Mazars: Family businesses in the UK are booming

10 June 2015 Consultancy.uk

Family businesses in the UK are booming, with 79% saying their profits are either higher or the same as last year, research by Mazars shows. The research also shows that as many firms are now operated by multiple generations, differences in business views are putting strains on family relationships. The researchers recommend a family ‘constitution’ to combat the stress put on families.

Family businesses in the UK are an increasingly important part of the economy* as they employ a great number of people, pay significant taxes to the UK Government, are ‘long-term’ players and are seen as innovators. “Family businesses are vital to the UK economy so their financial health is extremely important. In terms of employment alone, family businesses contribute 40% of all private sector jobs in the UK and generate £1.1 trillion in annual revenues,” explains Craig Manson, Partner at Mazars responsible for Family Businesses.

Net profits of the business

In a recently released report, Mazars researches a variety of family businesses in sizes and sectors in the UK. The research finds that despite the difficulties put on businesses by the recession, family businesses in the UK are booming. Almost 80% of respondents say profits are either higher than last year (58%) or the same (21%). More than half (55%) expect the UK economy to further improve in 2015 and their business to grow as a result.

Generations operating family businesses

Of the family businesses surveyed, the majority (64%) is still operated by the first generation, with a quarter run by the second generation and 10% by the third generation. According the researchers, as people live longer, more generations can be involved in running the business, resulting in inevitable differences in views.

Emotional aspects affecting important business decisions

These different views can make decisions in a family business more difficult, with more than half (59%) of respondents agreeing (47%) or strongly agreeing (12%) that emotional aspects can get in the way of important business decisions. Only 16% disagrees with this statement. As many as 87% of respondents say that the business disagreements put a strain on their family relationships, with 14% strongly agreeing with the statement.

Business disagreements put strain on family

The survey however also shows that the vast majority (69%) of the businesses feel that the attitudes and values shared by families can result in a strong culture within a business, reinforced in a constitution or family charter.

Commenting on these results, Manson says: “The survey reveals that working in the family can create stress within the family unit. These emotional influences can result in decisions that are not easily understood by an outsider. Agreeing a family ‘constitution’ often creates a framework for a more relaxed family and more successful business.”

* Consulting firm McKinsey & Company also released research into family businesses globally, highlighting that family businesses are more present and stronger than ever.

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Late payment culture cripples productivity of SMEs

29 March 2019 Consultancy.uk

UK SMEs are seeing their efforts to grow stifled by late payments, causing thousands to enter insolvency proceedings each year. According to experts from Duff & Phelps, this also has a major impact on the UK’s economy, meaning late payment culture must be tackled if the country is to dodge yet more economic stagnation in the shadow of Brexit.

Small and mid-sized enterprises in the UK face a myriad of pressures at present. Brexit anxieties are keenly felt by SMEs, with more than nine in 10 suggesting recently that economic conditions have worsened in the last 12 months. 66% of SME leaders also expect conditions to further worsen in the coming year.

At the same time, firms are keen to see value for money from investing in external expertise. Consulting fees which weight much more heavily on smaller firms, who spend £60 billion per year on professional services, but feel that more than £12 billion of that figure is wasted on unnecessary or bad advice.

Late payment culture cripples productivity of SMEs

Above all, however, SMEs are extremely vulnerable to late payments, and, according to a new study, the situation is only getting worse at present. According to corporate rescue consultancy Duff & Phelps, small businesses in the UK are facing a collective bill of £6.7 billion per annum due to late payments by other companies, while the average value of each late payment now stands at £6,142. This has risen from £2.6 billion in 2017, illustrating the plight of SMEs, particularly with uncertain economic times ahead.

Indeed, the spike in late payments has already caused significant productivity issues for SMEs, which in turn compromises their financial stability. With staff wasting hours chasing down late payments and businesses becoming preoccupied with short-term cash flow problems, they are less able to concentrate on creating new value for the firm, which in many cases gradually slides toward insolvency.

Small businesses across the UK are facing major cash flow pressure, leading to increased financial instability as a direct result of a late payments culture. This is likely a big driver of the UK’s 20% boom in insolvencies over the last three years, especially as it has a knock-on effect on other SMEs within the supply chain of those struggling firms. Approximately 50,000 small businesses fail each year because of late payments, amounting to a shortfall of more than £2.5 billion for the UK economy. 

Commenting on the findings, Paul Williams, Managing Director, Duff & Phelps, said, “In this modern era of technology, which is designed to enable business agility, late payments are particularly galling as there are no excuses. The day of the ‘cheque is in the post’ is long over!... More can be done to avoid businesses reaching this situation in the first place. SMEs underpin the economy, so prioritising timely payments will help allow business owners to focus their time and energy on providing good quality products and services and adding value to the customer experience, rather than chasing outstanding payments.”

The UK Government currently promotes its voluntary Prompt Payment Code to encourage good practice, but late payments by larger companies remain a common pain point for many SMEs. There may be hope for an end to late payments, however, following an announcement in the Spring Statement from Chancellor Philip Hammond. The Government aims to crack down on the practice, with Hammond stating big companies should hire a Non-Executive Director to be responsible for reducing late payments to small suppliers. The statement also advises that organizations publish payment practices in their annual reports.