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Why there are so many family businesses in the UK?

Family business


According to the IFB, the UK has 4.8 million family businesses, which is 88% of the total in the country. They form the backbone of the economy and, back in 2016, they paid out an estimated £149 billion in tax. But why are there so many across the UK?

In the age of huge corporations, it’s important to look at why some types of enterprise are so successful. Especially as family businesses tend to outperform other similar companies in the market. When we study this model, we can learn vital lessons about business more generally.

The UK is a place that takes pride in its heritage and – as we will see – the British public have a higher opinion of family businesses. This goes a long way toward suggesting why family-owned businesses make up such a large proportion of the total in the UK.

Thinking differently

One simple answer as to why family businesses are so common in the UK is because of their performance. We often think of family businesses as small, ‘mom and pop’ operations with a handful of employees when really, they make up some of the largest companies on the planet. Andrew Nisbet, founder of family catering business Nisbets, notes one reason for their success is that: “Family businesses think, invest and innovate for the long term and are not swayed by short-term profits.” 

According to Bolton Consulting Group’s analysis, family businesses account for 30% of all companies with sales in excess of $1 billion, including Samsung, Walmart, Porsche and Tata Group. This is no different in the UK, where firms like Specsavers, Dyson and JCB can be counted among the country’s family owned enterprises.

Some of the largest employers in the UK are family-owned, so it’s clear that these bring the average up in terms of total employees and tax paid, but even smaller family enterprises tend to fare better than other independent firms.

However, we see an inflated view when looking at the amount of family businesses in the UK. There are 4.5 million businesses in the UK without any employees. This means a huge number of these ‘family’ businesses are owned and operated by just one family member, which differs from the typical view we have of these companies.

History and values

Companies that stand the test of time are few and far between. The average age of a company in the UK between 2018-2019 was just 8.5 years. If we look at the US for another example, we see that the average lifespan of a S&P 500 company has fallen from 61 years in 1958 to just 15 years today. 

History is important not only for longevity, but also because it brings stability and builds up process. A longstanding family business shows that they can adapt to changing market conditions over a prolonged period. A company that exists for long time builds brand awareness, to the point where new, independent businesses find it difficult to compete with long-standing family brands.

Another reason they are so successful is because of their values. One value that ties well to family history is heritage, something that the public British appreciates. With longevity, there is an expectation of culture. Often longstanding companies will instil things like employee wellbeing and social responsibility into their ethos. Values represent your company’s mission, which is much easier to define when you aren’t just a flash in the pan.

Trust

Consumer trust is a difficult thing to build and it takes years of work to know what your customers want. On the flip side, trust is easily destroyed, so companies should do everything in their power to keep it. Building it as a company with a face is simple. If consumers feel as though they know you and your family then they will be more likely to buy your products, especially if you give back to the community. 

This is one of the biggest competitive edges that a family business has. Consumers trust family businesses because they have reputations of competency, consistency, and integrity. That isn’t to say that other businesses are incapable of cultivating a positive reputation, but they don’t have the same advantage by default.

Family businesses are equipped with marketing firepower with which to brand themselves.  If they are self-made, it can be a powerful story that consumers admire. Often executives are afraid of the spotlight, but it can be a useful tool in building your company’s brand.

As noted, some of the most successful businesses are family-owned. In the UK, the reason so many use this model is because brand heritage is something that people value. Longevity is an important factor because it takes time to build values. Consumers are more likely to use brands they know and trust, so the family businesses which have a head start already have an edge over their competition.



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