Liz Barclay, Small Business Commissioner, Reflects on the Importance of Family Firms

I was in Northern Ireland this week at an event held about 3 miles from the family farm I grew up on. For family farm read family business. According to the Enterprise Barometer 2022 launched on 21st November by Enterprise Northern Ireland, 38% of all businesses there are family owned and run.

Oxford Economics research shows that family-owned firms make up the majority of private sector businesses in the UK. There were 5.2 million businesses that were family-owned in 2019, which was 86.2% of the total. They contributed £637 billion to UK GDP and employed more than 14.2 million people, accounting for 51.4% of the private sector workforce and almost 40% of the employees in the whole economy.

That one figure of £637 billion contribution to UK GDP highlights the vast impact of family run firms. That’s a whopping 29.3 per cent of the nation’s economic output. The tax paid on that comes to around £205 billion, amounting to 26.0 per cent of the government’s total receipts.

Family businesses are more numerous in some areas than others. Take Wales for example: family firms account for nearly two thirds of all private sector employment there, compared with 51.4% across the UK as a whole. Something I found really interesting from the research is that family firms have a higher number of women at the top, in leadership roles, than non-family firms. I’m sure there are several reasons for that but it’s a discussion for another day.

John Stevenson the MP for Carlisle and Chair of the All Party Parliamentary Group on Family Businesses, about which he is passionate, told me a couple of years ago that: “Family businesses are hugely important to our national economy but also to local areas.” While they contribute millions to the exchequer and to the employment figures, “they also provide an important extra added value to communities through their commitment and leadership which goes beyond economic value. Family businesses are a force for good and should be celebrated”

Yet Martin Stepek, CEO of the Scottish Family Business Association says: “Family business are misunderstood and sadly all too often ignored. Culturally they’re very varied and most important in societal terms is their loyalty and commitment to place and people, which matters hugely in remote or rural communities, such as vast areas of Scotland. What form of enterprise other than a family business would retain its global headquarters in places so little known that most people would struggle to place them on a map? Walkers Shortbread is in Aberlour, north of the Cairngorms National Park, whilst Baxters, the soup business, is a little further north, in Fochabers. Place matters because the owning families and their ancestors were born and raised in these, often out of the way, communities. There is a social bond, which extends to the employees, often considered extended family of the owners”.

In 2019 when the latest Oxford Economics research was carried out, we thought the global pandemic was the biggest challenge small firms, whether family owned or not, would ever face. We know now that’s not the case. As we face into recession, with costs of doing business continuing to soar and access to appropriate funding getting tighter, the obstacles loom higher than ever. Family firms often perceive competition, red tape and taxation harder to overcome than non-family run businesses. Skills shortages is at number three on their list of challenges followed by late payments. From where we sit at the Office of the Small Business Commissioner, we want all business paid quicker so that cashflow is easier to manage, bills have a better chance of being paid and small firms can compete for the skills they so desperately need to survive.

However, as the saying goes: when times get tough, the tough get going. I have every confidence that when we see the next set of research findings the family run businesses of the Scotland, Wales, England and my native Northern Ireland will be hailed for their resilience. As the UK economy resets and starts to regrow and thrive family firms will be at the forefront. Here’s to their amazing impact and contribution.

Liz Barclay, Small Business Commissioner