Family businesses are not well prepared for succession despite plans to change hands within the next five years, reveals a survey by PricewaterhouseCoopers released on 5 June.
Kin in the game, a survey of 1600 family businesses around the world, showed that over half of the respondents don’t have a succession plan in place, although 30% of the families expect to transfer control over the next five years.
Grant Gordon, director general of the London-based Institute for Family Business, told CampdenFB: “Succession planning is arguably the biggest challenge that family firms face and a failure to plan for generational transition is one of the main reasons that family businesses fail in the UK.”
The survey also revealed that firms are not prepared for unexpected events such as illness or death among family members – over 60% of family businesses have no provisions in place to deal with unforeseen circumstances.
With succession planning a key factor for the growth of family businesses, lack of awareness about inheritance and capital gains tax – both of which have a strong bearing on succession – is also a concern. The survey showed that UK family businesses are relatively ignorant about taxation issues compared with some of their European counterparts – 91% of Spanish firms and almost 75% of German businesses are aware of tax implications for their family-run companies.
Gordon said: “Inheritance tax and capital gains tax are complex areas of taxation, but the overwhelming majority of owners have good awareness of the implications of these taxes.”
With family businesses regarded as the backbone of many countries, there is also some positive news – half the respondents have witnessed a growth in demand over the last 12 months, while many have expansion plans for the year ahead. But family businesses are still concerned about market conditions – 68% said it as their top concern, up from 44% during PwC’s 2007 survey.
London-based PwC is one of the largest professional and accountancy services firm in the world. The survey interviewed family business executives from 35 countries.