What Does the Future Hold for Family Business?
25th October 2018
Many family businesses have been around for hundreds of years. This alone tells us that they are great at being resilient through times of change and economic downturns. But interestingly, their role is more important than many might think. In the UK alone, family businesses make up almost 90% of all businesses and, as such, they are a key source of employment (12.2 million people in the UK work in family business). The picture is not very different looking abroad, with family business being the most popular business model in the world.
Given the important role they play in our lives, family businesses can teach us a lot about the overall health of the economy and sentiment in Europe. Moreover, knowing what their concerns and challenges are is particularly interesting as the UK, Europe and the rest of the world undergo massive societal, technological and political changes.
Using family businesses as a 'barometer for things to come', the 2018 European Family Business Barometer by KPMG and European Family Businesses (EFB) opens a window into what family businesses think about the future. How do they see market changes and growth? And what are their top priorities?
They are confident about the future
Family businesses are coming off a strong growth year, which has boosted their confidence and optimism for the future. Of the 1,576 owners, next generation and senior leaders interviewed across Europe, 73% are confident of their prospects over the next year. But while overall confidence is up across Europe, the UK was a notable exception, with confidence dropping from 83 percent in 2017 to 68 percent this year.
However, despite concerns, family businesses continue to invest in innovation and diversification, and at a rapidly accelerating pace. This goes to show that, while anticipating difficult times ahead, they are preparing for the future. Family firms continue adapting to change and investing not only to remain relevant, but to be ahead of the game despite market disruptions.
The war for talent
New technologies require new and higher levels of talent. But whilst demand is high, the supply remains short. This is one of the key challenges for family firms, with 53% identifying talent as one of their top three concerns.
Testament to their resilience and long-term outlook, family businesses are taking a creative approach to talent management with a view to improve their competitiveness. This includes developing new remuneration, incentive and benefits packages, as well as capitalising on their values to become 'employers of choice'.
Brexit continues to be at the top of mind for many family businesses, particularly in the UK and Ireland. Amidst uncertainty, only 11% of family businesses in Europe have taken steps to prepare for Brexit.
Interestingly, the barometer reports that political uncertainty may be causing family firms to postpone plans for international expansion, especially among smaller companies. However, looking at the long term, the majority of family businesses plan investments in internationalisation within their strategy. As part of their plans, many family firms are also looking at alternate growth corridors, away from traditional markets like the US and China, exploring new horizons including Africa.
About the Family Business Barometer:
The European Family Business Barometer is based on the responses of an online survey from over 1,500 questionnaires which were received from family businesses across 26 European countries from 7 May to 7 July 2018. It is freely accessible via this link.