Plans to cut red tape and introduce tax breaks for employee-owned companies have been unveiled by the Deputy Prime Minister Nick Clegg.

Addressing the city earlier this week, Clegg urged firms to offer shares to their employees in a bid to boost productivity and 'unlock growth'.

The Government hopes the plans will create a so-called 'John Lewis economy' and encourage 'responsible capitalism'.

One proposal under consideration is a 'right to request' rule, which would give staff an automatic opportunity to ask their employer for shares.

The Chief Secretary to the Treasury, Danny Alexander, is also thought to be '[looking] at the tax arrangements for employee-owned firms'.

At an event hosted by the City of London Corporation and Centre Forum think tank, the Deputy PM said: "We don't believe our problem is too much capitalism - we need more individuals to have a real stake in their firms. More of a John Lewis economy, if you like. And what many people don't realise about employee ownership is that it is a hugely underused tool in unlocking growth."

He added: "Firms that have engaged employees, who own a chunk of their company, are just as dynamic, just as savvy, as their competitors. In fact, they often perform better. Lower absenteeism. Less staff turnover. Lower production costs. In general, higher productivity and higher wages. They weathered the economic downturn better than other companies."

E advice@hwfisher.co.uk