Next week marks the first-ever Co-operatives Fortnight (19 June to 3 July 2010). I know what some of you are thinking: crusty Guardian-reading weirdos and this, smiles Dan McTierman of co-operative The Handmade Bakery, is probably what the neighbouring butcher thinks when he drops round a copy of his British Baker to help out this fledgling start-up.

But perceptions of the ethical co-op business model are changing from evidence that it slows down the employee turnover to claims it fosters a sense of ownership in workers who have a self-interest in the prosperity of the business by reaping the rewards of their efforts.

"Since the financial crisis, people have been plugging co-operatives as an antidote," says McTierman. "By default, there are checks and safeguards in place, because it’s about a group of people who have come together with similar aims in mind. The Co-op Bank is one of the fastest growing in the British banking sector and the government is talking about public sector co-ops. John Lewis is a workers’ co-op and they’ve been doing a lot better than fellow retailers in a recession."

He points to a co-op organic grocery in Manchester Unicorn that is turning over £90,000 a week. "Companies like that prove it works," he says.

Inspired by fermentation

This 1,000-loaf-a week Handmade Bakery in Slaithwaite, near Huddersfield, is a somewhat smaller proposition, sparked into life after McTierman attended a course at Town Mill bakery in Dorset, under baker Aidan Chapman. "I got so inspired by him talking about the magic of fermentation, things I didn’t have a clue about," he recalls.

This led to the formation of an informal bread club, which turned into a subscription bakery, based on a community-supported agriculture model, whereby the community pays the farmer upfront and has the guarantee of a committed customer base. "I thought, ’Why can’t this work for baking?’"

The Handmade Bakery’s spin on this model is direct-selling to customers, which offers better margins over wholesale, he says; current subscribers pay £9.20 for four loaves a month, made from sponge and dough or sourdough, with flours supplied by Yorkshire Organic Millers and Shipton Mill.

Then, in May last year, a community effort to save the local greengrocer presented an opportunity to set up a bakery. McTierman left his job and it opened in August, with £15,000 of Social Enterprise funding. This imposes an asset lock on the business, whereby the profits cannot be distributed to private individuals; directors cannot be paid a dividend; they cannot sell shares, although they could sell loan stock (which McTierman plans to do, paying interest to investors in the form of loaves at a typical rate of 7%); and, should the business fold, any surplus after the debts have been paid off must be given to a co-op or charity.

So why go down that restrictive route? The answer is a mix of practicality and ethics. Firstly, they had no capital to start a business and secondly, they were attracted by the politics as much as the baking. "Working at a desk, it’s sometimes hard to determine what your output is at the end of the day in this amorphous, electronic world. Here you’ve got job satisfaction in using your hands and your brain. The co-op overlay is a mix of doing something you believe in and having a stake in it," he says. "Hannah [my wife] and I had no idea about setting up a business. Co-operative UK were very supportive and it has been really good for our business."

Political thinking

While you may think of a co-operative as being a large and unwieldy rabble, there are presently only three members of The Handmade co-op. The plan is to grow it slowly through training bakers an additional revenue stream and its ’How to start a bakery co-op’ courses have sold out. "In the future, Hannah and I might not be here, but because this structure is set up, there will be a community bakery here baking on-site," he says.

But do they have a traditional three-year growth plan? "Yes, but it’s finite. We are happy to do 1,200 loaves a week, then concentrate on education. I’ve had enquiries from food-service people who supply British Airways and, increasingly, supermarkets we could have grown 10 times in the first year, but I’m just not interested. Maybe I’m an idiot! But I’d rather have a small bakery that does a lot of other interesting projects as well."