A skills famine, a volatile economy and Brexit are amongst the main concerns of UK family businesses as they look to their future, according to the latest PwC global Family Business Survey.
PwC’s bi-annual survey of close to 3,000 family-owned and owner-managed companies in 53 countries reveals a sector that enjoyed robust growth in the last financial year and remains confident of even faster growth over the next 24 months.
And, despite more than half (52%) of UK family firms concerned as to the impact of Brexit - up from a mere 11% in 2016 - 83% still expect to grow over the next two years, with close to one-in-five (18%) expecting their growth to be quick and aggressive.
Brexit is not the only challenge for UK family businesses, with the other top potential constraints to growth being recruiting the right skills (60%), the economic environment (56%) and the need to innovate (66%). Access to finance was less of an issue - seen as a challenge by a quarter of respondents - while only 22% saw the rise of artificial intelligence (AI) and robotics as potential concerns.
Research from the Ulster University Business School suggests that, UK-wide, family firms contribute around £519 billion to the economy - equal to 25 per cent of GDP. And of the top-100 Northern Ireland companies, 71 are family-owned, further emphasising the importance of the sector.
PwC interviewed 130 UK family business members from directors through to outright owners, with the highest priority for UK family businesses being the need to attract and retain the best talent and improve profitability in order to help deliver future business goals.
Commenting on the survey outcomes, PwC Northern Ireland partner Martin Cowie, said that recruiting people was top of the list of challenges for UK family firms:
“Across the UK there is a war for talent. And, while family businesses may not always be able to match salaries or offer share incentive schemes, they can often offer a more secure and rewarding working environment where employees feel they are part of an extended family.
“Family-owned and owner-managed businesses are at the heart of Northern Ireland’s economy and key to future prosperity. So, it’s crucial that local family businesses map the skills they need to grow their business in challenging times, build new markets and plan to prosper internationally in a post-Brexit world.
“The aspirations of their competitors, both elsewhere and globally, reflect the challenges of global markets. Our survey points to family firms focused on innovation, on building digital capacity, recruiting experienced management from outside the family and developing new export markets.
“In a 21st century, post-Brexit world, doing things the way they were done by the family a generation ago is no longer a viable business model. Family businesses have a great people track record: a loyal workforce, great local reputation and good links into their communities. They need to think carefully how they can use it to their advantage.”
When it comes to family members’ involvement in UK family businesses, 79% allow spouses and partners to work in the family firm and nearly six-in-ten (59%) say that next-generation family members are already working there. But while spouses, partners and next-generation workers are welcome, the UK’s family business sector remains largely a male preserve. Only 17% of women sit on the boards of UK family firms, just over a quarter of the average management team (26%) is female, while only 19% of the next-generation working in the business is female.
Family businesses are recognising the importance of embracing technology with more than half (53%) believing their business will grow its digital capabilities over the next two years. However, the number of businesses which feel vulnerable to digital disruption has almost doubled to 42% from 23% two years ago. More than half - 54% - acknowledge that they are vulnerable to a cyber-attack.
Looking to the future, 53% of respondents plan to pass leadership on to the next generation of their family, however only 18% have a formal and communicated plan in place, while close to a third (29%) have not involved the next generation in these plans. And, potentially reflecting on the challenges they acknowledge the small firms’ sector faces, almost half of UK family businesses (49%) say they will look to recruit professional management expertise from outside of the family.
Martin Cowie concluded:
“The next generation is key to a family business’ lasting legacy and not involving them in plans to pass on the business risks future disengagement, disappointment and dispute.
“It’s crucial to have a written and documented plan for the continuity of the business to improve transparency and trust. In Northern Ireland family firms, the next generation needs to build their experience, develop a collective sense of purpose and be supported in developing their own framework for success.
“Our conversations with family businesses show that often they recognise the need to start the process, but those conversations can be difficult. Timing is crucial and so is communication to everyone in the business, from family owners to external managers and the workforce.”