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Large UK family businesses register big jump in tax take

Large family businesses significantly increased their contribution to the UK economy in 2016 generating 21% more in taxes in 2016 than the previous year, new research says.

Large family businesses significantly increased their contribution to the UK economy in 2016 generating 21% more in taxes in 2016 than the previous year, new research says.

Large family enterprises, classified as those with more than 250 employees, paid almost £33 billion ($46 billion) in taxes, a significant proportion of the £149 billion contributed by all family businesses to the UK exchequer—more than the annual UK’s National Health Service budget.

This hike in tax revenue comes despite a wider lag in labour productivity (gross value added per employee) that saw family businesses continue to trail behind the overall private sector.

The UK Family Business Sector Report 2017-18 looked at a wide range of economic contributions the country’s 4.8 million family businesses make to the UK economy.

It revealed that family businesses’ gross value added contribution to UK gross domestic product (GDP) has increased by £100 billion since 2010—to £519 billion.

The vast majority (97%) of businesses in the study, produced by Oxford Economics for the Institute for Family Business (IFB) Research Foundation, are classified as microbusinesses with less than 10 employees.

There are only 785 large family businesses in the UK, according to the study, however they employ more than 1.1 million staff making up almost 10% of the total family business workforce.

The study restated the ongoing obstacles family-run SMEs faced accessing finance. They were less likely to have applied for finance in 2016 than their non-family counterparts, and slightly more likely to have had an application rejected.

This finding echoes Campden Wealth research into funding of European and North American ultra-wealthy family businesses. Family Business: Financing for Growth 2017 found family firms will increasingly turn to financing from private investors and private equity as traditional funding from banks and family members is expected to dry up.

Family-run SMEs also identified competition in the market and regulations to be the biggest obstacles to business success, with 48% and 44% considering these to be major obstacles, respectively.

These obstacles have not, however, inhibited wider contributions to the UK economy. A million new family businesses have been created in the past two years with family enterprises now generating a quarter of UK GDP.

The study estimated that family firms now turn over £1.4 trillion annually, up 7.2% since 2010—with family business turnover having grown by more than that of non-family businesses since 2010.

Family businesses in their first generation make up the bulk of the UK’s firms, with 21% (or one million) being in the second generation or greater. This proportion of second-generation owners increased to 82% among large family businesses. 

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