Why employee share ownership must form part of the post-COVID-19 economic recovery

Over the past year, the Social Market Foundation (SMF) has been undertaking new research into employee share ownership in the UK. ProShare, the kind sponsors of the research, will be hosting a launch event for our report on 4 May 2021.

Over the past year, the Social Market Foundation (SMF) has been undertaking new research into employee share ownership in the UK. ProShare, the kind sponsors of the research, will be hosting a launch event for our report on 4 May 2021.

Done right, we believe there is scope for wider rates of employee share ownership to form a key part of the economic recovery as the UK emerges from the coronavirus pandemic.

1. Boosting economic growth and productivity

As things stand, workers in the UK are less productive than their peers in France, Germany, the US and Italy. The official forecasting body, the Office for Budget Responsibility, believes that the pandemic will have a long-run scarring effect on productivity. For the British economy to thrive in the 21st Century, this productivity gap will need to be addressed and be near the top of the government’s agenda. We argue that employee ownership should be a key part of plans to bolster productivity.

Our report shows there is compelling evidence that when employees have a stake in the company they work for, it translates into improvements in business performance. This includes making it easier for firms to attract and retain talent and effect of share ownership on employee motivation.

2. Tackling the financial resilience crisis

Our report also argues that higher rates of employee share ownership should be pursued as part of a government agenda to bolster financial resilience after the pandemic. COVID-19 has highlighted the stark financial resilience gap that exists in the UK, which has widened over the past year.

Even before the pandemic, our analysis shows that close to half of those in the bottom income quartile (‘the poorest 25%’) were saving nothing from their income each month, with close to a third having no savings in the bank that they could draw upon in an emergency situation. While the past year has seen affluent white-collar professionals accumulate savings, as homeworking has led to reduced spend on commuting, lower income households have borne the brunt of job losses.

Without further action from government, we risk a future in which there is a stark gap between affluent, financially secure higher earners, and a ‘precariat’ of lower earners facing job insecurity and limited savings.

We know employee share ownership could form a key part of the policy solution here. New analysis in our report shows that share plans such as Save as You Earn (SAYE) and Share Incentive Plans (SIPs) work for improving financial resilience, with a significant ’wealth premium’ among households that hold shares or share options in the company they work for.

This is not merely a reflection of shareholders being more likely to have better-paying jobs; our analysis shows the findings hold true even when segmented by income. They also hold true when split by age group. This aligns with findings from the US that show a similar wealth premium for those participating in American Employee Stock Ownership Plans (ESOPs), even when adjusting for factors like income, age and education level.

Where next for policy?

Given that employee share ownership can boost economic growth and tackle the financial resilience crisis, what must government do to support it? Our report will outline a number of policy recommendations, including new measures to encourage more companies to offer share plans to employees. We also outline suggestions for making share plans more attractive for workers in the 21st Century economy, such as those working in the ‘gig economy’. We hope you can join us to find out more!


Scott Corfe, Research Director, Social Market Foundation

Scott Corfe joined the Social Market Foundation in 2017 and is the think tank’s Research Director. He authors research on a wide range of topics, including consumer markets, taxation, low pay, housing and technology. Before joining the SMF, Scott was Head of Macroeconomics and a Director at the economics consultancy Cebr, where he led much of the consultancy’s thought leadership and public policy research. Scott’s expert insights are frequently sought after in publications including the Financial Times, the Guardian, the Times and the Daily Telegraph. Scott has appeared on BBC News, Sky News, Radio 4 and a range of other broadcast media

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