UK family businesses positive, but concerns around talent remain

Family businesses in the UK remain upbeat about their economic prospects, in line with the majority of their EU counterparts. However, concerns surrounding talent shortages are on the rise, while access to talent is likely to become increasingly scarce, particularly for British proprietors, 42% of whom are worried about a coming war for talent, as the ageing UK departs from the wider market.

Family businesses are one of the bastions of sustainable growth, focused on generating long-term value for generations to come. To better understand the business environment faced by family businesses across Europe, KPMG and European Family Businesses recently released its latest edition (the sixth) of the’ European Family Business Barometer’, which surveyed 1,100 such businesses across Europe.

The research highlights that, even in light of various uncertainties gripping the region – such as Brexit and more global geopolitical changes – family businesses are relatively upbeat, both on the continent, where 18% are very confident and 53% confident, and in the UK, where 23% say that they are confident and 60% say that they are very confident.

The survey suggests that confidence has been boosted by improved revenue performances across the continent (57% posted improvement), partly on the back of stronger growth in the region, with 39% citing improved demand and a favourable competitive landscape. In addition, many of the firms have launched new products and services, which has also improved their relative market positions.

Areas of concern remain, however, with an escalating ‘war for talent’ / recruitment of skilled staff cited as one of the top three most concerning issues by 43% of respondents (42% in the UK). This is in spite of the fact most family businesses have traditionally been able to rely on family ties for recruitment and succession purposes. Now, however, increasing competition and what will likely become a depleted workforce, post-Brexit, mean that attractive opportunities could potentially open up to tempt individuals away from their family enterprise. Presently, only 50% of next gens hoping or expecting to take on the management of their family firm. Increased competition, meanwhile, came in at number two, at 37% (23% in the UK), while declining profitability was third, at 36% of respondents overall.

The areas of least concern pertained to energy costs, access to finance and tax rates – although concern around the price of energy were higher in the UK at 9% - while an unstable exchange rate was considerably more of a concern in the UK, cited by 28% of respondents, over 16% across the survey as a whole.

Family fortunes

Commenting on the increased scarcity of talent, Ingrid Waterfield Director KPMG in the UK, said, “Many family businesses are having difficulty attracting skilled labour and management level employees in the UK. Focussing on attracting a more diverse talent pool, coupled with providing and communicating a compelling employee proposition are two ways in which family businesses are differentiating themselves in the market and overcoming this challenge.”

While businesses are general confident about the future, wider geopolitical concerns remain a key feature – particularly those pertaining to Brexit, and its wider effect on their respective business relationships, in terms of trade, labour, services and capital.

For instance, few of the UK respondents were very positive about Brexit, at just 2%, while around 5% said that they were positive. The largest group by far, 44%, say that they have a negative outlook on the impact of Brexit on their family business, while 12% say that the impact is potentially very negative.

Across all respondents, 29% of respondents are keen to maintain the current situation, although this increases significantly for UK respondents only, at 47%. Few of the respondents are keen to see a decrease in integration, at 16% of all respondents and 23% of UK respondents.

The impact of Brexit on talent, particularly for high-skilled workers, remains a key issue – with increasing numbers of EU nationals put off by the current environment of uncertainty and, in some instances, hostility from the Home Office.