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Family businesses' contribution to UK economy emphasised in new research

By Harriet Mallinson

A UK family business association has released figures detailing how the sector supports the country's economy, revealing that family-owned enterprises pay £102 billion (€129 billion) in tax annually and provide 9.4 million jobs.

The UK's thriving family business sector is home to three million family enterprises and generates a quarter of GDP, the Institute for Family Business (IFB) said in its new research.

Significant UK family businesses include shoe retailer Clarks, cheap fashion chain Primark, and baked goods company Warburton's.

The news comes as the Office for National Statistics revealed today that in the August to October period the number of people out of work decreased by 63,000 to 1.96 million.

Oxford Economics carried out the research for the IFB to emphasise the importance of family businesses in the UK ahead of the election next year in an attempt to encourage the government to make changes to help boost growth in the sector.

The research, released today, reveals that an extra 30,000 family businesses have been created since 2010, increasing employment by family-run firms by half a million. This brings total family business employment up to 9.4 million – 39% of private sector employment.

The growth and success of the family business sector means that it now makes up a quarter of UK GDP, with gross value added (GVA) having increased by £3 billion to £360 billion since 2010.

It emerged that more than one in 10 large companies and nearly half of all medium-sized businesses are family owned.

The research found that UK family firms now turnover an estimated £1.1 trillion annually, 32% of total private sector turnover. Moreover, they make up over three fifths of all private sector firms and generate £102 billion of government revenues.

IFB director general Mark Hastings said: “Family business is the backbone of our economy. This new research reveals just how vital family business is for the UK economy and the scale of the contribution it makes to employment and government revenues.”

“Family firms are totally committed to the long term sustainable growth of their businesses – passing something better on to the next generation… I hope to see policy makers more openly recognising the strategic importance of the family business sector in rebalancing our economy. Family business plays a central role in skills training, promoting entrepreneurship, and investing for long term growth.”

The policy recommendations that IFB have put forward to the government include: alternatives to bank lending for business financing; the introduction of a private placement market, a bond market for small and medium enterprises and liberalising lending from the insurance market; and to liberalise the Enterprise Investment Scheme rules to allow family businesses to invest in new family start-ups. Such alternatives would boost business financing and be better aligned with the longer term investment horizons of family firms.

Furthermore they recommend a change in ruling to allow families to invest in enterprises by other family members in order to foster entrepreneurship and enhance innovation in the sector.

The IFB is chiefly made up of large and medium sized family firms and aims to promote UK family businesses.