Small business creation boomed during the recession, as uncertainties over job security prompted many to take the plunge and establish control over their futures. This attitude has continued after the end of the recession and has led to a sharp increase in the number of family run businesses in the UK – something which, according to new research, is going to contribute hugely to the country’s economy in the coming years.
In the new Barclays Business report, it was revealed that the number of first generation SMEs run by families has now reached 2.42 million – the highest level since the recession began to take its toll in 2008. As a result of this record high, family run SMEs will contribute a staggering £180 billion this year to the British economy, outperforming overall results in the manufacturing, retail and wholesale sectors.
In addition, the jobs created by these firms will make a huge impact upon unemployment. At present, they create around 5.5 million positions in the UK as a whole, but this is expected to rise to 6 million by 2018 – meaning that family run firms are on target to create more job opportunities than the public sector in the coming few years.
Director at Barclays, Rebecca McNeil, says; “We believe the end of the recession is paving the way for dynamic family firms who want to run businesses they are passionate about.”
Unfortunately, in a study of 200 next generation family members entitled Bridging the Gap: Handing over the Family Business to the Next Generation, accountancy firm PwC found that survival rates can drop as a new board of directors takes over.
Unlike in larger enterprises where leadership changes frequently, family run businesses often have the same chairman at the helm for decades and this can prevent members of the next generation joining the company from making an impact in areas which could see profit acceleration.
PwC partner Sian Steele says; “The transition from one generation to another has always been a potential fault line in the family firm, but never more so than now.
“The world has changed since the current generation took over, and the pace of change can only accelerate in response to global megatrends like demographic shifts, urbanisation, climate change and new technology.”
Going by the results of the study, a lack of ambition is not a factor holding the younger generation back, as 86 per cent have plans to do something “significant and special” when taking the reins of the family business. In addition, 80 per cent already have ideas in place to help promote growth through changing tactics or implementing new business strategies.
Ms Steele concludes; “Members of the current generation often comment that their children aren’t sufficiently entrepreneurial and aren’t prepared to put in the long hours they did to build the business; while down the hall their children are wishing their parents would embrace the possibilities of new technology, and be more receptive to new ideas.”
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