Chris Kelly is Member of Parliament for Dudley South and founder chairman of the All-Party Parliamentary Group for Family Business.
When you hear the words 'family business', what comes to mind? Is it your local restaurant that's been run by the same family for 60 years? Or perhaps the local corner store, with three generations helping behind the counter?
What about Samsung, BMW, Ikea, L'Oreal, or Zara? The reality is that some of the largest and most successful companies in the world are family businesses. In the UK, family firms like Associated British Foods, Berghaus, Dyson, Swire, Warburtons, Wates and Virgin are some of our most vibrant and successful brand owning and market leading companies.
The fact is, family businesses represent a serious and vital part of our economy. 9 million jobs — two out of every five jobs in the private sector — are provided by family businesses, and family firms generate a staggering £1.1 trillion annually in the UK. Family businesses contribute an estimated £81.7 billion in tax receipts to the UK Exchequer, which amounted to 14% of total Government revenues in 2010.
And it's not just the massive scale of the family business sector that makes it vital to this country's economy — it's the way that the businesses are run. Family firms offer the economy a commitment to strong values, the benefit of a long-term perspective, and a desire to create successful businesses that are passed down through generations. This contrasts to the concerns about the short-termism that frequently seems to characterise other business models, as highlighted by the recent Kay Review which accused the City of being 'obsessed' with making short-term profits, at a huge cost to the economy.
In my own constituency in the industrial heart of the country in the Black Country in the West Midlands, family firms account for 58% of private businesses. They really are the backbone of the local economy. Indeed, in spite of some of the toughest trading conditions in our lifetimes, the family business sector has increased its revenues by 6% since 2007 — a testament to its resilience when confronted with economic head winds.
Part of the reason for this achievement in the face of such tough economic conditions is precisely what sets family firms apart from the rest of the economy. I know from my own experience* that family businesses are characterised by stewardship and long-term planning — 'patient capital' focusing on investment in employees' skills and training as well as in R&D, plant and equipment — in order to hand down a sustainable and successful business to the next generation, not just impress the shareholders at the next quarterly meeting. Staff retention and turnover rates in family businesses are also amongst the best of all business models, demonstrating that employees value the long-term approach and investment decisions family businesses typically adopt.
There are countless examples of family firms who are bucking overall economic trends and actually investing during the recession. Anthony Woodhouse, Managing Director of brewer Hall & Woodhouse and the seventh generation to work in the business, likes to say that the brand new brewery they have just built is part of the firm's 300 year plan. Employment agency Reed, which is in its second generation of ownership, is currently undergoing major global expansion.
With turmoil in the markets, and few encouraging signs of progress in resolving the €uro area crisis, there has never been a more important time to focus on good, sustainable and successful business structures, with an emphasis on long-term growth rather than short-term profit taking.
At a time when the causes of and continuing fallout from the global economic crisis has led to debate in many quarters about the nature of capitalism and the role of private enterprise, the family business model and our three million family firms are something we should be highlighting and applauding as they continue to prove that long-term stewardship is a powerful and successful force in our economy.
* I have been involved in my family business, Keltruck Limited, all of my adult life (I refer readers to the Register of Members' Financial Interests) and even as a schoolboy and student during holidays.
All Parliamentarians are invited to join family business directors at the second annual reception of the Family Business APPG — which will be addressed by the Rt. Hon. Lord Heseltine CH at 19:00 for 19:30 on Monday 26 November 2012 on the Terrace Pavilion, House of Commons — and join our visit to Fullers brewery, Chiswick, London on the morning of Tuesday 27 November 2012, departing from outside Parliament. Parliamentarians may signal their interest in membership of the APPG and/or RSVP for either event to firstname.lastname@example.org (or turn-up on the night for the reception).