Date: 28/05/2008 Publication: by Jonathan Moules, The Financial Times Most of the UK businesses under family ownership 12 years ago have ceded control to outside interests, according to pan-European research. The study of 4,000 companies across the UK, Germany, France and Italy, commissioned by the Institute for Family Business, found that only 30 per cent of UK businesses that were family controlled in 1996 were run by the same dynasty a decade later. The researchers found that 42 per cent of UK family businesses were taken over and 28 per cent diluted the hereditary shareholding. Family firms account for 65 per cent of the 4.5m companies in the UK, 40 per cent of private sector employment and more than 30 per cent of GDP. Julian Franks, professor of finance at London Business School and one of the report's authors, said: "The UK is an outsider system where the role of the stock market and the active market for corporate control provide a powerful engine of change in ownership structures as compared with the insider systems of continental Europe." The study found that British family businesses are performing as well as companies with no genetic line. The average return on assets of 7.6 per cent for family businesses in the UK is not significantly different to other companies. However, it also found that UK family businesses were less profitable than family businesses in the other countries studied. Grant Gordon, director general of the Institute for Family Business, said: "The [UK] sector is a spawning ground for the capital markets with growing family firms feeding through to the stock exchange as businesses seek to develop. "It is therefore vital that the UK government creates a regulatory and commercial environment that enables entrepreneurial UK family firms to flourish, while encouraging the growth of new upcoming family businesses." Stability of family businesses is greatest where the controlling family is a descendant of the founder, where the controlling stake is undivided and with a large initial voting block. Although family-controlled companies elsewhere in Europe are typically more stable than those in the UK, the report found signs that this was changing. Improvements in investor protection of minority shareholders and changes to stock markets in Germany, France and Italy have contributed to this change, says the report. Back to Articles |