Architects embrace employee ownership as a succession solution

Employee ownership is one of the fastest growing business ownership models in the UK.  It is increasingly being recognised as an attractive option for business owners seeking the best way to realise the value they have created in the business (with tax reliefs) and ensure continued long-term growth.

In the UK there are now over 1700 employee owned businesses and the numbers continue to grow, with a 37% increase in the previous 12 months from June 2023.

Back in 2019 we predicted ‘Employee Ownership’ was going mainstream and noted that architects were leading the charge. Five years and one pandemic later, how does this analysis look?

Well, during those last five years Postlethwaite has successfully guided 106 businesses to employee ownership, eleven of which were architect firms. We can say with confidence, employee ownership has become more mainstream and should be part of the consideration set for all business owners when it comes to succession planning.

WHY DO ARCHITECTS SEEM TO BE LEADING THE WAY?

A leading factor is cultural: most architect practices rely heavily on collaborative working, requiring a strong culture of working together towards a tangible shared purpose. Employee ownership offers a natural fit with that type of working style.

It also reflects that many architects have strong values, choosing this profession to create beautiful buildings, increasingly with a focus on sustainability.  Employee ownership enables architects to feel they have a voice.

A transfer to employee ownership enables a company’s founders to realise the value in their company in a way which keeps its independence and so is more likely to preserve what is best in its culture and values, offering them peace of mind that employees have the prospect of a positive future. This is often a strong driving force for retiring owners who acknowledge that much of their company’s success stems from the talents and commitment of their employees.

CULTURE

This is not unique to architects however, business culture across the piece is evolving, leadership styles tending (with occasional exceptions) to be less about ‘command and control’ and more about fostering and encouraging everyone in an organisation to make the strongest contribution they possibly can. Nurturing and empowering staff to have a say.  But architects are in the vanguard. This way of working simply feels a naturally better way of doing business.

Combine that with a recognition that everyone’s contribution should be reflected by sharing rewards more widely, and you have a form of ownership well attuned to the needs of many modern firms and their people.

CHALLENGES

Many architect practices face an additional practical challenge.  It is often hard to identify new partners who are both willing and able to financially invest in taking over the ownership from current owners, and here employee ownership offers a solution.

For those practices considering employee ownership, know how and expertise is in good supply.  There is now a wealth of information on employee ownership and a wide support network for those starting out on this journey. This gives more businesses the confidence to dip their toes into the ‘employee ownership world’, gathering the information they need, learning from others and deciding whether it is right for them.

ICING ON THE CAKE

And lastly there are the tax breaks, in particular employee-owned companies being able to pay their employees income tax free annual bonuses and a full exemption from capital gains tax for owners who transfer their firm to employee ownership. This should be seen as the icing on the cake when becoming employee owned and we would not recommend it as the driving factor.

LONG TERM COMMITMENT

Employee ownership is never a panacea. For it to work as well as possible requires a big and long term commitment from everyone in the business.  For some companies it won’t be the right solution but for many it’s proved to be a success story.

Visit here for more information on employee ownership and its benefits.

Case study of employee-owned architect firm, Orms – video interview with company Director, Oliver Richards from 2019 available here.