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Family businesses remain committed to growth despite challenging operational environment

 

 

The new IFB Research Foundation ‘The State of the Nation: The UK Family Business Sector’ report, published today (Thursday 1st December), showcases that family businesses are the bedrock of the UK economy but face barriers to growth.

The contribution these businesses make to the towns and cities they operate in across the UK should not be underestimated. The new State of the Nation report shows that family businesses across the UK want to grow, but are still recovering from the Covid-19 pandemic and now face additional economic challenges.

The report highlights the important role that family businesses play in the economy and looks at the impact of the pandemic on those businesses, and their plans for the future.

Carried out by Oxford Economics, the analysis of the UK’s family business sector in 2020-21 found that three quarters of family firms said they intended to grow their sales over the next three years.

In the UK, there were 4.8 million family businesses, who employed 13.9 million people and contributed £575 billion to UK GDP in 2020-21. This means that family firms comprised 85.9% of all UK firms, directly generated 44.4% of GDP, and were responsible for 51% of all private sector employment in the UK economy in 2020-21.

Family firms’ performance in the face of the hard times of the pandemic showed resilience. People who own and run family SMEs were optimistic coming out of the pandemic, with plans to grow their turnover, many by increasing the skills of their workforce or recruiting new staff.

The report shows that Brexit is likely to contribute to the rising cost of imported products. Alongside rising energy costs, which have become particularly important in the second half of 2022, these new obstacles added to the competitive landscape for family businesses.

Supporting the professional development of the workforce and retention in family firms remained a priority for family firms. Like their non-family counterparts, they had to take difficult measures in response to the challenges posed by the Covid-19 pandemic. However, staff retention was better than for the rest of the private sector – just 32% of family SMEs with employees reduced their paid staff headcounts in 2020-21, compared with the higher figure of 38.8% of non-family firms.

Additionally, these businesses typically have a higher proportion of women leading them than non-family SMEs – 17.7% of family SMEs were women-led in 2020-21, compared with 13% for non-family SMEs, while 6.5% of family SMEs were minority-ethnic led, compared with 5.3% of non-family SMEs.

Sir Michael Bibby, Chair of the IFB Research Foundation said:

“As the UK is buffeted by fresh economic headwinds, family businesses remain the bedrock of the UK economy. This latest report from Oxford Economics and the IFB Research Foundation sheds further light on the economic impact of the UK’s family business sector and how family firms fared during the COVID 19 pandemic.

“During 2020-21, family businesses continued to be prominent in all sectors and all regions of the UK economy. While most family firms were optimistic about future growth coming out of the pandemic, there are new challenges facing them since this research was carried out, including high inflation and soaring energy costs. What this report shows us though is how many family businesses remained resilient during the COVID-19 crisis and how they were preparing for future challenges.”

Neil Davy, Chief Executive of the IFB said:

“Family businesses have, for successive generations, offered a model of how leading responsible businesses operate. They put people at the heart of their business, training their workforces, supporting local supply chains and suppliers, using their land and natural resources sustainably, investing in and supporting the communities in which they operate and on whom they rely.

“This new State of the Nation report shows that family businesses remain committed to growth following the Covid-19 pandemic, despite ongoing challenging business environment. Family run businesses provide regional growth potential and have the ambition and inclination to succeed.

“The IFB recently celebrated the second annual Family Business Week where MPs and businesses came together to take stock of the contribution of these businesses to the economy. Despite this moment of celebration, there are significant obstacles to family firms achieving future success. A fair tax system and business friendly policies will enable the family business sector to realise their growth potential. Family businesses are looking to the Government to provide stability for business investment. This is vitally important as another difficult winter for businesses starts to take its toll. “