Family Businesses: Contribution to Local Communities

Debate between Wendy Morton and John Stevenson

Tuesday 20th December 2022 Westminster Hall

[John Stevenson]

Absolutely. It is always lovely to hear individual businesses being highlighted by Members of Parliament. That demonstrates that family businesses are not just in one constituency but spread across the whole country. We need to be behind them in our local communities as well as nationally.

From our perspective as Members of Parliament, the importance and contribution of family businesses should not be underestimated. They matter to our national economy. Family businesses employ nearly 14 million people; over 50% of all private sector employment is in family businesses, so the majority of people are employed by a family business. It is estimated that they account for 44% of our GDP. Just think of their contribution to the Treasury, which is vital for our public services.

Family businesses are clearly the backbone of local economies up and down the country as well as nationally. Think of a small family business and the contribution it makes to the Exchequer. If it employs five people, that means five families supported by that business. The contribution goes beyond that, with the payment of national insurance for those five employees, and of corporation tax. It will probably collect VAT for the Exchequer and pay business rates at the local level. It makes a vast contribution, not just to the local but to the national economy. That is replicated up and down the country.

Carlisle is a good example as the home of national and international businesses which employ a lot of people and make headlines locally because of the number they employ and their brand names, such as Nestlé and Pirelli. But drilling down, what matters in many respects is the local family businesses. Story Construction is a first-generation business now moving into the second generation, employing in the region of 500 people. It was set up in the last 30 to 40 years and makes a significant contribution to local construction and to the rail construction industry. Pioneer Foods, a food hospitality business, is into its third generation of making a contribution to Carlisle’s economy. Thomas Graham is in its fifth generation of local leadership.

We have those international brands and companies, but I have just highlighted three individual businesses at the heart of our local economy that employ a lot of people making a vital contribution. They are now into their second, third and fifth generations. The individuals who lead those businesses are also vital to our local communities. They provide leadership. They are often respected, and local people will look up to them and may aspire to be similar to them, and to set up their own businesses in due course.

[Wendy Morton (Aldridge-Brownhills) (Con)]

My hon. Friend mentions the contribution of small businesses to the local community. What I often see is something that is almost invisible. Does my hon. Friend agree that business owners often support community events, such as the recent Christmas tree festival in Aldridge?

[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.