The Rise of EOTs: How Employee Ownership Is Quietly Reshaping UK Business

Since 2014, Employee Ownership Trusts (EOTs) have quietly revolutionized business succession planning in the UK. Today, they’re the dominant form of employee ownership, enabling thousands of companies to transfer ownership to their employees. In their latest research, Andrew Pendleton and Andrew Robinson explore why this model has taken off—and what challenges lie ahead.

The EOT Revolution in Numbers

By January 2025, the UK had around 2,000 EOTs—a sharp rise from fewer than 20 employee ownership transitions per year before 2014. With hundreds of new conversions annually, EOTs now account for an estimated 6% of all business transfers. This remarkable growth has made EOTs the dominant form of employee ownership in the UK.

If current growth continues, that number could double to 4,000 EOTs by 2030—a dramatic shift in the UK’s business ownership landscape.

What Are Employee Ownership Trusts?

EOTs were introduced following the 2012 Nuttall Review to overcome key barriers to employee ownership: low awareness, complex regulation, and limited financial support. Instead of employees buying shares individually, EOTs use a trust structure to hold a controlling interest (at least 50%, but typically 100%) on behalf of all employees.

This structure is:

• Simple – Easy to set up and manage.

• Flexible – Tailored to a wide range of businesses.

• Tax-efficient – Sellers benefit from capital gains tax relief; employees can receive up to £3,600 in tax-free annual bonuses.

Why EOTs Work

EOTs stand out for their ability to sidestep many traditional barriers to employee ownership:

• No employee buy-in required – 89% of EOT sales use deferred consideration, meaning employees don’t need to fund the purchase.

• Deferred buyouts – Sellers typically receive payment over six years from future company profits.

• No individual share accounts – Reducing administration and coordination challenges found in other ownership models.

The appeal for exiting owners is also strong:

• Regulatory simplicity – EOTs are easier to execute than trade sales.

• Capital gains tax exemption – Offers a significant financial incentive.

• Legacy protection – Ensures continuity, employee welfare, and company values.

• Transaction certainty – No need to negotiate with competitors or share sensitive information.

Who’s Converting to EOTs?

The research shows EOTs are particularly popular in:

• Professional Services – 39%

• Manufacturing – 13%

• Construction – 12.5%

• Wholesale & Retail Trade – 11.6%

The typical EOT company has 30 employees (median), with 82% having 100 employees or fewer.

Governance and Employee Involvement

While most EOT transitions are initiated by the exiting owner, employee participation often increases post-conversion. According to the research:

• 78% include employee trustees

• Employees make up about a third of trust board members

• In 26% of cases, employees hold a majority on the trust board

• 53% of companies have an employee director on the main company board

• 84% of trusts play an active governance role beyond holding shares

Key Findings from the Research

Using data from the White Rose Employee Ownership Centre, Pendleton and Robinson found:

• EOTs dominate the UK employee ownership space since 2014, with hundreds of companies making the transition each year.

• Successions are owner-led – Typically initiated by sellers, who often stay involved to oversee repayments and smooth the transition.

• Employee involvement varies – While many are consulted or informed, one-third have little to no say in the process.

• Governance is evolving – Trusts are commonly structured as companies limited by guarantee, with trustees acting in the best interests of employees.

• Financing: The majority of EOT buyouts are structured as deferred payments from future company profits, with average payment terms around six years.

Challenges and Criticisms

Despite their popularity, EOTs face growing scrutiny:

• Limited employee voice – Many transitions remain top-down, with employees brought in late or not at all.

• Ongoing owner influence – Departing owners often remain as trustees or executives, raising concerns about real control.

• No individual equity – Critics argue that collective ownership may fall short of delivering “true” employee ownership.

Regulatory changes in 2024 have begun addressing some of these issues by limiting former owners’ control of trusts and tightening valuation requirements.

A Model with Momentum

Pendleton and Robinson conclude that EOTs have been a resounding success in expanding employee ownership in the UK. Their flexibility, simplicity, and tax advantages have made them a popular succession tool, inspiring similar models internationally.

However, the model’s strengths—particularly its owner-led approach and collective structure—also present challenges around employee engagement and governance. Addressing these issues will be key to ensuring EOTs continue to deliver on their promise of broad-based, meaningful employee ownership.

The next phase will require a deeper focus on governance, transparency, and employee empowerment to ensure that this promising model delivers on its full potential.