It is great news this week that the Treasury will openly encourage increased investment in the country’s co-operative sector. The first new consolidated act for co-operatives since 1965 has been introduced into parliament, along with a fivefold rise in the limit for any one investment into a co-operative business (from £20,000 of withdrawable share capital to £100,000).
Laid before Parliament by Treasury Minister, Sajid Javid, the move comes on the back of focused campaigning by Co-operatives UK and our member over recent years. We have lobbied for the multiple pieces of legislation covering societies to be overhauled, including a rise in the limits on investment, in order to help co-operatives grow and avoid over exposure to debt finance.
Withdrawable share capital is used by co-operative businesses, large and small, such as consumer retail societies and agricultural co-operatives. It enables shareholders to withdraw their capital with relative ease, whilst still protecting the financial security of the business. The previous cap on investment by a member at £20,000 has seriously restricted the ability of many co-operatives to raise cash for expansion and capital investment. We estimate that the new limits, for example, will be worth around £5.3 million to the co-operative agricultural sector.
Today’s move will also be of significant benefit to small-scale co-operatives, where local people come together through calls for ‘community shares‘ to save neighbourhood assets, such as village shops, sports centres, heritage buildings and pubs. They are also used to finance community energy projects and regeneration initiatives.
Our research shows that there have been more community share offers for local and community enterprises than Initial Public Offerings for UK-listed companies in the last five years (182 share offers compared to 108 IPOs). Smaller sums, to be sure, but larger numbers. In 2013 alone, there have been almost 60 share offers, expecting to raise £15 million from over 15,000 supporters.
We need to be pretty careful to safeguard and support the quality of such offers, and avoid the obvious risks in some of the Wild West practices of peer to peer and crowd funding for enterprise, but the rise in share limits does confirm the arrival on the mainstream of a new asset class for ethical investment – locally based, co-operative and open to all.
The appetite and commitment to do business the co-operative way has not waned, and the Treasury decision is a vote of confidence in the strength and potential of the co-operative and mutual sector.
Ed Mayo's Blog 