The Institute for Family Business (IFB) use the following criteria to define a family business:
- The majority of votes are owned by the person or persons who established the firm, or those who have acquired the share capital of the firm or who are in the possession of their spouses, parents, child or child’s direct heirs.
- At least one representative of the family or kin is involved in the management or administration of the firm.
- Listed companies meet the definition of a family enterprise if the person who established or acquired the firm (share capital) or their families or descendants possess 25% of the right to vote as mandated by their share capital.
Family businesses in the UK
Oxford Economics estimates that there were 4.8 million family businesses in the UK in 2020, making up 85.9% of all private sector businesses. These businesses employed 13.9 million workers (51.5% of all private sector employment) and contributed £575 billion to the UK economy.
Most family businesses are very small firms – three-quarters of all family businesses in 2020 were sole traders with no employees, and a further 21% had 1-9 employees. London and the South-East together account for over 30% of all family businesses in the UK, which is broadly similar to the distribution of private sector businesses in general.
These estimates were partly based on data collected the previous year. Oxford Economics estimates that the number of family businesses decreased in 2020, from 5.2 million in 2019 (when these businesses employed 14.2 million people, contributed £637 billion to the economy, and paid £205 billion in tax receipts).
Family businesses and local communities
The November 2020 report Family Business and Community Engagement, written by academics from the Universities of York and Birmingham for the Institute for Family Businesses identified several ways in which family businesses in the UK engage with local communities, including:
- Establishing foundations
- Supporting learning and improving labour market access
- Enhancing employees’ contributions to communities through matching donations and organising community charity days
- Supporting business organisations such as Local Enterprise Partnerships
- Environmental action
The report found that as a result of family businesses often being passed through multiple generations, they have a “long-term commitment to a specific geographical place” that helps to “build trust with communities and other stakeholders” resulting in “being the bedrock of communities across the UK.”
A 2021 survey of UK family businesses conducted by PWC found that “the vast majority of UK family businesses also continue to engage in some form of social responsibility activities”, with 74% of family businesses surveyed contributing to the local community and 47% participating in traditional philanthropy or grant-based giving.
How family businesses survive hard times: Creating value for their customers and themselves has been a key component in ensuring they outlast listed companies, Financial Times, 30 June 2022
Transgenerational entrepreneurship: The regenerative power of family businesses, KPMG, May 2022
Mastering comeback: How family businesses are triumphing over COVID-19, KPMG, March 2021
The State of the Nation: The UK Family Business Sector 2020-21, Oxford Economics, December 2022
UK family business outlook, PWC, 2021
How family businesses have survived a brutal year: A sense of solidarity has helped many in the sector weather the crisis, Financial Times, 7 December 2020
Family business and community engagement, Institute for Family Business Research Institute, November 2020
Special Report: The Future of Family Business, Financial Times, 13 December 2017