Scottish co-ops more likely to survive their first five years

Scottish co-operative businesses are much more likely to survive their first five years as a start-up, according to a new report released this week.

The UK Co-operative Economy 2018 reveals that just 46 per cent of Scottish companies survive the difficult early years while 65 per cent of co-operatives are still going strong. Across the UK as a whole, the survival rate of co-operatives is even stronger at 80 per cent.

Ed Mayo, Secretary General of Co-operatives UK, which produced the report, said: “We know co-operatives are resilient and sustainable businesses and these incredible stats reinforce that view. It begs the question ‘why are there not more co-operatives in Scotland?’

The success of existing co-ops in Scotland – and how they make a positive difference to people’s lives – will be celebrated tomorrow at the Scottish Parliament’s Cross-Party Group on Co-Operatives. The event is part of Co-Operatives Fortnight, which runs from 23 June until 7 July.

Co-operatives are businesses owned and controlled by their members. The report finds that 7,226 independent co-operatives operate across the UK, ranging from well-known retailers like The Co-op and John Lewis to small farmer-owned businesses, community sports clubs and web developers. Their combined turnover hit a five-year high of more than £36.1 billion in 2017, while a record 13 million people now own and have a say in how the UK’s co-ops operate.

Scotland’s 573 co-operatives have a combined turnover of £2.4 billion, with membership levels at 1.2 million.

Mr Mayo said: “It’s no surprise there’s a prevalence of empty offices and boarded up shops in high streets across the UK’s towns and cities when more than half of all companies fail in their early years.”

After 12 months, 94% of all Scottish business start-ups remain in existence. This drops to 63 per cent after year three1(ONS) before a further slump to 46% by the end of the fifth year. Scottish co-operatives are far more resilient with a survival rate of 97 per cent, 71 per cent and 65 per cent after the first, third and fifth years of existence respectively.

Greencity Wholefoods is a workers’ co-operative in Glasgow. It operates with a flat management and wage structure, with the workers all enjoying an equal say in how the business is run. Long-standing worker-owner, Babs Macgregor, believes ownership is a key factor in co-op resilience and said: “In most businesses, workers feel they have little control. They’re at the mercy of rich shareholders, so no matter how hard they work, they don’t see the benefits. In a worker co-op, it’s the opposite – if you work hard and the business is successful, the benefits come back to you.”

Mr Mayo added: “Here’s an option that gives businesses twice as much chance of succeeding and in today’s climate, this is precisely what the economy needs, but where is the wider support? We want to see the co-op business model promoted by government and professional services, in the education sector and even more vocally by co-operatives themselves.

“If we want to see a more successful Scottish economy, where people have a say in decision-making and receive a fair share then we need more co-operatives.”

Sarah Deas, director at Co-operative Development Scotland (CDS), the arm of Scottish Enterprise which supports the development of co-operative and employee-owned enterprises across Scotland, commented: “The report clearly shows how resilient co-operatives are and that they are very much a viable business model. At CDS we support new and existing co-operatives to grow and develop. Anyone interested in setting up a co-operative shouldn’t hesitate to get in touch if they’d like any advice or support. We can help with a range of services including how to structure the company, financing and developing member participation.”