People over Profits – the rise of Co-operative Economics in the UK 

Co-operative economics is a system of business rapidly emerging in the UK, guided by principles of shared ownership, democratic governance, and the equal distribution of profits. Unlike traditional shareholder-driven enterprises, co-operatives – otherwise known as mutuals – prioritise the welfare of their members and the communities they serve. The two main categories of co-operative businesses are community/member-owned businesses and employee-owned businesses. Both are characterised by their profit-sharing schemes, often paid as yearly dividends equally distributed among members.  

As the UK struggles with growing income and geographic inequality, as well as the aftermath of Brexit and COVID, these principles seem fundamentally appealing. Yet, as with any economic model, the strengths of co-operatives are offset by inherent weaknesses, to the point that some critics argue they will never truly escape their niche. 

Co-operative economics has its theoretical roots in the works of 19th century thinkers like Robert Owen and the Rochdale Pioneers, who advocated for collective action as a means to address industrial-era exploitation. More recently, Elinor Ostrom’s studies on the governance of common-pool resources, for which she won the Nobel Prize in Economics, show that in certain conditions co-operative management works much better than privatisation. 

The case for co-operatives is further supported by the field of behavioural economics, which challenges the traditional model of homo economicus – namely the assumption that economic agents always act in their own interests. Instead, it highlights how humans derive utility not just from material wealth but also from fairness, social connection, and a sense of purpose—values deeply embedded in co-operative structures.  

The UK’s mutual sector, while still modest compared to other parts of Europe, is steadily expanding. Community and employee-owned businesses contributed £40.9 billion to the economy in 2023, a figure that will likely continue to rise. One of the most prominent examples is the John Lewis Partnership, the employee-owned retail giant, which also controls the 329 Waitrose supermarkets in the UK. Despite challenges in recent years due to the downturn in high street retail, including a £234m loss in the 2022 fiscal year, John Lewis remains a powerful force within the market, perhaps thanks to its profit-sharing model and commitment to employee (or Partner) welfare.  In some ways the greatest success story for co-operative economics in the UK was the rise of the Co-op Group, which runs the 7th-largest supermarket chain in the country and one of the leading funeral care businesses.  

Another area of co-operative economics that has seen considerable growth throughout the 2010s is the renewable energy sector. Community Energy England, a network of locally owned energy co-operatives, exemplifies how shared ownership can successfully promote decarbonisation. There are now 303 energy and environment co-operatives trading in the UK, which allow people to locally invest their money for climate benefit. Groups like Reading Hydro, set up in 2016, can supply local energy while remaining accountable to the community. 

The appeal of co-operative economics lies in its ability to balance profitability with social impact. By design, co-operatives mitigate some of capitalism’s flaws, such as the prioritisation of short-term gains over long-term sustainability. In worker-owned co-operatives, the emphasis on democratic decision-making often develops a stronger alignment between management and labour which reduces industrial disputes and enhances productivity. 

Moreover, co-operatives tend to exhibit remarkable resilience during economic downturns. A study by the International Labour Organisation (ILO) found that co-operatives globally fared much better in the 2008 financial crisis than their investor-owned counterparts. Moreover, after five years, only 39.6% of typical companies remain in business, compared to 81.2% of co-ops. Their focus on community and member welfare—rather than shareholder dividends—enables them to prioritise stability over risky, speculative ventures.  

The mutual model also can help address regional inequalities. Here in Britain, where economic activity remains disproportionately concentrated in London and the South-East, co-operatives have the potential to revitalise left-behind areas. In Newcastle, the model has enabled  the creation of The Globe – a former failing pub that was saved when the community formed a co-operative and raised funds through community shares to buy it and create the UK’s first co-op-owned music venue and education centre. Similar socially beneficial projects across the UK have the community-owned model to thank. 

However, one of the most persistent challenges to co-operatives regards access to capital. Traditional financial institutions often view these unconventional businesses as high-risk investments due to their peculiar governance structures and their emphasis on member welfare over the maximisation of profit. Co-operatives are thereby often limited in their scalability, particularly in capital-intensive sectors such as the manufacturing industry. 

Furthermore, democratic governance, while a cornerstone of the co-operative model, can lead to inefficiencies. Decision-making processes in co-operatives tend to be slower and more cumbersome compared to hierarchical organisations. While this enhances legitimacy, it can also hinder the ability to respond swiftly to market changes. For example, Co-op UK is slowed down by a convoluted leadership system that prioritises democracy at all costs, including a “Member’s Council” and a “Council Senate”.  

For cooperative economics to realise its full potential in the UK, systemic changes are necessary. Policymakers could play a crucial part in enabling mutuals by introducing tax incentives, grants, and legal frameworks that are tailored to their unique needs. The Co-operative and Community Benefit Societies Act in 2014 was a step in the right direction, officially recognising and consolidating co-operative businesses under a new name. Likewise, the Labour Party’s 2024 manifesto pledged to double the size of the co-operative and mutual economy, and their plan for the implementation of GB energy is supported by community-run energy businesses across the country. However, to truly fulfil the potential of this unique industry requires more radical changes and incentives.  

Embedding co-operative principles into business curricula and vocational training could help raise awareness to a new generation of entrepreneurs who view shared ownership as a viable alternative to traditional models. Co-operatives UK, the primary British think tank supporting co-operative economics, say that “poor awareness holds back flexible businesses whose members can be consumers, workers, residents, suppliers or even have a combination of different types of owners”. Many mistakenly view co-operatives as mere loyalty reward systems, a misconception partly fuelled by the Co-op’s suspension of the dividend system until 2016. This misconception deserves to be challenged. 

Ultimately, the rise of co-operative economics in the UK reflects a broader search for ethics in business. While it is no panacea, the co-operative model offers valuable lessons for building a fairer, more resilient economy. In the end, principles of co-operation may well prove to be not just an alternative but an imperative.