Founder of pioneering employee-owned company calls on all political parties to pledge increased support for employee ownership in Ireland
The founder of a pioneering employee-owned company has said the next Government should incentivise Irish business owners to sell-in to their employees, rather than sell out to overseas owners, if they want to grow the domestic econony.
Alan Coleman, the founder and CEO of digital marketing agency Wolfgang Digital, said there is a need to rebalance the economy and reduce our reliance on multinationals, but that is not happening because private equity firms and foreign companies are buying up an increasing number of the most successful Irish-owned businesses.
Alan Coleman
He has joined with the Irish ProShare Association (IPSA) to call on all political parties to commit to increasing support for employee ownership as an economic model to support homegrown businesses. They want the next government to prioritise introducing Employee Ownership Trusts (EOTs), as was recently recommended by the Indecon Review comissioned by the Department of Finance.
Alan said: “Successive governments have done a remarkable job over many decades making Ireland a world leading country for inward investment – but we’re past peak multinational. The opportunity now is to build a vibrant, homegrown economy by becoming a world leading country for employee ownership. This starts with incentivising business owners to sell in rather than sell out as has been so successful in the UK.”
Figures show that the number of Irish businesses that have been sold to foreign owners has more than doubled in the last five years,rising from 72 in 2018, to 150 last year. That increase of 108% is in contrast to a 51% rise in the overall number of businesses being sold in the same period.[1]
In the UK, more than 1,750 employee-owned companies have been created in 10 years since EOT legislation was introduced – making more than 124,000 employees owners in their workplace. EOT tax advantages in the UK include a CGT exemption on gains made by individual shareholders when selling to an EOT, an inheritance tax exemption, and an income tax exemption on certain bonuses issued to all employees.
Alan added: “EOTs have succeeded in the UK and other countries because governments got behind them and incentivised employee ownership. Three Irish businesses a week are being sold overseas – and often they are the companies with the greatest potential. The cost can be counted not just in job losses and loss of tax revenue, but in missed opportunities to build a stronger, more resilient domestic economy.”
Wolfgang Digital’s employee reps with CEO Alan Coleman. (l-r) Chris Bury, Alan Coleman, Rob Beirne, Shreya Barua, Ian Booth, Stephen Murphy, and Niamh O’Doherty.
Studies in the UK and US have shown that employee-owned businesses are more productive, more resiliant, create more jobs, pay better, invest more in training and development, and offer better working conditions. By involving employees in business decisions they create a culture of ownership and collective responsibility for the company’s performance.
IPSA chair Marie Flynn said: “EOTs provide an ideal solution for the succession issues facing some businesses and can ensure the growth of Irish-owned and operated businesses.
“Currently, EOTs offer no tax incentives for business owners or employees in Ireland. In fact, the tax framework works as a significant disincentive, which means that often higher tax rates are paid by sellers/employees as a result. That needs to change if the Government wants to pave the way for a vibrant new era of employee-owned businesses in Ireland – and EOTs are the perfect place to start.”
[1] Source: Davy Q2 H1 M&A Review (p23 & p26): https://www.davy.ie/binaries/content/assets/davy/capital-markets/q2-h1-2024-ma-review-v2.pdf
