With the publication of the Co-operative Economy 2014 and celebrations for the second employee ownership day taking place on 4 July, Giles Simon take an in-depth look at the state of the worker co-operative sector in the UK.

“Worker co-ops are an excellent way to organise businesses,” says Chris Nicholl of Delta T.

Delta T is one of an estimated 474 worker co-operatives in the UK, which together, according to Co-operatives UK, turn over approximately £180m and employ up to 3,500 people.

Unlike the largest parts of the UK’s co-operative movement, which are concentrated in retail and agriculture, worker co-operatives trade in a broad range of sectors. 60% are in the creative industries, retail or professional services, doing everything from selling bikes and making films, to campaigning, accountancy and architecture.

Those making up the remainder are equally diverse. 12% of worker co-ops are involved in health or social care, for example, while others work in manufacturing and industry (4%). One is even working towards opening a new coal mine.

Retail and wholesale account for eight of the ten largest worker co-ops in the UK. Five of these are wholefood retailers, while the other three are not involved with food: Edinburgh Bicycle Co-operative, Michael Jones the jewellers and Anglia Home Furnishings.

Delta T, just outside the ten largest, is a worker co-operative operating in a more unusual industry. Based in Cambridgeshire, it designs and manufactures specialist instruments for agricultural science, which it sells to an international market.

Founded in 1971, Delta T has 37 employees and turns over £3.7m a year. Chris Nicholl, who chairs Delta T’s management committee, believes worker co-operatives offer “a human-friendly system” that “naturally appeals to people because it’s fairer.”

He adds: “Most of the people that work here stay because, having experienced what it’s like to work at a co-op, they don’t want to work for another business. In a standard business, because it’s owned by someone who is not part of the business, they can do things like sell it off or make half the staff redundant. Co-ops are much less susceptible to that.”

Delta T does not actively promote itself as a co-operative in its sales materials, though Mr Nicholl says that when employees at other businesses in the industry find out they are a co-op, “a lot of them are intrigued by it, and some are a little envious, because the people working at Delta T get treated better.”

Leading Lives is another of the largest worker co-operatives. Formed in 2012 when Suffolk County Council spun out its entire adult social care service, it now has an annual turnover of £11m and employs 450 people.

Tony Carr, former head of service for the council and now Leading Lives’ managing director, worked with a team to take the council’s social care department out of council control. “We chose a worker co-operative because we like the values,” he says. “We support inclusion, independence and choice and the co-operative model suited that nicely.

“It gave us the opportunity to engage and involve staff. We’re delivering the same services we ran at the county council, but we’re running them at a lower cost. And we’ve lost a lot of the politics.”

Moving from a council-run service to a co-operative business has its challenges. For example, Leading Lives still relies heavily on one large contract with Suffolk County Council. For the employees, he says, “there’s been a massive culture change. Some have responded really well, some have struggled.” Of the 450 employees, 70% have now opted to become members of Leading Lives, indicating that its co-operative status is embedding.

Delta T and Leading Lives are both at the larger end of worker co-operatives. This makes them unusual; worker co-ops in the UK tend to be small. Of the 160 for which there is data, eight (5%) have a turnover of more than £5m, 13 (8%) turnover between £1m and £5m, while 80 (50%) have a turnover of less than £100,000. The European Union classes businesses with less than €2m (£1.6m) turnover as a micro-enterprise, indicating the bulk of worker co-ops are in this category.

John Atherton, Co-operatives UK’s membership officer with a specific remit for worker co-operatives, recognises that “worker co-operatives on the whole are small and medium businesses, with most having between two and 20 employees, and the largest five the only ones approaching or exceeding 100 members”.

Does it matter that the UK’s worker co-operatives remain small? While many choose to stay small and grow gradually, if at all, others point to the Spanish worker co-operative, Mondragon, as an example for the British movement to emulate. One of the world’s largest co-operatives, Mondragon employs over 80,000 people, runs over 250 businesses and, despite difficult times, totalled €14bn (£11.2bn) in revenue last year.

The issue of size raises questions about the relationship between worker co-operatives and employee-owned businesses. Although there are arguments about where the boundaries lie, worker co-ops are generally seen as businesses that are fully owned and directly controlled by their employees.

Employee-owned business is a broader term that includes worker co-ops, but also enterprises in which employees have less than full ownership – sometimes owning a minority of shares – and businesses such as John Lewis, owned indirectly by employees through a trust.

While worker co-ops are often small, employee-owned businesses tend to be large. There is less data on these organisations, but the Mutuals Yearbook notes that in 2013, the UK’s 250 employee-owned businesses together turned over £30bn – significantly more than worker co-operatives’ £180m.

John Atherton explains: “Employee-owned businesses such as John Lewis, Scott Bader or Tullis Russell tend to be much larger, with thousands or tens of thousands of employees. This may be to do with the fact that most worker co-operatives are created from start-up, whereas most employee-owned businesses are the product of business succession – usually buyouts or gifts from an owner who wants to exit the business and sell or give it to the employees.”

But he adds that this isn’t the case in the rest of EU. “France in particular has a thriving worker co-op sector built from converting existing businesses.”

The difference from employee-ownership might be one of more than just size, though. While there are clear affinities between the two, there is concern among some advocates of worker co-operatives that the government’s interest in employee-ownership – such as Employee Ownership Day and new tax incentives – is a risk.

Bob Cannell, a member of the UK’s largest worker co-op, Suma, says: “Employee-owned businesses and worker co-ops should be working together to serve our separate constituencies and also to combine where we overlap, as they do in Spain. Unfortunately, the co-operative message is being continually lost. The best and most sustainable benefits from employee ownership come when workers co-own and co-manage their enterprises. So worker co-operatives should be the ultimate aim and not the also-rans of the employee ownership movement.”

Sion Whellens of worker co-op Calverts agrees, raising concerns about “the marginalisation of worker co-operation in our political and economic discourse. Worker co-operation, with the vital ingredient of common ownership, is up against non-democratic, trust or share-based employee-ownership models”.

However, Sarah Deas, chief executive of Co-operative Development Scotland, sees stronger links between the two models. “Employee-owned businesses and worker co-operatives share an ethos of openness and trust,” she says.

“They empower employees to have a ‘voice’. Worker co-operatives tend to be established by like-minded individuals, driven by shared belief systems.

“In Scotland we are seeing growing interest in employee ownership as a succession solution. CDS is currently advising 91 companies that are interested in this model. It is becoming recognised as a model that roots businesses in their community, drives performance and enables the benefits of enterprise to be shared more widely.”

While there is division around employee ownership, there seems less on the relationship between worker co-ops and the wider co-op movement. 15 years ago, worker co-operatives existed largely in isolation from consumer co-operatives, but with shared events and national and regional bodies, the divide has decreased.

Chris Nicholl from Delta T says: “The co-op movement I know fairly well. When I go along to co-op movement events and hear about what’s going on, I feel very excited about that. Things like co-operative schools are great initiatives.

“I’m not sure where employee-owned business fit into that. I don’t have a strong enough connection to the employee-ownership sector.”

There is, though, a growing sense among some worker co-op activists that they need to do more for themselves. A recent Worker Co-operative Weekend, the first event in recent years just for worker co-ops, gathered activists to discuss some of the big issues.

“Three significant outcomes of weekend,” says Sion Whellens, “were moves to create a solidarity fund, to extend and deepen international worker networks, and to underwrite a permanent programme of high quality worker co-operative gatherings and skills training events.

“This shows we’re ready to take more responsibility for the future direction, quality and image of worker co-operation in the UK.”