Family businesses are ‘less productive than other firms’

Figures from the Office for National Statistics (ONS), which studied management practices across more than 700 manufacturing businesses, then compared the results to the owners of the businesses, show that family-owned businesses and companies run by the founder’s family members tend to be less productive than firms with outside owners and managers.

The figures suggest companies with the founder’s family in control are on average 20 per cent less productive than other businesses, a factor which could cause concern for growth across the economy, as around three-quarters of UK firms are family-owned.

According to the research, the average worker’s output in a non-family owned business stood at £53,340 in 2015, while in contrast the average output in a family-owned and family-managed company was just £36,910.

There is also a gap between UK-only based firms and multinationals. Domestic businesses have an average worker output of £41,350, compared with £54,910 for UK multinationals and £57,110 for foreign multinationals.

Andy Haldane, Chief Economist at the Bank of England, says managers in unproductive businesses are often too slow to realise that the business has fallen behind its more innovative peers. He also notes that companies which trade internationally tend to be more productive.

“Firms that export are likely to be exposed to global competition and many are integrated into global supply chains. This increases incentives to boost efficiencies and to match international best practices,” Mr Haldane says.

“The self-same forces are likely to be at play among foreign-owned firms. The productivity benefits these external-facing firms bring underscore the importance of openness to trade and foreign direct investment in generating rising productivity and living standards over time.”

Business owners can gain control of their finances by putting processes in place for effective business administration and sound management accounts which will enable better control of your financial situation and awareness of the business in real time.

Constructive criticism and debate are also essential for business growth. It's therefore important to partner with a specialist financial adviser to family businesses, such as Beavis Morgan.

We will work with you to implement processes which will help you maintain effective management of your company’s working capital, and apply systems which will help you survive and thrive in challenging times.

We will also hold regular meeting with you to discuss progress, where we will ask those challenging questions to help you detect and overcome any potential problems before they become real issues.

Contact Steve Govey or your usual Beavis Morgan Partner for further information about how we can assist.