Family Businesses: Contribution to Local Communities

Kevin Foster Excerpts

Tuesday 20th December 2022 Westminster Hall

[John Stevenson]

My right hon. Friend is getting ahead of me. She is absolutely right, and I will come to the contribution that such businesses make to local communities. There are, of course, similar factors for family businesses at the national and local level: the high employment levels in family businesses, the investment that we want to see, and the tax contribution that they make both locally and nationally, which I have already highlighted. I have set out what I think is a powerful demonstration of the importance of family businesses; however, some people would ask what the difference is between a family business and other corporations. Are they not in many respects just the same? I accept and recognise that they face many similar issues.

At present, energy costs are obviously affecting many businesses, both those that are family run and those that have other structures. It is a serious issue right now. On taxation rates, what corporation tax is set at matters to both family businesses and others, although dividend tax and capital gains tax can have a particular influence on family businesses, because of the way they structure themselves and the way the families take profits out of the business. Skills matter to any corporation, as does getting the right staff and ensuring that the right training is in place. That also matters to a family business, which needs to recruit in exactly the same way as any other. Regulation affects different sectors in different ways. I have already highlighted the importance of the food and drink sector, on which regulation clearly has a huge impact.

There are, however, a number of issues that in my view are unique to family businesses. The obvious one is succession. Passing the business on to the next generation, or indeed between families, can be a challenge. Who should inherit? Who takes over? Can the older generation let go and allow the next generation to take the reins of the business? If there are cousins, or two or three generations, involved, how is that dealt with? Those are some of the principal challenges for family businesses, and the Institute for Family Business spends quite a bit of time helping to support family businesses with them.

There are additional challenges with financing and growing family businesses. How do we ensure that a family business can grow in exactly the same way as other corporations? In my view, family businesses have a real strength, in that they can draw financial support from members of the family, which can help with that growth. It can also be a weakness, because they need to attract external finance to grow. Family businesses must be willing to accept outside help and allow external influences to support the business in its attempt to grow. Families have to accept the risk that they may be taken over, or that their influence in the business will be diluted by external investment from other parties.

Family businesses also have some key strengths, such as resilience. They often deal with recessions better than most other businesses. They are flexible and more adaptable in terms of hours of work. A person is more likely to want to work longer hours in their family business to ensure that it will cope with any bumps on the road. Family businesses also take the long view. It is not just about the next set of financial figures; it is about the next generation. That can lead to long-term investment, rather than a short-term view about making profits here and now. The stats suggest that often staff are loyal, and remain with such businesses for far longer than they would otherwise. Also, family businesses are invariably very loyal to their staff, who in many cases have worked for them for many years. That creates a real element of stability.

[Kevin Foster (Torbay) (Con)]

Does my hon. Friend agree that family businesses showed that loyalty to staff during the pandemic? For example, a number of tourism businesses in Torbay decided that the family would take no wages to ensure that staff could be paid, which we would not see in many other corporations.

[John Stevenson]

My hon. Friend makes a valid point. We saw that in the pandemic, and we often see it in recessions as well. Family businesses are more resilient and stay loyal to their staff, and that gets them through in a way that many other businesses would not necessarily tolerate. Another interesting aspect of the research from the Institute for Family Business is that there is more female involvement in family businesses than in general in business; we should research more why that is the case.

Family businesses are often the start of something. They start as very small businesses, then continue within the family, or at least owned or controlled by the family, but with external management; or they dilute and float on the market. I do not think that selling out is a negative, as the business—what the family have created—is successful and can continue to thrive but in a different environment and under a different structure. Life does move on.

I am a solicitor, and work in a practice that was set up in 1805. Until 1916, three generations of the family were involved. Since then, there has been no family involvement, but the business is still going strong today and it had that family involvement for those three generations.

Where I think family businesses provide an extra layer of benefit is in terms not of the economy but of the community. Family businesses are often embedded in their community. The children go to local schools. The business employs local people. The families want the local area to succeed because they live in it and socialise in it—they are part of it. They often get involved, as school governors and in charities and other community organisations. If they are brave, they may even get involved in local politics; they may get involved in other things, such as the local enterprise partnership or the chamber of commerce. They are invariably respected leaders in the community—people want to emulate them. That support to their local areas is a real strength of family businesses and the leaders within them; that element does not show up in national statistics, but it is vital to the success of our communities up and down the community.

I am very conscious of the lack of Government recognition for the importance of family businesses. I think everybody here would recognise that they are the backbone of our economy and a source of strength for our communities. Is there more that the Government could do, on the growing of these businesses, and in understanding their nature, the challenges they face and how we can ensure the investment and finance for them so that they will grow, expand and become the big corporations of tomorrow?

There is also the skills agenda. Training opportunities can be difficult, as many of these businesses are small or micro businesses that find it challenging to train staff and to get the skills they need. What can the Government do to support them?

There is also a need for general advice, for not just financial but succession planning. Quite often, family businesses feel they are operating in isolation. That is why organisations such as the Institute for Family Business are so important, because they help with that sort of advice, but many businesses do not get it. I wonder whether the Government could do more to help.

