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EFES NEWSLETTER - DECEMBER 2025
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Over
the past ten years, employee ownership in SMEs has seen
extraordinary growth in Great Britain. We were rapidly
moving towards a situation where one in ten SMEs would
be employee-owned. In most cases, employees become 100%
owners of their company. Without having to spend a single
penny of their own money. This success was due to the
introduction of the Employee Ownership Trust
mechanism in 2014.
And
then... "Calamity" Reeves arrived. Rachel
Reeves is the new Chancellor of the Exchequer in the
UK government elected in 2024. Bucking the European
trend to facilitate business transfers, Calamity Reeves
has opted to tax and retax.
For
starters, a 20% inheritance tax is to be imposed on
family transfers. Then, in her Budget Speech of 26 November,
she announced a change affecting transfers to employees.
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Instead of a 100% tax exemption on capital gains when
transferring a company to employees, this exemption
has now been cut to 50%.
The
effect is dramatic. Overnight, business transfers
to employees in Great Britain have come to a
halt. Instead of two business transfers per day,
we're now practically at zero. Why is the impact so
great? Because Calamity Reeves' decision breaks the
very mechanism that finances transfers of businesses
to their employees.
Given that the funding does not come out of the employees'
pockets, it has to come from elsewhere. Selling a company
to employees is essentially a sale on credit. It's like
a car: you buy it on credit and can drive it from day
one. The trust that represents the employees’ collective
ownership buys the business on credit; the employees
benefit from ownership from day one. From that moment
on, they receive not only their salary, but also benefit
from the company's profits. All this in exchange for
the same workforce as before. This is what enables the
loan to be repaid.
To work at scale, however, initial tax support is essential.
And the necessary support is well known: business owners
who sell to their employees must be exempt from capital
gains tax on the sale. In Great Britain, for example,
business transfers to employees are generally completed
within five to seven years. This duration is entirely
consistent with this type of operation. But by reducing
public support, the required timeframe stretches to
eight to ten years, making financing extremely difficult.
Many questions remain unanswered in the wake of this
unfortunate episode. Will the British government reverse
course? Are all ongoing business transfers doomed? What
is Calamity Reeves' real motivation? – Instead of facilitating
transfers in the form of an Employee Ownership Trust,
she is promising a budget to promote cooperatives. In
any event, the question of how to support business transfers
will become increasingly pressing across Europe: should
support go to families, or to employees?
See our press review for more information.
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Press
review
A
selection of 22 remarkable articles in 5 countries in November
2025: Canada, Denmark, France, Italy, United Kingdom.
Canada:
Employee ownership with Teamshares support for Root Cellar
grocery store chain.
Ten years after Great Britain, the Employee Ownership Trust
mechanism is taking its first steps in Canada.
Denmark: Enhanced tax incentives for employee share
ownership.
France: New employee share plan for Capgemini.
Italy: New employee share plan for Snam.
UK: Around one hundred new business transfers to employees
every two months. Thanks to the Employee Ownership Trust formula,
two new SMEs are transfered to their employees every day now.
This time, among others, the cases of: JMArchitects, Whitehead
Monckton law firm, The Behaviours creative agency, Home Trust
Care, Booth Welsh engineering, Insignia crisis management,
Advanced Plastics manufacturer, Brookend Veterinary Practice,
Grimsby construction, Reid Mitchell HD consultancy, Rapiergroup
events agency.
Tough times for family business transfers, with a new 20%
inheritance tax. And tough times for business transfers to
employees, with tax incentives cut in half. Calamity Reeves
has struck both sides, families and employees alike, who will
be the winners?
The full press review is available
on:
https://www.efesonline.org/PRESS
REVIEW/2025/November.htm
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A
political roadmap for employee ownership in Europe
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