East Devon District Council (EDDC)'s decision to launch a pilot fund supporting employee ownership transitions might, at first glance, seem like a small-scale intervention. With a £5,000 budget to help cover legal, training, and administrative costs and the aim of helping just two to five businesses in its first phase, it appears modest in financial terms. But in policy terms, its significance extends far beyond these numbers - signaling how local authorities can think differently about safeguarding local economies, employment, and long-term prosperity.

Small and medium-sized enterprises are the backbone of local economies, but they're particularly vulnerable during ownership transitions - especially when founders retire. Without clear succession plans, viable businesses can close simply because no suitable buyer is found.

Across the UK, thousands of SMEs face an impending succession crisis as baby boomer business owners approach retirement. Traditional succession models often result in businesses being sold to external buyers, closed down, or absorbed into larger corporations - outcomes that can lead to job losses, reduced local economic activity, and wealth extraction from local communities.

Employee ownership provides a ready-made solution that preserves the business's skills, relationships, and local economic footprint. By supporting SMEs through this transition, EDDC is giving them not just an exit route for owners, but a continuity plan for the workforce. Over time, this creates a stronger, more shock-resistant local business base -one less likely to fold during downturns or sell out to external buyers who might strip assets or cut jobs.

The pilot demonstrates how small public investments can leverage significant private sector transitions. Legal and administrative costs - often the primary barrier for interested businesses - become manageable when supported by targeted public funding. This represents strategic use of limited local authority resources to maximize economic impact and preserve local employment.

When a business is sold to an outside buyer - especially larger corporate or private equity investors - there's real risk that operations, jobs, and profits are relocated or restructured beyond recognition. EDDC's pilot flips this dynamic by anchoring ownership in the hands of people who already live and work locally.

Employee ownership keeps decision-making rooted in place. When market conditions change or economic shocks hit, the business's primary loyalty remains with the community it serves - not distant shareholders. For councils, this is a proactive way to "future-proof" local employment rather than waiting to respond to crises after they've happened.

Research consistently shows that employee-owned businesses demonstrate greater stability during economic downturns, with lower rates of closure and redundancy. This resilience stems from employees who are also owners having stronger incentives to weather temporary difficulties, while decision-making processes tend to prioritize long-term sustainability over short-term profits.

Employee ownership shifts both financial rewards and governance into the hands of people who keep businesses running day-to-day. This model addresses one of contemporary capitalism's central challenges: the growing disconnect between those who work and those who own.

Evidence shows employee-owned businesses often have higher wages, better staff retention, and stronger motivation - benefits that flow directly to local households. Statistics indicate these businesses typically see 8-12% productivity boosts, annual wages around £2,900 higher on average, and 83% increases in staff motivation. Because employee-owners typically live in or near their workplace communities, increased wages and profit-sharing circulate within the local economy, creating multiplier effects benefiting local retailers, service providers, and housing markets.

In this way, the pilot is more than a business support scheme - it's a structural intervention to make economic growth more democratic and broadly shared. The model provides pathways for workers to participate both in the growth they create, and in enterprise governance without requiring substantial capital investments typically needed to start or purchase businesses independently.

The scale of this pilot may be small, but its potential influence is large. It's the first local authority-led initiative of its kind in the UK, offering a replicable model for councils everywhere. With tens of thousands of SME owners nearing retirement over the next decade, the opportunity for employee ownership transitions is vast.

EDDC has planted a flag: local economic resilience is built not just by attracting new businesses, but by securing the future of ones we already have. In doing so, they're reframing economic development as something done with communities, not to them.

This approach demonstrates how local authorities can move beyond traditional economic development strategies that often depend on attracting external investment or large-scale infrastructure projects. Employee ownership support represents economic development that works with existing local assets - established businesses and skilled workers - to create enhanced value and stability.

This pioneering pilot offers a template other local authorities across the UK would be wise to consider adapting. The modest financial commitment - just £5,000 for the pilot phase -makes this approach accessible even for councils facing tight budget constraints. More importantly, potential returns on this investment, measured in preserved employment, retained local wealth, and enhanced business resilience, far exceed the initial cost.

The initiative also exemplifies a new paradigm in local economic development - one prioritizing social purpose alongside economic growth.

As the pilot progresses, other councils will undoubtedly watch closely to assess its impact and consider similar initiatives. In an era of increasing economic uncertainty and growing concerns about inequality and community sustainability, employee ownership offers a practical pathway toward more inclusive and resilient local economies.

EDDC has taken a crucial first step in demonstrating how local authorities can actively support this transformation -creating a model others would be wise to follow.