There is also the issue of profile. Leaders in the community, as I have already said, often come from family businesses. Some, though not many, have a national presence. Sadly, trust in business is at a low ebb right now, but family businesses often have a far better reputation. It may be that the Government should be seeking to exploit that in a positive way. We need businesses to succeed. We should celebrate their successes. I think people often feel more comfortable celebrating the success of a family business than the success of what they perceive as a faceless corporation. Maybe the Government need to associate business more with the family side of things, demonstrating the importance and the vital contribution family businesses make to our society, as well as to our economy.

In society, families really do matter. In business, family businesses are absolutely vital. Let us celebrate their success, but let us help them more than we do to ensure that they continue to be the backbone of our country and central to our communities.

--- Later in debate ---

[Kevin Foster (Torbay) (Con)]

It is a pleasure to serve under your chairmanship, Mr Robertson, and to follow my good friend, the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) and hear his experiences of business. I congratulate my hon. Friend the Member for Carlisle (John Stevenson) on securing the debate, which is a timely chance to highlight the role that family businesses play in Torbay’s economy.

As my hon. Friend the Member for Carlisle reflected, family businesses make a major contribution to the UK economy overall. Oxford Economics estimated that there were 4.8 million family businesses in the UK in 2020, making up 85.9% of all private sector businesses. Those businesses employed 13.9 million workers, or 51.5% of all private sector employment, and contributed £575 billion to the UK economy. These are big numbers overall, despite most family businesses actually being small firms—something like three quarters of all family businesses in 2020 were sole traders with no employees. A further 21% have between one and nine employees, although I understand that the estimates were based partly on data collected the previous year.

It is interesting to note that those numbers represented a decrease. The number of family businesses decreased in 2020 from 5.2 million in 2019, when they employed 14.2 million people and contributed £637 billion to the economy. If the Treasury was here, it would be interested in the fact that such businesses paid £205 billion in tax receipts. Some of that may reflect the impact of the pandemic, not least given that the typical family business many of us think of is a shop or a guest house, both of which were affected by that period.

Many family businesses are not just sources of economic activity, but mainstays of the local community. A 2021 survey of family businesses conducted by PwC found that the vast majority of UK family businesses also continue to engage in some form of social responsibility activity. Some 74% of family businesses surveyed contributed to their local community, and 47% participated in traditional philanthropy or grant-based giving as a company.

[Dr Cameron]

The hon. Gentleman is making excellent points. Given that family businesses are such a focal component of our communities, does he agree they have a key role in reducing the disability employment gap, and are often the businesses that promote disability inclusion in our communities?

[Kevin Foster]

I completely agree. The type of support a family can provide to someone with disabilities—even in their own family, for example, by extending the care and support offered to their loved one and supporting them in the workplace—can be vital. Many families have rightly shifted their expectations of what a family member with disabilities will be able to do. To be honest, past attitudes might have been, “Could this person work?” or “Perhaps they shouldn’t, perhaps they won’t ever work.” Thankfully, there has now been a big change in many businesses. The hon. Member is right that family businesses can help to lead that charge.

The economic and social impact of family businesses can be seen clearly in Torbay, and it is important to reflect on this positive aspect. I will start with Rew Hotels. The Rew Hotel Group was founded in 1970 by Mrs Sylvia Rew, and is still family managed. Positioned right on Torquay’s seafront are the two hotels it runs: Livermead House and Livermead Cliff. The family are not just quiet owners but part of the frontline delivery of services to customers. It is a good example of a family business where the family has been able to develop two distinct offers while making the business a family in itself, with several senior staff members having started waiting tables or behind the bar, and then been given opportunities to develop their career within the hotel and the business

Susan’s Flower Shop has been trading at the heart of Paignton, Devon for over 50 years; the business itself has become a family, given that it has been trading for such a lengthy period. Brian and Susan, who are the leading figures, are involved in many aspects of local community work and supporting the bay as a whole.

There is also Conroy Couch, which is one of the oldest established businesses in Torquay and one of the oldest jewellers in the UK. It was first opened in 1863 by Mr Conroy Couch, and such was the quality of its initial fitting that the shop front has altered very little since, with the height of the entry doors serving as a reminder of a time when men commonly wore top hats and would be wearing them when they attempted to come through the door. Towards the end of the last century, the shop was taken over by the Rowe family, who are well-known and respected jewellers in Torquay. Today, David and his daughter Michelle still hold the values that the original founder of the business held dear: it is an active part of supporting local Rotary appeals, and works to ensure that Torquay high street has an annual Christmas lights display.

A larger example of a family business is Beverley Holidays, which operates three holiday parks in Torbay. It has been a family-run business for over 60 years, and during that period its owners have seen some dramatic changes in Torbay’s tourism sector. A caravan holiday might conjure up images from the past of putting coins in meters and sleeping on a sofa, yet many caravans in those parks offer standards equivalent to executive hotel suites, meaning that as a family business Beverley Holidays can compete with the large national chains on both price and quality.

