Executive Summary – The UK Family Business
Family businesses account for two-thirds of firms in the UK private sector…
There are 3 million family businesses in the UK, or two in three of all private sector firms, and they are made up predominantly of Small and Medium-sized Enterprises (SME).
…helping to generate a significant economic impact
- UK family businesses provided 9.2 million jobs, 40% of total private sector employment, or two in five private sector jobs. To place this in context, this is around 50% more than the entire UK public sector and makes family firms the largest source of employment in the private sector.
- Family firms generated revenues of £1.1 trillion in 2010, or 35% of private sector turnover. On these revenues, family firms made a £346 billion value-added contribution to UK GDP, or nearly a quarter of the total.
- Family businesses are estimated to have contributed £81.7 billion in tax receipts to the UK Exchequer, or 14% of total government revenues in 2010.
Family firms are concentrated most strongly in particular sectors…
The highest sector concentrations are in agriculture and extraction (89%), hotels and restaurants (85%), and in wholesale and retail (77%). The sectors with the highest absolute number of firms are business services (including real estate) and construction.
…and make up at least half of all firms in each UK region
The South East (499,000) and London (466,000) have the highest number of family businesses. The East Midlands and Northern Ireland have the highest concentration of family firms (78%), while the West Midlands has the lowest (58%).
During the recession demand for credit rose, but family firms were more successful in obtaining external finance…
- According to survey data, the proportion of SME family businesses that applied for finance over the previous year rose from 18% in 2008 to 30% in 2010.
- Survey data show that 76% of family firms that applied for external finance in 2010 were successful compared to 68% of non-family firms.
…and family businesses appeared less vulnerable to corporate dissolutions
Insolvency rates rose in family firms, but they are lower for family firms across all size bands than for their non- family counterparts, possibly a reflection of stronger balance-sheet fundamentals prior to the recession.
2 Institute for Family Business
Policy summary for the family business sector
- Family firms, particularly smaller ones, need to have access to credit. Government supported policies on lending to SMEs are therefore important.
- We estimate that over the next five years, on average, 172,000 family businesses a year will leave the control of a generation. Given the scale of this movement there is a potential role for government in terms of providing support and advice.
- Taxation policy should enable owners planning for succession to have the ability to transfer ownership, without imposing an adverse financial impact on the company. Business Property Relief on Inheritance Tax is a highly significant policy on business transfer.
- Family businesses are recognised for their role in driving entrepreneurship. The promotion of a culture where the pursuit of enterprise is embedded in our business DNA should be a national priority.
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