Family Businesses: Contribution to Local Communities

(Limited Text - Ministerial Extracts only)

Tuesday 20th December 2022 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

It is a pleasure to see you in the Chair, Mr Robertson. I thank my hon. Friend the Member for Carlisle (John Stevenson) for bringing forward this important and beautifully timed debate. If Christmas is about anything, it is family. Moreover, business is important in this place; it is absolutely right to have a debate on family businesses on our last day of term. I thank hon. Members for sharing their fine examples of businesses in their constituencies; we are all very proud of those businesses. It is hugely important that we support them.

There were many fantastic points made in this debate. Most of all, hon. Members stressed the importance of family businesses to their communities. Their contribution is fundamental. It is not just about employing local people; they can contribute to local charities, sponsor local football teams, or indeed sit on councils. My hon. Friend the Member for Carlisle made that important point. Easingwold is still part of my constituency, though it will not be after the boundary changes, which is quite annoying. There used to be the old Easingwold Rural District Council. Around the walls of the council chamber were black-and-white photographs of all the former council leaders. They were all local business people that I knew really well. They were important, and so proud of the town and their contribution to it. Now that our model for local authorities has changed, maybe that connection between businesses and their communities is not as strong as it was; that was a point made by my hon. Friend.

My right hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) said that local businesses’ contribution to their communities cannot be overestimated. I am very proud to be somebody who might be described as having a family business. We started our business back in 1992; I was in partnership not with a family member, but with a very good friend, John Waterhouse, but over the years, we gathered family into our business. It did not start off as a family business, but it became one. The point about the proportion of women contributing to family businesses being greater than the proportion of women in business in general is interesting; my sister took over as chief executive of our business in 2015, just before we listed it, and I have to say that she did a far better job of running it than I did. It very much became a family business.

I am very proud to have this role. I am from business and for business, and am proud to have an opportunity to play an important part shaping how we look after all businesses in future, not least family businesses. My hon. Friend the Member for Torbay (Kevin Foster) made a point about support for staff. In the pandemic crisis, lots of business people cut their wages to make sure that they did not have to cut staff from their businesses. We did the same. I always used to say to people when they were starting a business, “You work twice the hours for half the money, if you run a business. That is what you have to be prepared for. You do that for a lot of years.” The commitment cannot be overestimated.

The hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) made another point that really resonated with me, about local reputation, which is fundamental. A family business operates and does the right thing because its reputation is on the line every single day, whether that is through the service provided to the customers or the way employees are treated. Those elements are vital to local reputation and are hugely important.

Of course, the family business community is very disparate, and its representation here is really important. I also commend the Institute for Family Business—I think we have some representation in the Public Gallery today—for its work. It is so important to highlight the benefits of family businesses and their contribution. I was proud to speak at the Family Business Week event, as did the shadow Minister. It was a fantastic event. There were so many people there, and a huge range of businesses, from construction to hospitality. It highlighted that 88% of UK businesses are family businesses, which employ 14 million people; and that 50% of mid-size businesses are family businesses, which shows both their contribution and the opportunity ahead.

I want to touch on what we are doing to support all businesses through a difficult period—there is no doubt that we will go through a difficult period—and I will come to some things we can do better in the future, to improve the prospects for family businesses. Clearly, it has been a difficult time for business generally, with the EU transition, the covid pandemic and now a supply-chain crisis and an energy crisis. It is important to recognise that these are global issues that we are trying to mitigate—they are not principally domestic—but they are clearly leading to recession, due to the need to put up interest rates to try to control inflation. It is therefore absolutely right that the Government should step in to try to mitigate some of the pressures, with measures such as the energy bill relief scheme, which is hugely important for businesses and is saving them a significant amount of money. That is a very expensive package; about £25 billion of taxpayers’ money is going into the scheme to try to mitigate the effects of the extra cost of energy for businesses.

The EBRS 2—the extension to that scheme—will be announced shortly. We are keen to make sure that we get all these good, viable businesses through this tricky time, until energy prices become more moderate. The one positive thing I can say about the difficult time ahead is that our business went through three recessions, and we came out stronger on the other side each time. Good businesses get through it and come out stronger, and the best years come after difficult years. Hopefully there is some optimism for the future, as well as a recognition of the challenges we face.

The Government announced a cut to fuel duty, and employment allowance has increased, reducing national insurance by up to £5,000 for small and medium-sized enterprises. There is also the £13.6 billion of business rate relief for businesses. I do not want to argue with the shadow Minister, as it is nearly Christmas, but I keep hearing that the Opposition are going to scrap or reform business rates—I am not sure which it is. To talk about getting rid of £22 billion without talking about what they will replace it with is not right and will create more uncertainty for businesses. It would be better to set out exactly how that money will be replaced. Perhaps we can deal with that issue in the new term next year.

