The turnover of the UK’s Top 100 family businesses held up far better during the pandemic than the average for UK businesses as a whole over the last year (note 1), shows new research by Boodle Hatfield, a leading private wealth law firm.
Turnover amongst the Top 100 family-owned businesses dropped just 4% to £138 billion last year (note 2), compared to the average for all UK businesses (note 3), which fell by an average of 11% over the same period.
The total profits for the Top 100 family businesses fell by 36% from £3.8 billion in 2020 to £2.4 billion in 2021, marginally higher than the 35% drop in profits across all UK businesses (note 3) over the period.
The healthy cash position and conservative attitude towards debt levels that family businesses hold means that they were able to maintain dividend payments throughout the pandemic. The Top 100 family-owned businesses registered a 40% increase in the value of dividends paid out during the year, rising from £766 million in 2020 to £1.07 billion in 2021.
Much of this increase was driven by an exceptional dividend paid by chemicals giant Ineos. Even when this exceptional dividend is removed, dividends paid out by the other 99 businesses in the Top 100 fell just 12%, compared to a decline of 32% in the value of dividends paid out by all UK businesses between 2020 and 2021.
Hayden Bailey, Partner at Boodle Hatfield, comments: “Despite recent challenges, Britain’s family-owned businesses are well placed for a post-Covid bounceback.”
“Owners of family businesses typically take a long-term view and their operational style favours steady, sustainable growth rather than pursuing short-term profits in the short term. That gives many of them the ability to steady the ship more easily during times of economic upheaval – something that has been extremely valuable over the past year.”
Boodle Hatfield says that as the Government attempts to manage its pandemic debt, some tax reliefs that are vital to family-owned businesses and other entrepreneurs, such as the popular Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) may be under threat. This could disincentivise entrepreneurs from continuing to invest in and grow their businesses if they have to pay a much higher tax on the eventual sale of their business.
Hayden Bailey says: “The Government must take stock of the importance of family-owned businesses when managing its post-pandemic recovery plan. Recent changes to the rules around Business Asset Disposal Relief have already dented the confidence of entrepreneurs. It is vital that steps are taken so that the UK remains an attractive place for family businesses.”
Boodle Hatfield says that family-owned retail businesses have been a relative success story during the pandemic. The 16 family-owned retailers in the Top 100 saw their turnover hold steady at £37.6 billion in 2021, down less than 1% from £37.9 billion in 2020. This group includes household-name businesses such as River Island and Lush.
Hayden Bailey adds, “The Top 100 family businesses in the UK are incredibly diverse in their sectors, reaching everything from retail and distribution to energy and recruitment. That large family-owned retailers have got through the pandemic so well shows that remaining in family ownership can be an important part of delivering long-term success.”
Other economic sectors represented among the Top 100 family businesses include:
• Automotive retailers (16 businesses)
• Construction (15 businesses)
• Food manufacturing (10 businesses)
• Diversified conglomerates (10 businesses)
Pandemic triggers struggles for family-owned transport and automotive retail businesses
The family-owned businesses which fared the worst over the last year were those which faced issues triggered by the pandemic and the supply chain crisis.
Family-owned transport and storage businesses in the Top 100 saw their turnover fall by 40% as they struggled with supply chain problems created by the pandemic and Brexit. Automotive retailers, a major component of the Top 100, saw their revenues drop 8% as the supply of new cars dried up worldwide.
Performance of Top 100 family-owned businesses stays steady through pandemic:
Turnover 2020 – £141.3 billion
Turnover 2021 – £135.4 billion
Reduced by 4%
Profits 2020 – £3.8 billion
Profits 2021 – £2.4 billion
Reduced by 36%
Dividends 2020 – £766 million
Dividends 2021 – £1.1 billion
Increased by 40%
Note 1 – Based on an analysis of company accounts filed in the 12 months to December 31 2021
Note 2 – The largest 100 businesses by 2021 reported turnover in which 50% or more of the equity is owned by an individual, group of related individuals or a family trust
Note 3 – Sample of 184,000 UK businesses, including private equity-owned and listed businesses, in the year to December 31 2021