The government plans to make it easier to create co-operatives by introducing a Bill to cut red tape.
Prime Minister David Cameron said that the Co-operatives Bill would be put before Parliament ahead of the next election
His announcement follows government moves to encourage public sector staff to set up employee-owned mutuals, as part of its public service reform plans.
The new legislation would consolidate the 17 separate pieces of law that currently regulate the companies, which are now to be reviewed by the Law Commission.
In a speech today, Cameron said: ‘We know that breaking monopolies, encouraging choice, opening up new forms of enterprise is not just right for business but the best way of improving public services too.
‘But right now there are too many barriers in the way. So today I can announce they will all be brought together and simplified in a new Co-operatives Bill that will be put before Parliament.’
His comments follow Deputy Prime Minister Nick Clegg’s call earlier this week for more employee ownership of companies, as part of a more responsible form of capitalism.
The trade body for the sector, Co-operatives UK, welcomed the move.
Secretary general Ed Mayo said that it would ‘make it as easy and natural to form a co-operative as any other form of business’.
He added: ‘We are delighted to see the coalition taking action to put co-operative businesses on an equal footing and create a diverse economy.
‘Co-operatives, as well as being widely recognised for their ethical business practices, are a vital part of the British economy, employing more than 235,000 people, turning over more than £33bn each year and generating a significant amount of wealth for the country.’
The group says that co-operative businesses are currently outperforming the UK economy and have grown by 20% since the start of the credit crunch. The consolidation of the legislation will create a more equal playing field for them by creating clarity and reducing running costs.