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Family business handovers fraught with difficulty, says PwC report

Written by Joe Jeffrey on Wednesday, 16 April 2014. Posted in People

Survey from PwC reveals that next generation are concerned about transition from running a start-up to taking on the family business

Family business handovers fraught with difficulty, says PwC report

We love a good old family business in the UK. However, as cuddly as they may appear on the surface, things aren’t as straightforward for those involved. New research from PwC, the professional services firm, has revealed that a business handover from one generation to the next can make or break a family business. Its survey of more than 200 would-be family business-owners focused largely on how family firms are planning to hand over the reins to the next generation, as well as how the handover process and challenges faced in implementing such changeovers are viewed.  It also suggested that the risks of getting it wrong have never been greater. 

In conjunction with PwC publication, Bridging the gap: Handing over the family business to the next generation, results of the survey showed that, worryingly, those making the transition from start-up venture to family firm are more fraught and the next generation set to take over under these circumstances are less enthusiastic to do so, with 20% indicating they are not looking forward to running a business under such circumstances.

Nevertheless, there's no doubting the next generation of family business owners’ ambition. An impressive 86% of those surveyed indicated they want to do something significant and special upon taking hold of the reigns, whilst 80% have big ideas for change and expansion.

Moreover, almost half of those surveyed have either taken business degrees to help prepare them for succession or management and training courses.  

It's not plain sailing though. The results also reveal that 88% of respondents believe they will have to work even harder than others in their firm to 'prove themselves', with 59% pinpointing gaining the respect of co-workers as the single biggest challenge they face.

And like in any family, conflict is a distinct possibility. Those who are handing over the reins may overestimate how well they have run their business and at the same time underestimate their child's capacity to follow suit. 

Sian Steele, UK partner at PwC, said: "Members of the current generation often comment that their children aren't sufficiently entrepreneurial and aren't prepared to put in the long hours they did to build the business; while down the hall their children are wishing their parents would embrace the possibilities of new technology and be more receptive to new ideas.

"This sort of impasse can slow down decision-making, and lead to the phenomenon of the 'sticky baton', where the older generation hands over the management of the firm in theory, but in reality retains complete control over everything that matters.”

PwC's findings come as Barclays Business has revealed that first-generation family SMEs currently contribute £180bn a year to the UK economy – and that’s set to increase to £218bn by 2018. According to Family Affair: Spotlight on UK Family SMEs, a report conducted by Barclays Business and the Centre for Economics and Business Research (Cebr), the same first generation family-owned SMEs are set to see their revenues rise from £540bn a year to £661bn by 2018 - an increase of over one fifth. It also revealed that 2013 saw an 8% rise in lending to family firms. 

Given that there are now almost 2.5 million first-generation family SMEs in the UK – signalling the highest number since the recession took hold in 2008 – perhaps it's time for the next generation to get ready to roll. It's either (baby) boom or bust, after all.  

About the Author

Joe Jeffrey

Joe Jeffrey

Having escaped the rat-race of asset management in the City, Jeffrey decided to follow his true passion by changing careers and stepping into the world of journalism. When not writing about start-ups, SMEs, technology and music, he enjoys socialising on as many occasions as his wallet will allow, walking his dog, Chewie, and getting down with the kids by listening to hip-hop.

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