Evidence toolkits
Plural ownership policies aim to support businesses with alternative legal and organisational structures – such as cooperatives, social enterprises, and municipal enterprises. Local ownership policies aim to support locally-owned businesses.
Both policies aim to increase the extent to which profits benefit local residents. Local ownership policies aim to achieve this directly, with profits going to local business owners. For plural ownership, local residents can also benefit as owners if profits are distributed to owners, or if profits are used to benefit the local area in other ways.
There may also be other impacts if plurally- or locally-owned businesses behave differently to businesses with conventional ownership structures.
This briefing provides a framework to help policymakers think through some of the local economic impacts of plural and local ownership and the available policy options for supporting both.
Summary of findings
Direct employment effects come from jobs at supported businesses. Understanding the type of businesses targeted (start-ups or existing businesses), baseline employment levels, and the aim of support (start-up, growth or survival) will help identify what data to use in calculating direct employment effects. Only rough estimates are possible. These should not be adjusted because support is for plurally- and locally-owned businesses unless there is local evidence to justify such adjustments.
Employment at supported business may come at the cost of employment in non-supported local businesses. Such displacement is more likely in non-tradeable sectors. As plurally- and locally-owned businesses tend to be in non-tradeable sectors, displacement is likely to be high.
Additional local jobs can be created through supply chains or if those newly employed in the area spend income locally. Use an employment multiplier to estimate total employment effects. Understanding supply chains, spending patterns, and travel-to-work patterns to help assess the potential scale of multiplier effects.
The higher the proportion of jobs filled by local residents, the greater the potential impact on the local economy. Plurally-owned businesses may recruit differently – for example, prioritising disadvantaged groups. In these cases, it may be appropriate to slightly increase estimates of local residents employed.
Effects on local wages are unlikely unless the change in employment is large relative to the local labour market. Plurally-owned business may set wages higher than market rates (for some or all employees). Plurally- and locally-owned business tend to be smaller, and wages tend to be lower in small businesses.
The evidence is inconclusive on whether plural ownership raises or lowers productivity. There is no evidence for local ownership. Plurally- and locally-owned business tend to be smaller, and productivity tends to be lower in small businesses – although this varies by sector. Unless additional local evidence is available, assume that policies to support plural and local ownership will not change productivity. Some support – especially grants and other subsidies – may lead businesses to continue to operate when they would otherwise cease trading, leading to an inefficient allocation of resources.
If profits are distributed to owners, the local economy will benefit if owners live – and spend – locally. Plurally-owned businesses may also use profits to benefit the local community in other ways, such as donating to community projects. The local economic benefits will depend on how money is spent.
The main policy levers are providing business advice and improving access to finance. Other policies include innovation, skills development, property, and local procurement. The evidence on the effectiveness of business advice and access to finance is mixed. For key outcomes (employment, productivity, etc.) only around a third to half of supported businesses will see positive effects – so it is important to be realistic about the potential effects of plural and local ownership policies on the local economy. A lack of evidence means we do not know if effectiveness of interventions varies across different ownership models.
Some plurally-owned businesses – especially social enterprises – are set-up to provide wider benefits. Plural and local ownership may also have other wider benefits, such as contributing to civil society and improving pride in place. In most cases, these are likely to be small and difficult to measure.
The main policy cost is the provision of support services for plurally- and locally-owned businesses. Costs will depend on the policy chosen, meaning they are highly variable. If plural and local ownership is supported through local procurement, this may lead to higher contract costs.
Rapid evidence review
To support the drafting of the evidence briefing, we undertook a rapid evidence review of the evaluation evidence on plural ownership.
Our search identified six studies. The majority of studies compare the performance of plurally-owned businesses to other businesses on economic outcomes – such as employment and productivity. One study looks at the evidence on what influences the establishment of plurally-owned businesses.
Four of the studies look at co-operatives. We found few studies that evaluated the economic impact of other types of plurally-owned businesses. We looked for – but did not find – studies on the impacts of business advice and access to finance on the establishment or performance of plurally-owned businesses.
Key findings
The evidence suggests that ownership models can affect firm outcomes – but there is no clear pattern, limited evidence, and most studies look at co-operatives. Overall, there is no strong evidence for or against claims about the importance of plural ownership for firm performance.
Need for more evidence
We need more evidence on all aspects of plural ownership, including on whether outcomes (such as employment, productivity, and wages) are different in plurally-owned businesses to other businesses, whether rates of plural ownership affect local economic outcomes, and evidence on what interventions are most effective in supporting plural ownership.
