What challenges are family businesses facing today?
The UK is going through a period of uncertainty. The economy is struggling to recover from the Covid-19 pandemic, we’ve had months of political uncertainty and the rise in the price of necessities such as energy and food have caused…
Blog13th Dec 2022
The UK is going through a period of uncertainty. The economy is struggling to recover from the Covid-19 pandemic, we’ve had months of political uncertainty and the rise in the price of necessities such as energy and food have caused inflation to rise to a 40-year high of 11.052%. As a result, businesses are under mounting pressure like never before.
Accounting for more than 88% of private companies in Britain, family businesses are known for their resilience as well as an innovative and visionary approach. A recent survey by Family Business United showed that of those surveyed, for 76% of them the economic climate was the top challenge. Proving that much like the rest of the UK the rising cost of living is a concern for a sector our economy relies on greatly.
Family businesses are a British success story, recognised worldwide for forward-thinking and risk taking. They are the backbone of the UK economy providing jobs for around 14 million people and contributing to local communities and high streets. Despite this the family business sector has been struggling with the fallout from Brexit. The full economic impact of Brexit cannot be measured however, the recent survey by Family Business United showed that Brexit is having an effect on family businesses. Of those surveyed the rising cost of labour and raw materials was a concern for 60% and supply chain Issues were a concern for 48%. This fallout from Brexit coupled with the rising inflation and interest family businesses have been battling for the last 6 months has had a damaging effect on businesses ability to invest in their future. This poses a threat to the future of the business.
The new Chancellor, Jeremy Hunt recently gave the Autumn Statement which provided a degree of certainty for businesses. Prior to the statement it was speculated that there would be what was described as a raid on business that has thankfully not gone ahead. There are positives to be taken from the statement such as The Office for Budget Responsibility forecasting the economy growing 4.2% this year and income tax thresholds and inheritance tax thresholds remaining frozen until 2028. However, businesses are still facing challenges around business rates and there will be an increase in the corporation tax rate from April 2023. The reduction of the Dividend Allowance will prove troublesome for small business owners who received limited support throughout the pandemic and face an uncertain and difficult winter.
Family businesses have always shown that they are resilient and can weather a storm. However, even with the certainty given by the Autumn Statement there will be concerns about the profitability and sustainability of these businesses. There will be loans that need paid, deferred rates and tax bills alongside the rising cost of living. In previous years, the challenges for these businesses centred around succession, future proofing for the next generation and governance. The Family Business United Survey has shown that priorities have now shifted, these are still challenges but they may not be at the forefront for businesses.
Being proactive and thinking one step ahead will always be the best way to achieve business goals. Running a business right now is challenging however, armed with innovation and resilience family businesses will be able to adapt and make necessary changes to improve profitability and ensure their survival.
If you would like to know more about how we can support and advise family businesses with successions and other matters, contact Paula Fraser, or any of our Family Business team.