Family business is not just about retail and tourism—we have heard some examples today. In that context, one company that particularly jumps to my mind is Casting Support Systems, or CSS as it is commonly known. It is a family business that was established by Ted Head, and produces a range of products for the distribution, aerospace and automotive industries. Earlier this year, it won the Queen’s award for enterprise for its export achievements and relocated to a brand new, purpose-built factory in Paignton. To give the scale of the impact of that family business, between 2018 and 2021 its exports rose from £267,000 to £1.7 million.

Another sector that can be overlooked is one that is often seen in our local communities, and one to which family businesses are integral: travelling fairs. The name Anderton and Rowlands is synonymous with funfairs and bank holidays in Devon and Cornwall. That business started back in 1854, when Albert Haslam, a variety artist, set up on his own, giving magic exhibitions. His tutor was one Professor Anderson, and upon his death, Albert assumed the name of Anderton. In 1903, the show first travelled under the name of Anderton and Rowlands, the name that has been in existence since. Since the 1950s, the firm has continued to expand, and the name Anderton and Rowlands is now in its fifth generation. It is currently owned by the DeVey family. George DeVey—who was born in a showman’s wagon travelling to a maternity hospital back in 1937—Simon DeVey and Simon DeVey Jr are key parts of it, and it is now the biggest fairground operator travelling in Devon and Cornwall.

Finally, I should mention Bygones in Torquay. Back in the 1980s, Ken Cuming’s obsession with railwayana was starting to outgrow his house; I understand that the final straw for his wife Patricia came in 1986, when he purchased a 27-tonne steam railway engine from Falmouth docks. As fortune would have it, the couple spotted that an old cinema had become available in St Marychurch, and bravely took the plunge of turning their hobby into a family business. Over the next year or so, with the help of an excellent mason and carpenter, and many friends, the family recreated a Victorian street scene, and on 23 May 1987 Bygones was opened to the public by the then mayor of Torbay. Sadly, Ken Cuming passed away in June 2017, but his wife Patricia, son Richard and daughter Amanda are still working daily in Bygones, which is a popular attraction that also supports veterans.

I could be here all day listing great family businesses in Torbay, and it has been good to recognise some of them in my speech. I am sure that many Members will be thinking of businesses in their own constituencies; we have already heard about some. However, family businesses are not immune to changes in our economy, especially on the high street. Sadly, it has been a long time since Rossiters department store in Paignton was bustling in the week before Christmas. Rossiters was part of Paignton for 150 years. Father Christmas often arrived there in dramatic style—one year on a turntable ladder, and once in the late 1980s even by parachute jump on to Paignton Green—but changing shopping trends and competition from online and out-of-town retail sadly led to it closing its doors in 2009. Even yesterday, we read that the future of a 106-year-old family business, Shaws the Drapers, which has stores across Devon, including one in Torquay, is under threat. Managers of the family-run company have admitted that it must change to survive, and, sadly, signs outside its shops state that all remaining stock is now on sale.

There are many positives to a strong family business sector, but what might inhibit its future growth? Family businesses are often based in and synonymous with one area. That means that the decisions of local councils can either boost or severely dent their prospects. Take, for example, the recent decisions of the coalition of Lib Dem and independent councillors that runs Torbay Council. Earlier this year, the coalition decided to close Torbay Road in Paignton to traffic as part of a pedestrianisation pilot. Torbay Road is a busy shopping street, and many businesses along that stretch of road and nearby are family owned. They have reported that trade has fallen off dramatically over the last three months. At a meeting last week, Conservative councillors requested that the coalition review the impact, but a review was decided not to be urgent enough. Similarly, the coalition’s decision to sign off a request from a developer to close Brixham Road for three months is unlikely to help many family businesses across our bay.

We must return to a familiar subject to me: business rates. Take Susan’s Flower Shop, which, as I mentioned earlier, is a family business that has been trading for just over 50 years. There is not a strong incentive to expand or maintain premises where business rates are concerned. Its shops are below the £12,000 rateable value, so no rates would be payable if it traded out of only one shop. As soon as a small family business has a second shop, rates become payable on both. That is a disincentive for family-run small businesses such as those in the floristry trade. Many shop owners would like to open a second shop for a family member to run when they are old enough. There is a reason why we see businesses called “Jacksons” or “Fredericksons” in our areas; that is a nod not just to a past surname, but to a time when a father might have set his son up in business after having taught him—Jack’s son—the trade. I am sure that many more empty shops would be filled by family businesses if that tax disincentive were removed.

I hope that the Minister will set out his thoughts on the following. First, how will the Government ensure that local councils pay attention to the needs of local family businesses when making decisions? Secondly, what consideration will be given to the position of family-run businesses in the long-awaited business rates review? Thirdly, not all members of a family have the skillsets required to grow a business, so they may need to recruit from outside the family for the first time; how are the Government supporting them to do so? Finally, what is the vision for family-owned businesses, from the Minister’s perspective? How does he see them being encouraged and nurtured by this Government? Knowing his own background and passion in the area, I expect that he will be particularly keen on that.

Family businesses are not just part of the economic output of our country, but an integral part of the social fabric. Without them, we would all be poorer, not only in the sense of the jobs and economic activity they create, but in the sense of the social responsibility that many show simply by wanting their businesses to be positive parts of the communities they are proud to call home.