The Government obviously reversed the decision to increase national insurance, which was helpful for most businesses and saved them about £4,200 a year. Importantly, at the Budget we announced the incentives to invest—the annual investment allowance. That is £1 million annually of full expensing against a business’s profitability. That is an important investment concession, and the Government are absolutely right to give that long-term certainty to businesses. That is an important new step, and that £1 million is permanent. That gives businesses the confidence that they can invest, knowing that it will be tax efficient.

My hon. Friend the Member for Carlisle and the shadow Minister talked about succession—passing on businesses to the next generation. Business property relief is a really important part of that. Not everybody understands exactly what it does, but it is an important tax concession that means that families can pass on their business to the next generation without paying inheritance tax. That hugely important tax incentive keeps family businesses together, and it is being done for exactly the right reasons.

The Government have exempted more businesses from regulations. Various business regulations have increased from a threshold of 50 or 250 employees to 500, which should lower regulations on many family businesses. We are trying to help family businesses, as well as many other businesses, transition to net zero. We have zero-rated energy on energy-saving products, which is really important. The Help to Grow: Management scheme improves management skills for SMEs. The Government are subsidising 90% of the cost of that scheme, which is hugely important in improving our management skills. Of course, the £4.8 billion levelling up fund and the £2.6 billion shared prosperity fund try to improve the communities that family businesses make such a huge contribution towards.

To improve the prospects of family businesses, and all small and medium-sized businesses, the most import thing that we can do is support them by spending our hard-earned money there and use them rather than their larger competitors. Like others, I was delighted to attend small business Saturday. From early morning to late evening, I visited fantastic small businesses across my constituency. I just want to name-check Taylor’s of Pickering. Pickering is a small town in a beautiful part of North Yorkshire, and Les and Joan Taylor started the business in 1969. It is a greengrocer and fishmonger, and it is in its third generation now. Peter Taylor, who now runs it, gets up at 2 o’clock every morning to deliver his groceries—he is a wholesaler too—and smoke his fish. It is a fantastic business. Those kinds of business are the backbone of our communities. As the hon. Member for Strangford (Jim Shannon) said, we are a nation of shopkeepers, and it is important that we go and shop in those businesses. I know that he does that on his high streets in Strangford.

We are doing a lot on finance, which a number of Members talked about. The hon. Member for Caithness, Sutherland and Easter Ross and my right hon. Friend the Member for Aldridge-Brownhills talked about the demise of the local bank manager. In my community, Ron Taylor was our local bank manager and a very well-known figure. I think that has disappeared.

We are doing things to improve access to finance for SMEs and family businesses. The British Business Bank has given £12.2 billion through various different mechanisms to 96,000 businesses, and when it comes to new family businesses, over £1 billion is now being lent in start-up loans to about 100,000 businesses. However, there is an argument that we need to once again put in place patient capital for intergenerational businesses—some other countries do that better than we do. Certainly, in lots of the G7 nations, particularly Germany, regional mutual banks provide long-term finance for family businesses; that, I think, is why we see many more big intergenerational businesses in places such as Germany. That is something we need to look at and learn from, and in my role I am keen to explore the potential of that.

The UK has a very good story to tell in terms of business. We are first in the OECD for the numbers of start-ups per capita, but we are 13th in terms of scale-up, so we do not get as many businesses growing quickly in those early years. Again, that is something I very much want to focus on in my role. It is a huge opportunity, because we know that if we can solve that particular equation—that first and 13th equation—we can solve the productivity puzzle.

We are looking at many other things, including through our review of payment and cash flow, which is another source of finance. We are very keen to scrutinise current practices and develop best practice in that area, to make sure we have good advice and mentoring services. There are 38 growth hubs around the country. We are keen to improve people’s growth hubs, and to hear stories from hon. Members across the House about the quality of their local growth hubs, to make sure that they are as good as they can be. We invest heavily in them. They are there to provide advice on access to finance and mentoring, and we want to make sure that they are delivering good outcomes for our local SMEs. We also want to improve procurement by bringing more SMEs and family businesses into public sector procurement. The Procurement Bill is going through Parliament at the moment, but there are lots of other lessons we can learn.

I will conclude now, to give my hon. Friend the Member for Carlisle a couple of minutes in which to sum up. As I say, it is a great privilege for me to be able to speak in this debate. All hon. Members across the House come to this place to make a difference, and this debate has been a great opportunity for me to be able to give something back to my community—the business community that has been transformational for my life. Thank you for that opportunity, Mr Robertson, and I conclude by wishing all hon. Members a very merry Christmas and a happy new year.