Family businesses being held back – Haines Watts

MANY family businesses are being held back from developing further as they contend with succession issues and shareholder disputes – with a knock on effect of restraining UK economic growth.

That’s the view of Chris Waterfield, tax manager at the Birmingham office of chartered accountants Haines Watts.

With family businesses accounting for two thirds of firms in the UK private sector – and with more than 200,000 in the West Midlands region alone – the potential for family businesses to play a significant role in the UK’s economic resurgence is considerable, Waterfield says.

He said that succession and shareholder issues are a major cause of distraction from the effective day to day running of many businesses.

“It’s easy to forget the significance of UK family businesses. They provide close on ten million jobs and 40% of total private sector employment,” Waterfield said.

“As a report from the Institute of Family Business stated, the private sector jobs they create is some 50% more than the entire UK public sector – and makes family firms the largest source of employment in the private sector.

“They also contribute significantly in tax receipts and government revenue.

“But they do face issues – of which the greatest relates to succession. Over the next five years, on average, the Institute reckons 172,000 family businesses a year will leave the control of a generation – and that means they are in huge need of support.”

Because the family business is often regarded as ‘one of the family’, succession issues normally play on the minds of owners for much longer than in a non-family owned business.

Waterfield said: “It is one of the most difficult decisions for an owner to make: should they stay or should they go – and when should they go?”

Waterfield said that sales of family businesses to non-family members are increasing in part due to family members pursuing their own careers elsewhere.

“It used to be that succession past from father to son and so on – but that is no longer the case,” he said.

“Often they are sold to competitors or businesses in associated sectors and an increasing number of those are overseas. That in itself poses potential additional issues especially in share buy-out situations.”