Family Business In Rude Health
7th December 2017
You might have seen reporting on a survey of family business owners today, asking about their expectations and concerns. For me, it brought to mind the common misquotation of Mark Twain - ‘reports of my death are greatly exaggerated’.
The survey of 100 SME owners by Direct Line has the headline ‘Death of the Family Business’. It’s certainly a startling headline, but the reality is very different and the family business sector is in fact in rude health. It’s one of the myths of family business about which people often ask me. And I am pleased to be able to report to them that the family business model is still relevant and popular with families, business owners and consumers alike.
In 2015 family firms created 800 new jobs a day –with family businesses now employing over 12 million people in the UK. In the same year their turnover increased by 6 per cent, to £1.4 trillion. And family firms make a huge contribution to the UK economy, generating a quarter of UK GDP, and paying £133 billion in taxes each year.
And while some individual business owners might expect to close their own family business, it’s important to remember that new family businesses are being born every day. Siblings starting up businesses together, or entrepreneurs bringing in other family members for the first time.
The Direct Line report also states that owners don’t think younger generations are interested in the business. We have good news for the business owners interviewed – that isn’t the case at all! In fact research by Bradford and Lancaster universities, for the IFB Research Foundation, showed that future owners had a real sense of duty and care towards the family business, legacy, employees and community. In a survey of more than 2,000 current and future family business owners, 90% of the next generation said they wanted to be involved with their family firm because they care about its future success and development. And four out of five had already taken steps to learn about the business to prepare for the future.
And it’s important to remember that if the next generation in your own family aren’t interested in joining the business right now, that doesn’t mean they never will be. We encourage families to support their next generation to get experience outside of the family firm. Many of them decide after that they want to use their new skills to help the family firm grow, and they can join with fresh ideas and a desire to build on the legacy of their family.
The Direct Line survey also states that some family firms believe inheritance tax rules ‘make it very difficult to pass on a family business’. Succession planning is essential for family firms and, although complex, with good planning a successful transfer is very possible. There are also reliefs available to family businesses – such as Business Property Relief from Inheritance Tax – which are vital to ensuring businesses can be passed on without being broken up. If you own a family business it is important to get tax advice to understand the situation for your own firm.
If you own a family business and need support on how to prepare for succession, you can find our free-to-access handy guides here. Or get in touch to find out more about how IFB supports family firms to continue to thrive and grow.