A quiet revolution is sweeping the American workplace. In record numbers, business owners are selling their companies not to private equity or trade rivals, but to their own employees. The Employee Ownership Trust (EOT) model, which transfers a controlling stake to workers with no upfront cost, has gained such momentum that UK policymakers are now being urged to adopt it as a cure for chronic regional inequality and poor productivity.
According to data from the National Centre for Employee Ownership, more than 400 US companies converted to EOTs in 2023, up from just 50 in 2017. The trusts, which hold shares on behalf of all employees, give workers a direct financial stake in the firm’s success. Unlike traditional share schemes, EOTs do not require workers to buy shares; instead, the trust buys them over time using future profits, allowing employees to benefit without personal risk.
Why are owners doing it? Many are baby boomers looking for an exit that preserves their legacy. Selling to a trade buyer might fetch a higher price, but it often leads to asset stripping, job losses, and relocations. An EOT sale ensures the business stays independent, the jobs remain local, and the cultural DNA is protected. For employees, it means a share of the profits, a seat at the table, and in many cases, a say in strategy.
Take the case of Kingston Healthcare, a chain of care homes in Ohio. Owner Jack Thompson, now 72, wanted to retire but feared a private equity takeover would cut costs and harm residents. “I built this with my staff,” he said. “They knew the residents, they cared. Selling to them was the only way to keep the heart in the business.” Three years on, Kingston’s staff turnover has halved, and profits have risen 15 percent year on year as workers redesigned rotas to reduce agency costs.
Across the Atlantic, the UK already has an EOT framework, introduced in 2014 by then-Chancellor George Osborne. It offers a generous Capital Gains Tax relief for owners who sell to an EOT, making it nearly tax-free. Yet uptake has been sluggish. Just 1,200 companies have converted in a decade, a fraction of the half million SMEs that change hands every year. Why the gap? Critics point to a lack of awareness, complex legal fees, and the absence of a dedicated government champion.
Labour’s shadow business secretary, Jonathan Reynolds, has promised to overhaul the rules. “We want to see a million workers in employee-owned firms by 2030,” he told the House of Commons last month. His plan includes a national awareness campaign, a fast-track legal process, and a government-backed loan scheme to help trusts finance the purchase. Cooperatives UK, a trade body, says the target is achievable but warns that without a shift in culture, it will remain a niche.
“Employee ownership is not a silver bullet for every business,” says Dr Amelia Foster of the University of Manchester’s Centre for Corporate Ownership. “But for a certain type of firm, particularly those in manufacturing, social care, and professional services, it can be transformative. It raises productivity, reduces absenteeism, and anchors jobs in communities that would otherwise lose them.”
Take Richer Sounds, the hi-fi retailer. Founder Julian Richer transferred a majority stake to his employees in 2019. The company reported its best ever sales in 2023, even as high street rivals collapsed. Or Aardman Animations, the Wallace and Gromit studio, which has been employee-owned for a decade. Staff there say the model protects creative freedom and ensures that the next big idea stays in Bristol, not Los Angeles.
The economic case is bolstered by research from the Employee Ownership Association, which found that EOT firms grow faster, pay better wages, and are more resilient during downturns. During the pandemic, employee-owned businesses were half as likely to make redundancies as their peers. That resilience is crucial in regions like the North East and Wales, where plant closures can devastate whole towns.
But there are risks. Not all workers want the responsibility of ownership. Some prefer a steady wage and clear hierarchy. And if the business fails, the trust can quickly become a burden. The Graff Diamonds collapse in 2018, where an EOT ended in administration, is a cautionary tale. Employees lost jobs and pension savings.
Nevertheless, the US surge offers a blueprint. British business groups are now lobbying for a US-style “owner transition” hotline, where owners can get free advice and hear from peers who have made the leap. The government has launched a pilot in the West Midlands, but union leaders say it is too small and too slow.
“We have to stop selling our family firms to venture capital vultures,” said Frances O’Grady, former TUC general secretary. “Employee ownership gives workers a real stake, a genuine voice, and a share of the wealth they create. It is the best hope we have for a fairer, more productive economy.”
As the US numbers climb, the message for British owners is clear: you can sell and still save your legacy. The question is whether enough of them will listen before the private equity sharks come circling again.
