20 June 2025 is EO Day, the day designated by the employee ownership association to celebrate everything employee ownership (“EO”) related in the UK.

According to data from the UK EO Business register published by the eoa and the White Rose Employee Ownership Centre there are 2,470 EO businesses in the UK with over 358,000 employees. Of these companies, over 65% would be classified as small (less than 50 employees) with only 8% as large.

The fastest growing sectors are Professional services, scientific and technical activities (28%), Manufacturing (15%), Construction (14%), Administrative and support services (14%) and Wholesale and retail (11%).

At Geldards we have seen the huge popularity of EO with a wide range of companies transitioning to EO in the last 12 months. We also organised the first Wales EO conference in Cardiff with over 90 attendees.

The future for EO

Looking to the future, here are our predictions for EO in the next 12 months:

Continued popularity of EO as an exit route

However, growth in the sector will be slower due to the increase from one to four years after the end of the tax year in which the transaction takes place for a claw back of capital gains tax from the sellers. This means that sellers will really want to do an EOT and make sure it is successful. The current economic is causing sellers to pause any change in ownership to allow them to maintain full control over the business.

EOTs looking to merge to take advantage of benefits of scale

An “acquisition” by another EO business may be more palatable compared to a “trade sale” being out of the question when the company was owned by the founder. A merger still allows the sellers to be paid with the capital gains tax relief although employees in the acquired company do not get a “pay day”.

An increasing number of EO businesses reaching Financial Freedom Day

These companies will need to decide what to do to with the cash they had previously being paying to the sellers. The EO businesses may decide to reward their employees by paying or funding additional salary or benefits and/or acquire other businesses as a “trade” acquirer. A great time to engage with the employees.

Private Equity funds enter the EO sector

We are aware of Private Equity funds interested in buying successful EO companies outright and, in very limited cases, acquiring a minority shareholding in the EO company (via a subscription for new shares) to provide funds for growth and expansion before a future sale.

Continuation of disputes arising between the sellers, trustees and management teams

These disputes are mainly caused by arguments over control (the sellers not letting go) and arguments over inability to pay the deferred consideration due to a business downturn or an over-valuation at the time of the transition.

Hopefully these types of disputes will reduce following the changes to the rules on the control of the trust and the requirement for trustees to take all reasonable steps to ensure they are not paying more than market value for the shares.

An increase in the use of share options to incentivise the senior leadership team

A company owned by an EOT can award share options to senior leadership teams. There are lots of tax and trustee duties to consider – not for the unwary.

A £1m cap on the cash that can be paid capital gains tax free

It is very easy to see the introduction of a cap of £1m on the capital gains tax free cash to mirror the limits for Business Asset Disposal Relief for CGT and Business Property Relief for inheritance tax given the need to raise tax and the increasing number of EO transactions. The tax relief given for EOTs is becoming more expensive and the Government may decide that the generous tax relief for sellers does not need to be quite so generous.

We are still seeing a large amount of interest in EO although owners being more careful that it is right for them given the extension to the CGT claw back period. Unfortunately, we are also seeing a steady flow of instructions when EOTs are going wrong and the parties want to try and resolve their issues. Inevitably, things have generally got pretty bad for any party to contact a lawyer.

We are always happy to chat to people looking to discuss EO in whatever form, be it a sale to EO, buying out of EO and disputes involving EO.