland for the first business week. She works across the Highlands and Islands Enterprise and Scottish Enterprise areas promoting and supporting collaborative and sustainable business models. She gives her thoughts on why employee-owned firms could become an increasingly common entity in the business community.

I was delighted to be invited to participate in Shetland Business Week. As we heard from Graeme Roy on Wednesday, Shetland has a buoyant economy, and although there are challenges, the islands have weathered the recent recession and downturn in the energy sector well.

One of the challenges discussed at various events was that of business succession. There are approximately 1,400 Shetland-owned bus­inesses in the islands.

What happens when a business owner wants to retire? On the mainland, finding a trade buyer is often the initial option. That’s not so easy in Shetland.

The size of the local economy can mean there are few local buyers for businesses, particularly for businesses of any scale. Location means that acquisition of a business in Shetland may not be attractive to buyers on mainland Scotland or elsewhere, and indeed, I detected a reluctance to see well kent local firms leave the islands.

This desire to retain business ownership in Shetland might give some indication as to why the topic of employee ownership is proving popular. There were two well-attended sessions on the subject during the business week.

Businesses and advisers heard how employee-owned firms outperform conventionally structured companies on a range of business metrics; productivity increases, people engagement is higher, innovation levels rise. Importantly for Shetland, companies owned by their employees are more likely to remain rooted in their local community providing jobs and retaining wealth generated in the local area for generations to come.

For business owners, a sale to employees provides an exit route that delivers a fair price for their business and allows the owners to set and shape their exit from the firm.

While in Shetland, I took the opportunity to visit Shetland Vets and was greatly encouraged to hear how well things were going since their move to employee ownership in 2014.

The owners, Juliet and Jim Nicolson, could easily have sold the practice to one of the national vet businesses that are currently buying up independent vet firms. The Nicolsons wanted to ensure that the practice would always be responsive to the needs of the community, not governed by company policies set in London or Manchester.

Shetland Vets is now in the hands of its 24 employees and can focus on continuing to deliver superb care to Shetland’s animals.

I would like to think that Shetland Vets are the first of what will become many employee-owned firms on the islands.

There are several firms currently exploring the option, with a few who are about to begin the process towards employee ownership. Indeed, by the end of 2017 we may well see Shetland having a greater concentration of employee ownership than any other area of the
UK.

There are other ways that collaborative business models are relevant to the Shetland economy. The food and drink sector, and creative industries, appear to be particularly innovative on the islands. It was interesting to hear how some of the “micro businesses” operate and I wonder whether there might be an opportunity to look at more formal collaboration to help these firms open up different markets for their products.

For example, Food from Argyll is a co-operative consortium formed in 2007 by a group of food and drink producers in that area. Its aim is to market and promote produce that is farmed, made or harvested throughout the region.

Consortia can also be formed to maximise the use of resources. Tayforth Machinery Ring is a nonprofit, member-owned consortium which encourages joint use of agricultural equipment and labour between its farming and non-farming members in Fife, Tayside and Central Scotland. By working together, these smaller firms have found that collaboration helps them achieve so much more.

Having never visited Shetland before, I took some time to explore. Shetland is stunning, and the welcome I received everywhere was heart-warming.

Shetland is a very special place and I look forward to returning.