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Beyond the balance sheet

Dispelling the 4 common myths about family businesses

Paul Andews 10/2/2014 5 minute read

Paul Andrews looks at some of the myths that undermine family businesses.

I've come across a lot of assumptions and common myths about family businesses over the years. Most are just plain inaccurate. With that in mind I thought I'd put together a post challenging these preconceptions, and uncovering the real truth behind this dynamic, engaging and profitable sector.

Myth 1 - Family businesses are small businesses

There are many small family businesses across the UK and their contribution to the economy is immense. However, not all family businesses are small and in recent years there has been growing recognition of the sector and the benefits they bring to Britain. Take the likes of Wates, one of the largest UK building and construction companies, not to mention David Nieper, Weston’s Cider, Baxters, Walkers Shortbread, Shepherd Neame and Samworth Brothers, all of whom are large businesses and clearly disprove the size assumption.

 

Myth 2 – Family businesses are not household names

Quite the contrary! Family firms are household names, although many will not have been appreciated for their family heritage and connections. Examples include SC Johnson, Ford, Walmart, Samsung and IKEA. In the UK there are some great family firms such as The Goring Hotel, Macsween of Edinburgh, Kinloch Anderson, Clarks, William Jackson Food Group, Taylors of Harrogate, Fortnum & Mason, The Morgan Motor Company, William Grant and Drayton Manor Theme Park. In many cases, it is not until their names are listed that people realise they are actually family businesses.

 

Myth 3 – Family businesses are not survivors

Whilst statistics may show that only a small proportion of family firms successfully pass to the third generation, there are great examples of family firms that date back as far as 1420. These firms represent great British family business successes.

Whitechapel Bell Foundry is the oldest family firm in the UK dating back to 1420 but others help to dispel the myth including RJ Balson, the oldest butcher (1515), R Durtnell & Sons Limited, the oldest builders (1591) and James Lock & Co, the oldest hat maker (1676). Others include C Hoare & Co, the oldest bankers (1672) and CPJ Field and Co, the oldest funeral directors (1690). Clearly, these family firms are survivors!

 

Myth 4 – Family businesses are not significant employers

This is simply not the case when the likes of The Swire Group, JCB, NG Bailey, Warburtons, Wates and Shepherd Neame are taken into account. Individually these family firms are significant local, regional and national employers and collectively family firms in the UK make up a significant workforce.

Family firms exist the length and breadth of the UK as the following shows, with the most in the South East but it is in Northern Ireland and the East Midlands where the concentration in terms of private sector firms is highest overall: 

 

1. South East - 498,874 family businesses (68.10 per cent)

2. London - 465,665 family businesses (65.90 per cent)

3. North West - 301,603 family businesses (69.50 per cent)

4. East of England - 297,965 family businesses (62.90 per cent)

5. South West - 249,804 family businesses (59.30 per cent) 

6. East Midlands - 237,608 family businesses (77.70 per cent)

7. Yorkshire & Humber - 213,251 family businesses (63.50 per cent) 

8. West Midlands - 204,098 family businesses (58.00 per cent)

9. Scotland - 178,573 family businesses (62.00 per cent)

10. Wales - 131,188 family businesses (68.40 per cent)

11. Northern Ireland - 94,146 family businesses (77.80 per cent)

12. North East - 86,573 family businesses (70.90 per cent)

 

In fact, Family Businesses are the backbone of the UK economy and the bedrock of our communities:

  • There are 3m family firms in Britain
  • Family businesses employ over 9m people 
  • Family firms contribute almost a quarter of total UK GDP
  • Family businesses provide over £81bn in tax to the UK Exchequer annually 
  • 50 per cent of the Scottish private sector workforce is employed in family firms
  • 73 per cent of Scottish businesses describe themselves as family businesses

In reality, many families control and manage significant entrepreneurial businesses within the UK, and already have plans and governance structures in place to continue to be successful for many generations to come. There are hundreds of family firms that dispel the myths that they cannot span the generations successfully and these organisations will continue to contribute not just to the UK economy but also compete at a global level.

Whilst it is true that not all family businesses are global organisations, many lead their sectors and continue to pioneer new frameworks to help them continue successfully. The sector deserves respect and recognition for all that it has achieved and continues to achieve day-in, day-out. Family firms really are the backbone of the UK economy and help put the "great" in Great Britain.

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The content of this post is up to date and relevant as at 10/02/2014.

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