Family businesses continue to provide strong growth in UK
Family businesses remain a cornerstone of the UK economy, offering a broad range of more social business models, focused on wider cultural phenomenon than just growth and profit. A new survey notes that family businesses are relatively well positioned in the UK, but continue to face issues around succession and family conflict.
Family businesses in the UK continue to be relatively positive about their prospects going forward. Their central approach, which is more extensive than just profit and revenue focus, enables them to aim for the long-term, something that has shown to improve profit and revenue overall. Concerns remain for family businesses however, with succession and leadership continuing to create uncertainties, according to PwC’s UK Family Business Survey.
The survey, which is the eighth edition of the study from PwC, involved 2,800 global respondents from businesses across the value spectrum. Of the 100 respondents based in the UK, the vast majority (75%) generated revenues of $21 million to $500 million. The research, meanwhile, found that 22% had been in business for more than four generations, while 1st and 2nd generation businesses represented 17% and 37% of the respondents respectively. Only 4% of respondents, meanwhile, stated that they did not take a hands-on role in the management of the day to day business.
The family businesses surveyed remained generally positive about their outlooks, in line with a study by fellow Big Four consultancy KPMG in December, which found that 72% of family businesses were confident of their prospects. In this PwC survey, 60% said that they are generating consistent revenue growth, while three quarters of businesses stated that they are planning to continue their operations in the existing market. Most family businesses in the UK are not planning to use external financing, meanwhile, with 70% saying that they have things relatively well in hand when it comes to organisation.
UK businesses and their global counterparts are relatively in agreement on what sets them apart from other types of businesses. Top of the list, both in the UK and globally, is adherence to ‘stronger cultures and values’ at 82% of UK respondents and 74% of global respondents. Family businesses also mentioned that they ‘measure success differently – more than just profit and growth’ – than other types, with UK businesses indicating this slightly more often than global family businesses, at 76% and 72% respectively. These features of family businesses provide a broader basis for social cohesion, with many taking a long-term approach to their planning.
Difficulties
Some areas, such as access to capital, are noted by some of the respondents as more difficult than for other types of businesses; in the capital access case, 26% of UK businesses and 32% of global businesses say that such access is more difficult. Family businesses, according to 29% of UK companies and 40% of global companies, say that they take more risks.
The study also asked family businesses about their biggest perceived challenges for the coming five year period. Innovation took the number one spot globally, as cited by 64% of respondents, even while in the UK, concern about innovation was less pronounced, at 52% of respondents. Competition in the sector was cited by 52% of respondents as a clear concern, while the ability to attract and retain new talent also came in at 52%.
UK respondents were, in general, less concerned about challenges meanwhile. The biggest noted gaps were in the general economic situation (41% vs. 54%), the ‘need to professionalise the business’ (28% vs. 43%) and ‘containing costs’ (27% vs. 36%).
A key area of concern for family businesses in the UK is also that they are slightly less likely than their global peers to have procedures in place to deal with conflict in the family, at 78% vs. 82%. Main procedures are meanwhile relatively under-represented, with 'measuring and appraising performance' at 37% of firms surveyed, a 'family council' at 14%, a 'conflict resolution mechanism' at 24%, and a 'family constitution' at 14%.
Sian Steele, UK family business leader at PwC, concluded, “Family businesses are certainly up for a challenge and those that we speak to feel confident and excited about the future and the opportunity that it poses. There is no room for complacency and those that survive from generation to generation focus on robust, strategic planning, taking them from where they are to where they need to be in the long term. The family firm has to tackle issues around the family itself. Here the issues are more personal, more complex, and the risks if it goes wrong are potentially terminal - ‘family firm’s fail for family reasons’.”
