The business case for co-operation

Derek Walker welcomes a new report that calls for increased support for co-operatives in Wales

The report of the Welsh Commission on Co-operatives and Mutuals, published at the end of last week, highlights their potential advantages for the Welsh economy and society. The report calls for co-operative approaches to be considered in the delivery of education in Wales. It calls for specialist co-operative and mutual business support and funding streams. And it asks government to consider legislation to support community assets and community right of first refusal upon them.

The report examines public sector procurement in Wales and how that could be used strategically to grow the co-operative economy. It considers, market intelligence, innovation practices, networks and advocacy in the co-operative sector and how those approaches could be applied across sectors. It is a far-reaching and insightful document which offers plenty of opportunity for discussion over the coming weeks.

In simple terms, co-operation means working together to achieve a shared goal. Individuals that work together can run village pubs and local shops. They can save local services. They can build successful businesses that empower employees and sustain their communities.

Businesses which co-operate with each other can co-market products, share costs and may generate the potential to bid for more work than they could by themselves. Co-operation makes good business sense.

Recent media coverage about co-operatives has been understandably dominated by the problems in the Co-operative Bank. But, the sector is broad and diverse. It stretches beyond the bank and retail sector into manufacturing, energy, education and training, food production and even housing. Latest estimates suggest there are at least 440 co-operatives in Wales. Their estimated turnover was estimated at £1.54 billion per year in 2012. Although that figure is impressive, there is untapped potential for it to deliver more.

Co-operation and co-operatives are not new in Wales. The sector has been part of our society in Wales for nearly two centuries.  From the co-operative societies in the Valleys to the miners’ libraries of the early 20th Century, individuals in Wales have long worked together to achieve common aims. Co-operatives have often been borne out of need in Wales, and to a certain degree that is still the case.

In this new report, the requirement for co-operative development and growth is borne out of a strong business case. It recognises that the economy in Wales has been weakened by the concentration of jobs and industry in the South East of England and proposes that new, home-grown, means of organising economic activity are needed.

It recognises, too, that co-operatives can be springboards for growth. Socially owned enterprises such as co-operatives are more resilient than other business forms with more than 90 per cent of co-operatives surviving their first three years compared to 65 per cent of conventional businesses. According to CASS business schools research, average sales growth of employee owned businesses during the recession was far higher than comparable non-employee owned businesses at the time.

The report identifies a number of different co-operative models which can stimulate that growth if developed and bought more into the mainstream. Co-operative, mutual and employee owned businesses such as the Co-operative Group and John Lewis have the expertise and purchase power that could help generate new co-operative enterprises.

Mutual Housing Associations have significant buying power. For instance RCT Homes has an annual turnover of over £44 million. Employee owned businesses such as Primepac in Ebbw Vale and Aber Instruments and Dulas in mid Wales demonstrate that co-operative approaches can be of massive benefit to businesses for growth and as a viable succession option. Micro enterprises such as food co-operatives, community shops, pubs and energy co-operatives can make a real economic impact at a local scale.

The report stresses the need for specialist business support and advice for people looking to form co-operatives and employee owned businesses. Experience has shown that where business support is generically offered to all SMEs, it hasn’t been appropriate or relevant for those wanting to set up co-operatives and mutuals. The Commission offers a detailed analysis of the many business sectors where co-operative and mutual models have the most potential including housing, energy, shops and pubs, finance, transport and delivering public services. The report calls on existing co-operatives to support and mentor new co-operative enterprises and to work with them to build supply relationships.

The report also recognises the need for specialised investment finance for developing co-operatives and employee owned businesses. The Commission recommends more flexibility in public procurement and for procurement practices aimed at encouraging co-operative businesses and consortia  to be ‘mainstreamed’ through Welsh procurement practice. It calls for a pilot project to develop the potential of targeted public procurement to catalyse the creation of new co-operatives. This mirrors the impressive Evergreen Co-operatives project in Ohio that aims to create 10 new co-operative enterprises and 500 jobs in the medium term.

The Commission’s report also recognises the value of community assets. It proposes that Welsh Government should consider legislation to enable communities to list their assets and have the first right of refusal to bring those assets into community ownership should they be put up for sale. This has massive implications for future community ownership of resources like pubs, shops, community buildings and even sports clubs.

All of these recommendations will have an important positive impact on jobs, growth and communities in Wales. But, it is essential to ensure that these developments are protected by an ongoing educational focus that ensures that future generations understand the benefits of working together.

And to me this is all tied together by the first set of recommendations in the report. The Commissioners recommend that the values, principles and skills of co-operation should be embedded within our education system. This inventive recommendation will ensure that co-operative business models are reintroduced back into mainstream education. It will ensure that future generations that progress through the Welsh education system see co-operation and co-operatives as a solid means of building enterprise and as an attractive, sustainable career choice.


Derek Walker is Chief Executive of the Wales Co-operative Centre.

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