Why the future of business is mutually beneficial
During election campaigns, business policies often take a back seat to more ‘retail friendly’ policies. As recent debates have focused on funding sources, discussions around enhancing productivity and refining tax incentives seem to fall by the wayside. While these topics have their place, they don’t always capture the public’s imagination.
If parties are in need of fresh ideas, why not empower customers and workers by incentivising mutual and co-operative ownership models? By allowing them to take a stake and have a voice in how businesses are owned and run, this fresh approach would foster greater innovation, fairness and inclusivity.
Reflecting on two recent examples from the news this year, it’s difficult to believe that if Thames Water had been owned by its customers, they would have allowed sewage to pollute our rivers. Equally, if postmasters had held a stake in the Post Office, it’s entirely feasible that they might have prioritised fixing IT system failures instead of wrongfully prosecuting their colleagues.
Simplifying the process for more companies to adopt mutual ownership models is vital. This is why the Association of Financial Mutuals, the Building Societies Association, Co-operatives UK, and the Association of British Credit Unions are jointly calling on political parties to implement supportive policies and remove barriers.
Readers will no doubt be familiar with the mutual model, where organisations are entirely owned and governed by their members. Profits are shared among the members or reinvested into the business. While notable examples like John Lewis and Nationwide Building Society often come to mind, there are thousands more mutuals, co-operatives, and social enterprises across the UK. Currently, there are 26m memberships of building societies and credit unions; 74m memberships of co-operatives and mutuals (more than one per member of the whole UK population). These entities contribute nearly £90bn to the economy, equating to 3.5 per cent of GDP, supporting over 400,000 jobs.
Despite their contributions, mutuals and co-operatives are often overlooked in political discourse. Business ownership is typically framed as a choice between privatisation and nationalisation, ignoring the mutual model that supports sustainable, long-term growth. Many of these organisations are thriving, with building societies having grown their share of high street presence from 14 to 28 per cent since 2012, paying £9bn more in interest to their members than they would have received on average from equivalent accounts with banks. With their unique ownership structure, they are less influenced by the ebbs and flows of stock market volatility or short-term shareholder demands, fostering an environment of trust, innovation, and stability, resulting in higher survival rates compared to other business models.
Despite the many benefits of mutual ownership, it is true that some face significant challenges. A notable example is the protracted (and widely reported) attempt by Bain Capital to acquire the insurer LV=, which underscored the need for stronger government support for mutuals. Given the struggles of many investor-controlled companies, the government must develop policies that support member-owned organisations.
As the general election approaches, there is a pressing need to review and improve the regulatory framework to facilitate easier access to capital for mutuals. Proposals include establishing a British Business Bank start-up fund specifically for mutuals and co-operatives. Additionally, expanding the remit of the Competition and Markets Authority to promote corporate diversity across all sectors could provide a more balanced economic landscape. Likewise, introducing workplace savings schemes in companies with over 250 employees could also help foster a fairer and more prosperous economy.
Government policy should leverage the potential of co-operatives and mutuals. We are advocating for a strong partnership between mutuals, co-operatives, the government, and society, based on a business model that delivers tangible benefits to communities and the wider economy. This includes making mutuals and co-operatives central to future government policy and economic strategy.
Consider the advantages of mutuals. These organisations prioritise their members' interests, leading to better alignment with the community's needs and long-term sustainability. Mutuals are not driven by external investors seeking quick profits, which allows them to focus on quality service, ethical practices, and community engagement. For instance, building societies and credit unions provide critical financial services to underserved areas, promoting financial inclusion and resilience.
Moreover, mutuals offer a viable solution to many issues facing traditional businesses. They can improve trust and accountability, reducing the likelihood of the kinds of scandals that have plagued investor-owned companies. The mutual model encourages transparency and member participation, leading to better governance and decision-making. This can help restore public confidence in business and create a more stable and fair economy.
As we move towards the general election, bolstering government support for mutuals is essential for rebuilding trust between businesses and society in the UK. We should not have to rely on media dramatisations to remind us of the significant societal contributions of mutuals, co-operatives, and social enterprises. Instead, we need to recognise and promote the substantial benefits they bring to our communities and the economy.
Ultimately, mutuals and co-operatives represent a business model that aligns economic success with social responsibility. They offer a path to a more inclusive and resilient economy, one that benefits everyone. It is time for policymakers to embrace this model and ensure that mutuals and co-operatives are at the heart of our economic future.
Rose Marley is the CEO of Co-ops UK, and Robin Fieth is the CEO of the Building Societies Association
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