Employee ownership trusts (EOTs), introduced in the UK in 2014, are gaining traction as a viable business model, particularly in light of recent economic challenges. Simon Blake, a partner at Price Bailey, highlighted that the current funding environment makes selling to employees, along with associated tax incentives, an increasingly appealing option. Notably, The Entertainer, the UK’s largest toy retailer, announced its transition to 100% employee ownership in August 2025.
Statistics from the Employee Ownership Association indicate that around 2,250 businesses in the UK are now employee-owned, with growth particularly prominent in sectors such as professional services, construction, and manufacturing. EOTs allow shareholders to transfer their shares into a trust that benefits all employees, fostering greater engagement and motivation among staff.
The advantages of EOTs include tax reliefs for shareholders, potential tax-free bonuses for employees, and improved staff retention and morale. Employees who feel invested in the company are often more entrepreneurial, contributing to the business’s success, which can lead to long-term job stability in the local community.
However, transitioning to an EOT also comes with challenges. The ownership is indirect, meaning control is exerted through trustees rather than direct management. Shareholders may face delays in receiving payment as the trust gradually compensates them, which could present risks if business performance declines. Additionally, complexities surrounding valuation and the specific conditions governing tax relief could pose obstacles.
EOTs appear particularly beneficial for medium-sized enterprises and as a succession strategy for retiring owners. For those interested in this model, consulting with professionals or the Employee Ownership Association is advisable.
Why this story matters
- Represents a shift towards more inclusive business ownership models, particularly during financial uncertainty.
Key takeaway
- EOTs provide a pathway for businesses to engage employees actively while offering tax benefits and potential operational stability.
Opposing viewpoint
- Despite advantages, the complexities and risks associated with EOTs may deter some owners from pursuing this route for business transition.
