Written evidence submitted by the Institute for Family Business (PEG0156)
As the restrictions begin to lift, discussions about “building back better” provide an opportunity for business and policy-makers alike to forge the future of our economy, working together to maintain and implement long-term policies focused on regional growth, investment, good jobs, and responsible business practices. Ensuring the continued and sustainable growth of family businesses not only brings benefits to the whole economy, but to consumers, employees and the Exchequer too.
We believe that the road to economic recovery can be achieved most effectively in two stages: short-term stabilisation, giving businesses the confidence that they can return to work, before supporting growth stimulated by investment in capital, new jobs and skills.
Family businesses have a central role to play in this process. Many of our members have been significantly impacted by COVID-19, with the subsequent lockdown posing huge financial and operational challenges.
We are proud of the way in which the family business sector has responded to this ongoing crisis and the resilience that these businesses have demonstrated. Many of our members have shown both a willingness and an ability to quickly adapt their operations in order to continue to be able to operate. The actions that they have taken have helped safeguard jobs, both in the short term and in the long term.
Despite these challenges, the crisis has proved the extent to which family businesses support the communities in which they are rooted. The experiences of the past few months will be crucial in ensuring a full and swift economic recovery which benefits all aspects of business and the economy at large.
We welcome the measures announced by the Chancellor in his summer statement, and in particular those policies aimed at supporting young people into employment and those aimed at restoring business confidence. We believe that this represents the beginning of the long road to economic recovery, and we now urge the Government to adopt a long-term approach to the economy which prioritises growth by supporting investment in capital, new jobs and skills.
The Institute for Family Business (IFB) is the UK’s family business organization. Our members include some of the most successful, world leading, businesses in the country. Together they employ over half a million people and have a combined turnover of £100 billion[1] annually, and work across the whole UK in every region, and every sector. We work with family businesses to help them build better and stronger business for future generations of their families, employees and communities.
We work closely with family firms to support them in growing their enterprises for generations to come. A central part of our work is to provide educational resources and knowledge-sharing designed to support business owners and those who work in family business. We aim to champion best practice within the family business community and help others to learn from these examples.
Family business is the backbone of our economy and the bedrock of our communities. In the UK, family firms generate a quarter of GDP and employ over thirteen million people.
By their very nature, family businesses take a long-term view, building on long-term stewardship of people and resources. Their commitment to passing something on to the next generation is locked into their corporate DNA.
The family business sector is extremely diverse. Family businesses come in all sizes and are found in all industries and communities across the UK. The tax contribution of family businesses now stands at £182 billion.
As the lockdown continues to ease and we look to the future, the Government should work with business to develop a strategy which will promote investment and growth as the means of recovery. The nature and scale of the economic impact require a long-term approach to recovery. The UK Government should not look to quickly repay the debt it has amassed during the Covid crisis, but instead take a long-term approach to repayment, whilst seeking to stimulate growth in the short to medium term.
Forming the two-part strategy outlined below, the Government should immediately look to stabilization – giving businesses the confidence they need in order to survive and return to some degree of normality – before looking to stimulate investment as a means of achieving medium-to-long-term economic growth.
No conversations can be had about growth without addressing the stability that businesses need in order to survive. These are extremely uncertain times for business, with many having to make difficult financial and operational decisions regarding their future. As part of the road to economic recovery, businesses need the confidence that they can start doing business again, accepting that it will require new and innovative ways of working. That includes confidence in how they are expected to operate, but also a tax system which enables them to rebuild and invest.
Once businesses have been provided with the stabilisation, confidence and support required to rebuild their usual operations, attention must turn to the stimulation of investment as a means of achieving the necessary future economic growth. In particular, policy-makers must use all the levers at their disposal to help stimulate capital investment, investment in new jobs and investment in skills. The economic recovery also provides the opportunity to look afresh at some of the challenges the UK have faced around issues such as productivity and regional investment.
The UK must look at how it can support and encourage businesses to invest in themselves and their future as a means of ensuring a full economic recovery following the pandemic. To this effect, we encourage the Government to focus on three specific areas: support and stimulus; investment; and on people.
Support and stimulus
The Government must look to measures such as deferring tax payments for those businesses most badly affected by COVID-19 and the lockdown, providing more support for supply chain companies in the most affected industries, alongside extending the time that businesses can apply for the Government’s loan schemes in order to help those who have not yet been able to access support.
We welcome the decision taken by the Government to reduce VAT on businesses in the hospitality and tourism sectors, and recognize that this will help those businesses most affected by the crisis. More support is still needed for those businesses which supply these sectors and rely heavily on them, but have not been able to access the sector specific support.
The Government should look to offer bespoke support for sectors that are going to be impact longer term by COVID-19, while also reviewing the business rates relief system and consider extending this to more businesses in supply chains of sectors most affected by the pandemic and lockdown. This additional support will also be important in supporting businesses in the event of localised lockdowns, such as that seen in Leicester.
Furthermore, the Government should also support business cash flows by extending VAT payment deferrals.
Investment
The Government must look at how it can support and encourage businesses to invest in themselves and their future. These measures should aim to help to lower the cost of entry for investment, in both people and capital expenditure. That includes extending the timeframe for the increased level of Annual Investment Allowance beyond the end of 2020, and providing incentives to companies to train and upskill their employees. This approach will help the UK increase productivity, while also supporting good quality job creation.
We welcome the Government’s recent announcements on bringing forward infrastructure investments, and would encourage further investment, alongside additional measures to support R&D and capital expenditure.
We would also like to reiterate our support for the recommendations outlined in our pre-Budget submission earlier this year. These recommendations are now more important than ever, and include the following measures:
As part of the drive to support investment, the UK also needs a strategy which addresses the needs of mid-sized businesses and supports mid-sized business growth. These businesses are often family businesses, and are at the heart of communities outside of London and other cities. Supporting their growth is an opportunity to transform the business landscape in the UK, enabling them to take the step from regional player to international competitor. These businesses are often overlooked in policy-making, with the focus either on very large or small businesses. These firms – the UK’s Mittlestand – have huge potential, which needs to be harnessed as we look to build a stronger economy at both a national and regional level.
Supporting people
Given the uncertainty around employment for many, it is crucial that the Government invests in the workforce.
Family businesses have a generational outlook and are acutely aware of the need to support and build opportunities for the generations following them. Family business owners are particularly concerned about the impact this crisis has had on young people, who are more likely to lose their jobs. Creating opportunities for young people and supporting them in getting back to work must be an immediate priority for the Government.
That should include reforming the current apprenticeship system to make it work better for young people and employers, and the Government further incentivize employers to hire young people. To this effect, we welcome the Chancellor’s announcements in his summer statement which provided further support for young people in traineeships and apprenticeships. We believe that these measures represent a step in the right direction in terms of helping young people into work.
In the UK family businesses employed over 13.4 million people prior to this crisis, and generated a quarter of UK GDP. Family firms are the backbone of our economy and the bedrock of communities across the whole country. As well as the economic benefits they bring, they also play an important role in their communities spearheading and supporting initiatives designed to improve the overall wellbeing of the area. Growth in this sector brings benefits to the whole UK economy, to consumers, to the exchequer and to the millions who work in family firms.
August 2020
[1] All figures taken from prior to the COVID-19 pandemic and lockdown unless otherwise stated.