Can employee ownership (EO) work for construction companies? Absolutely! Transitions to EO have been more common in sectors providing services, however construction companies can also transition to EO. In fact, since 2014 the transitions to EO in the sector has grown over 6000%. According to a recent article by Construction News, one in seven EO businesses in the UK are from the construction sector. In an industry with aging business owners and shortages in skilled employees, EO could be the answer.
The Ownership Challenge Facing Construction Business Owners
Many construction businesses are privately owned. Some of the challenges the construction sector is facing, such as succession planning, legacy concerns, productivity and safety, can be overcome by an EO transition, if not completely, then at least to some degree. Selling a business to its employees can be a practical solution which benefits the founders of a business as well as its employees.
What does EO look like in the Construction sector?
Some Construction businesses have already made the transition. Notable names include Triton Construction, Architype and most recently the Cheshire based Precision Facades in September 2025. The Construction sector is vital to the British economy. The sector heavily relies on key employees. Often if a competitor takes over a business, the culture could change and some of the vital employees may decide it is time for them to move on. During an EO transition, an employee ownership trust is set up which is for the sole benefit of employees (EOT). The trustee of the EOT is a company which is usually a company limited by guarantee (Trustee). The Trustee has a board of directors, which ensures that the EOT is run for the benefit of the employees. Becoming an EOT is a values-aligned solution for some of the challenges the sector is facing.
Why Construction Companies Are Embracing This Model
The EO model is becoming increasingly popular within the construction industry for a variety of reasons.
Some of the practical motivators for the business are:
- Preserving the company legacy;
- Rewarding loyal employees;
- Avoiding third-party sales; and
- Long-term business resilience
The founders also benefit. A key benefit is the tax relief afforded by HMRC and this is explained further below, but the main attraction for founders seems to be the fact that the legacy of the company will be preserved while all employees can be rewarded.
Common EO myths
“Won’t I lose control?” – yes and no. The Sellers no longer control the business, the EOT does, for the benefit of the employees. Often some of the consideration for the business is paid over time, to make it affordable for the business and while the consideration is being paid, a founder is normally part of the Trustee board (but not always). This can be very helpful for the business and for the management team so that the business and management team do not lose the valuable know-how and insight the founder has. The management of the construction business itself can remain the same. The difference is that the owner of the business is going to be an EOT rather than an individual.
“Isn’t EO just for big businesses?” Subject to a few conditions, EO works for large and small businesses. In fact, most construction businesses which have transitioned to EO are privately owned and not large corporations.
How it all works in practice
Normally, a founder will approach their accountant or lawyer to discuss business succession. Their advisor should raise the possibility of employee ownership. If this is something that a founder wishes to pursue the conversation shifts to the requirements to obtain CGT relief.
A tax clearance is sought by the tax advisor – this could be the company’s or the founder’s accountant or another firm. If the business is in a regulated sector or have clients which are in regulated sectors, then regulatory permission may be needed.
The company is valued and there are rules in place to ensure that not more than market value is paid by the EOT for the company. If the founder wants to benefit from the tax advantages, they must sell 51% or more to the EOT.
“Is it too complicated or expensive?” – it is important to have the right team of advisors with the right set of skills and experience in order to ensure the conditions are met so that the sellers can benefit from the tax relief and the employees can benefit from up to £3,600 tax free bonus. The employees can have higher bonuses, however the tax free portion is limited to £3,600 at the moment.
The transaction itself is less stressful for the founders (there is no negotiation with a buyer), involves a lower level of due diligence from the buyer (the buyer in an EO transaction is the trust, set up for the benefit of the employees) and perhaps most importantly, it can be less expensive than a traditional trade sale from a legal and accountancy perspective.
The founder must be aware that there are a number of ways to lose the tax advantages. For example, the founder must know that:
- They cannot be in control of the trust;
- CGT relief can be clawed back by HMRC in certain circumstances for a number of years; and
- Tax free profit share must be carefully calculated per employee in accordance with the legislation to ensure HMRC does not claw back the CGT relief.
Our Story: 9 Years as an Employee-Owned Law Firm
Stephens Scown has been employee owned for 9 years. In that time our EO has evolved and professionalised alongside the rest of the firm.
We have better recruitment and retention and the employee voice flows freely from our employee council, which we have aptly named the “Scownership Council”. We have changed our model over time to reflect our growth – changes in the legal profession, larger headcount, new offices etc.
The firm has a strategy board and two of our employees who were on the Scownership Council are on this very board, being the voice of the employees and forming part of the future strategy planning.
We work with businesses considering EO and those that have become EO (using us or other providers). We provide proactive legal advice which is supplemented by our own EO experience.
If a business owner in the construction sector is interested in EO they should get in touch with us for a free confidential initial chat.