The future of UK family businesses


UK family firms need to upgrade the processes, governance and skills within their business, and their own families, to stay ahead of hungry new competitors and remain relevant in a rapidly changing business environment, says a new report published by PwC. The report, The Family Factor: Professionalising the UK Family Firm, finds that only 13% of UK family businesses have a succession plan that has been discussed and documented, and only 16% of their turnover is from foreign markets, compared to 25% of family business turnover globally. A mere 8% of UK family firms say they aim to expand aggressively in the next five years, compared to numbers as high as 57% in China, 40% in the Middle East and 40% in India. Worryingly, while 64% of family businesses globally cite innovation as a key challenge over the next five years, only half of UK family firms agree.

Sian Steele, partner, PwC said:

“There’s worrying evidence that, as they age, growth and innovation become a lower priority for family businesses. Third, fourth or later generations place more emphasis on ensuring that the business remains in the family. In today’s environment though, no business can afford to stand still.”

There are signs that the focus of family businesses is turning inwards as they consider what needs to change. In 2012, 64% of UK firms questioned said they had a strong sense of responsibility to support community initiatives, but that number has fallen to 45% this year. Likewise, as the economic environment has improved, there has been a fall in family business leaders’ feeling that they need to retain staff and support jobs.

Sian Steele, partner, PwC, said:

“After weathering the economic storms of the last few years, family businesses are coming out of survival mode and are beginning to look at what they need to change in what’s undoubtedly a harsher business environment.”

Some 43% of UK family businesses want to pass the business on to the next generation wholesale, while 22% (a significantly lower proportion than the globally) say they want to pass on ownership, but also bring in professional management.

Bringing in top talent is a challenge for family businesses, as candidates may not see a sustainable career progression within a family business. Equally, there is little point in hiring the right people unless you have the processes and systems that enable them to do their jobs. UK family businesses firmly identify recruiting the right people as the key challenge over the next 12 months.

Sian Steele, partner, PwC, said:

“Often because of the family structure, family businesses can find it difficult to face up to make hard commercial choices and decisions. Making a capital commitment to foreign expansion or selling parts of the original business are emotional and divisive issues. They often get postponed.

“Many businesses today need to survive on thinner margins, identify and address potential threats early, and innovate and adapt faster. It’s tough for any business, but can be an even greater challenge for some families.”

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