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Family businesses aid economic stability during credit crunch

The credit crisis highlights the importance of long-term economic development in which family businesses play a vital role. This is the view of Michael O'Sullivan, head of UK research for Credit Suisse's private banking business, which has released research looking at the life cycle of family-owned businesses.

"Ultimately, one of the reasons for the relative stability of larger economies in continental Europe is the significant presence of family businesses which, at least on a stylised basis, tend to be less leveraged and generally have a longer-term focus on investment and innovation," said O'Sullivan.

When it comes to family businesses, the focus in the UK has predominantly been on listed companies. However, O'Sullivan believes that policy makers could do well by taking the lead from privately held family businesses when it comes to enterprise strategy and regional development initiatives.

One of the reasons why UK family businesses may lag behind the sharp improvement seen elsewhere in business survivorship rates is precisely because they take a more long-term and less aggressive view of business development.

The research also highlighted the key constraints to their development – in particular, the tension many face between "family first" and "business first" goals. In addition, succession planning was problematic with 42% of entrepreneurs have no fixed succession planning for when they retire and only 27% planning to keep the business in the family on retirement.

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