Why the government can’t afford to ignore family businesses

(GETTY IMAGES)

As the Conservative Party conference continues in Birmingham, the Chancellor is setting out his plans to boost the economy, and provide some answers to the financial problems businesses in the country are facing at the moment.

In his speech on Monday, George Osborne set out his plans to offer employees a stake in the firm they work for, in exchange for forfeiting some employment rights. The Chancellor argues that this will mean workers would be more closely linked with the success of the company they work for, and so be more engaged and gain a longer term perspective on the business.

The plan has sparked some controversy, but few have pointed out that there is already a highly successful, alternative business model in this country that offers this long term perspective and the engagement of employees: the family business sector.

Last week, more than 800 family businesses leaders from across the world gathered in London for the Family Business Network’s 23^rd International Summit. I want to see family business firmly on the agenda as part of the solution to the growth challenge. In the face of global economic downturn and widespread uncertainty about jobs and prospects, governments and policy makers are struggling to find the elusive elixir of growth. Yet, wherever you look, despite the challenges, family firms are continuing to thrive and grow. In many cases family firms are outperforming other businesses – a testament to their strength and resilience.

As recent research by Credit Suisse shows, in the last 12 months 60 per cent of family businesses reported revenue growth of five per cent or more. One in 10 report revenue growth in excess of 15 per cent. In contrast, over the same period revenues in European-listed businesses have fallen by one per cent. The evidence also shows that family businesses have a track record of delivering superior returns relative to the cost of capital than the broader corporate sector. In other words, patient capital pays off.

In the UK, family businesses already provide more than nine million jobs, a quarter of GDP and over £80 billion in tax receipts. But it goes beyond the balance sheet. In an age where the shock of the economic meltdown has raised questions about the culture of short-termism and a breakdown of trust in private enterprise, the values that family firms hold have much to offer in the broader business community.

Family firms are built on bedrock of strong and enduring values, a focus on quality and a vision for and commitment to the long-term. In many cases family firms are a genuine part of and contributor to local communities. Seventy two per cent of family businesses have a strategy related to environmental, social and governance issues, and family businesses have good Environment, Society and Governance scores on average. In sum, they are an example of what responsible capitalism can look like.

The UK is already a magnet for inward investment – rising last year by seven per cent to total nearly $54 billion. Cumulative inward capital investment in the UK now stands at $1.2 trillion – the second highest in the world.

Our message to the government is this; we have an opportunity to connect a successful business sector with a successful business environment – to roll out the red carpet and make Britain a dynamic global hub for family business. Family firms can be a strategic partner for government in attracting inward investment to the UK and driving exports, through our relationships with the flourishing family business sector in key markets around the world.

But we can’t do it alone. Small changes to promote family business entrepreneurship could make a significant difference to the UK economy. In recent years we have called for the government to boost enterprising family firms by removing discrimination in the tax system, cutting red tape and bureaucracy around employment legislation and working with family firms to plan for the future and secure jobs.

Some progress has been made but there is still work to do to make sure that family firms continue to flourish. Over a third of our members said they would invest more in family start-ups if current restrictions in the Enterprise Investment Scheme were lifted to allow them to compete on a level playing field with non-family run start-ups.

Ahead of his much-anticipated leader’s speech, we offered Prime Minister David Cameron an alternative approach for the economy – one that is based on long-term planning and stewardship, not short-term profit. By working with and supporting the family business sector, the government could help to secure thousands of jobs for the long-term. In the face of enormous economic challenges, surely that’s something Government can’t afford to ignore?

Ross Warburton is Chairman of the Institute for Family Business

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• Frank_Poster

  They’ve lost the plot. They know nothing about real business. Engratiating their donors and mega Corporations and allowing them to pillage is their idea of supporting business.

• pointingto

  Just a chance of brave admissions of party politics, both Conservatives and Labour do more what our country deserves. We
  should have nurtured the welfare and respect in time of need and full
  employment meeting economic challenges. Family businesses need
  incentives and training for those willing to take over the
  responsibility to strive to succeed.

• hodgeey

  Osborne should know.

  Politics is a family business, a mafia; politicians of every hue united in a common purpose to profit at the expense of the electorate.

• http://www.yahoo.co.uk/ Firozali A.Mulla

  I never understand when we have a family and we want to understand them. Solomon ans Soloman case was a family and friends we still live with this so what is the problem with this but this I have doubt on … DO we have the cash ” we have an opportunity to connect a successful business sector with a successful business environment – to roll out the red carpet and make Britain a dynamic global hub for family business. I thank you Do it then tell I thank you Firozali A.Mulla DBA

• http://www.yahoo.co.uk/ Firozali A.Mulla

  We are blaming the politicians leaders and all it is the shareholder wanting more when you think of Coke moving away from Greece I thank you Firozali A.Mulla DBA The common men are not Stiglitz

• porkfright

  They’ve been in power for two years and done blagger all for growth and the economy.