The new IFB Research Foundation’s ‘The State of the Nation: The UK Family Business Sector’ report, found there were 4.8 million family businesses in the UK, which employed 13.9 million people and contributed £575 billion to UK GDP in 2020–21.
This means that family firms comprised 85.9 per cent of all UK firms, directly generated 44.4 per cent of GDP, and were responsible for 51 per cent of all private sector employment in the UK economy in 2020–21.
The report revealed that people who own and run family SMEs were optimistic coming out of the pandemic, with plans to grow their turnover, many by increasing the skills of their workforce or recruiting new staff.
It also revealed that Brexit is likely to contribute to the rising cost of imported products. Alongside rising energy costs, which have become particularly important in the second half of 2022, these new obstacles added to the competitive landscape for family businesses.
Supporting the professional development of the workforce and retention in family firms remained a priority and like their non-family counterparts, they had to take difficult measures in response to the challenges posed by the COVID-19 pandemic.
However, staff retention was better than for the rest of the private sector — just 32 per cent of family SMEs with employees reduced their paid staff headcounts in 2020–21, compared with the higher figure of 38.8 per cent of non-family firms.
Additionally, these businesses typically have a higher proportion of women leading them than non-family SMEs — 17.7 per cent of family SMEs were women-led in 2020–21, compared with 13 per cent for non-family SMEs, while 6.5 per cent of family SMEs were minority ethnic-led, compared with 5.3 per cent of non-family SMEs.
The State of the Nation report showed that family businesses across the UK want to grow, but are still recovering from the COVID-19 pandemic and now face additional economic challenges.
The report highlighted the important role that family businesses play in the economy and looked at the impact of the pandemic on those businesses and their plans for the future.
Sir Michael Bibby, chair of the IFB Research Foundation, said this latest report from Oxford Economics and the IFB Research Foundation shed further light on the economic impact of the UK’s family business sector and how family firms fared during the COVID-19 pandemic.
“During 2020–21, family businesses continued to be prominent in all sectors and all regions of the UK economy,” he said.
“While most family firms were optimistic about future growth coming out of the pandemic, there are new challenges facing them since this research was carried out, including high inflation and soaring energy costs. What this report shows us though is how many family businesses remained resilient during the COVID-19 crisis and how they were preparing for future challenges.”
Neil Davy, chief executive of the IFB, said despite this moment of celebration, there are significant obstacles to family firms achieving future success.
“A fair tax system and business-friendly policies will enable the family business sector to realise their growth potential,” he said.
“Family businesses are looking to the Government to provide stability for business investment. This is vitally important as another difficult winter for businesses starts to take its toll.”
