Chancellor urged to listen to family businesses to boost economy

  1. IFB Chairman Ross Warburton urges Government to make family business a key strategic partner to boost growth
  2. Family firms generate a quarter of UK GDP - £1.1 trillion in revenues annually
  3. 9.2m jobs provided by family businesses - two in five private sector jobs
  4. 60 per cent of family firms grew by five per cent or more last year

 

 

 

 

Government could boost economic growth by making family business a key strategic partner, helping family firms to secure and grow jobs across the country.  That is the challenge set out by Chairman of the Institute for Family Business (IFB), Ross Warburton at a major international conference for family business in London.

Ross Warburton issued a stark warning to the Chancellor on the risks of not supporting the sector, which provides two in five private sector jobs in the UK, generates revenues of £1.1 trillion a year and £81.7 billion in tax receipts to the UK Exchequer. 

Family firms have a record of success during the recession: a recent Credit Suisse report reveals that 60 per cent of family businesses actually grew by five per cent or more in the last twelve months - one in ten have grown by over 15 per cent. Over the same period revenues in European listed businesses have fallen by one per cent. 

Ross Warburton called the family business model an example of responsible capitalism in an age of economic uncertainty.  In a speech to delegates at the Family Business Network's 23rd International Summit, held in London, said that the benefits of family businesses go beyond the balance sheet, and point to the deep rooted culture and values of family firms with genuine long-term vision and commitments to their communities

Last year, the IFB called on the Government to boost the family business sector by:

  1. Removing discrimination in the tax system that penalises family firms
  2. Cutting red tape and bureaucracy around employment legislation
  3. Working with family firms to plan for the future and secure jobs

 

 

 

 

While ministers have responded to the IFB's calls and made progress on cutting red tape through the Enterprise Bill, they have failed to align the tax treatment of debt and equity business investment, thereby maintaining the incentive to firms to invest by taking on debt rather than using their own revenues - a prudent investment model favoured by family firms.

Government has also failed to reform the Enterprise Investment Scheme (EIS) that penalises entrepreneurial family firms by preventing owners obtaining tax relief when investing in family business start-ups.  Restrictions in the EIS mean that family members investing in a new family business only receive half the return on that investment compared with a non-family run start-up that qualified for EIS relief.  Over a third of IFB members said they would invest more in family start-ups if the law were changed. 

Ross Warburton, Chairman of the IFB said:

"My message to Government is this.  We have an opportunity connect a successful business sector with a successful business environment - to roll out the red carpet and make Britain a dynamic global hub for family business. Make family business your key strategic partner in attracting inward investment to the UK and driving exports through our relationships with the flourishing family business sector in key markets around the world.

 "We face a very challenging global environment.  We continue to be buffeted by global economic headwinds.  People feel uncertain about the prospects for them and their families and insecure about their jobs. National economies seem to lurch from crisis to crisis and pockets of unrest flare up.

"In the face of this, Governments and policy makers appear to be struggling to find the elusive elixir of growth.  Yet at the same time wherever you look, despite the challenges, family firms continue to thrive and grow and are in many cases outperforming other businesses - a testament to the strength and resilience of the family business model.

"As recent research by Credit Suisse shows, in the last 12 months 60 per cent of family businesses report revenue growth of five per cent or more.  One in ten report revenue growth in excess of 15 per cent.  In contrast, over the same period revenues in European listed businesses have fallen by one per cent.  The evidence also shows that family businesses have a track record of delivering superior returns relative to the cost of capital than the broader corporate sector - patient capital pays off.

"As a sector we want to play our part in finding solutions.  In the UK, we are looking to build a dialogue and work constructively with Government on the growth agenda.  Given the right conditions we can work more effectively together to deliver the growth, jobs and investment that will benefit our national economy and local communities.

"And just think about what we could achieve together.  In the UK, family businesses already provide two in five private sector jobs, a quarter of GDP and over £80 billion in tax receipts.

"But it goes beyond the balance sheet.  In an age where the shock of the economic meltdown has raised questions in many quarters about corporate practice and the role of private enterprise in society, the deep rooted culture of family firms has much to offer the broader business community - built on a bedrock of strong and enduring values, a vision for and commitment to the long-term and a genuine part of and contributor to local communities.  In summary, an example of what responsible capitalism can look like."

Ends

Notes to Editors

  1. The Institute for Family Business is an independent, not-for-profit, politically neutral, membership association which supports the UK family business sector.
  2. Ross Warburton was speaking on Thursday 4th October at the 23rd annual Family Business Network Global Summit in London
  3. Family firms account fortwo thirds of private sector enterprisesin the UK economy - almost 3 million businesses; 40% of total private sector employment, providing jobs to 9.2million people;£81.7bn per annum of UK tax receipts.