Britain’s family firms, many of which have been passed down from generation to generation, are not only the country’s backbone in a material sense but also in spirit.
They are the local scaffolders, builders, brewers, pub owners and farmers who build our homes, make special beers and endure cold, wintry mornings to grow so much of our food.
They are also big employers: family-run businesses make up around 90 per cent of the 5.6m or so privately-owned firms in the UK, employing close to 16m people.
Put into context, that’s more than half of all those employed in the private sector and nearly half of the total 34.2m individuals working in the country.
If you want to be pernickety, that’s double the 8m or so who don’t work at all, the so-called ‘economically inactive’.
As most family firms are so invested in their communities, it’s no surprise that they contribute far more to those communities and local charities than big companies do.
Tax target: Family-run businesses make up around 90% of the 5.6m or so privately-owned firms in the UK, employing close to 16m people
Many are also based in some of our poorest regions, like Cornwall and the North. Family firms are also big taxpayers.
It’s estimated they paid £422billion tax in 2023 – and contributed £985billion in Gross Value Added (GVA) – nearly two-thirds of the total private sector contribution.
Yet this vibrant part of the economy will be devastated if Rachel Reeves goes ahead with the changes she made at the last Budget to abolish the inheritance tax relief (IHT) for family firms, from what’s known as business property relief (BPR) and farmers, who have until now enjoyed what’s known as agricultural property relief (APR).
Reeves wants them all to pay 20 per cent on assets worth over £1million from next April.
The farming lobby has been brilliant at highlighting the dire consequences that abolishing APR would have on the industry, and our precarious food security.
But despite all the damning evidence, there is no hint that Reeves is for turning.
Worse than that, she and her colleagues appear to have buried the Government’s own commissioned review into the industry by Baroness Batters, former president of the National Farmers’ Union, which is understood to condemn the changes.
Astonishing!
Now, the lobbying group Family Business UK is cranking up its campaign to persuade the Chancellor to reverse the changes in the Budget – or at least pause them. Two-thirds of all family firms are pulling in their horns because of the mooted reforms and other higher costs.
At least 208,000 jobs are estimated by Family Business to be at risk over the next few years, while the potential losses of abolishing the BPR relief will more than dwarf the £500million a year the Treasury hopes to raise.
It reckons the Government will lose £1.9billion because of lower economic activity while GVA will be slashed by £14.8billion by the end of the decade, equal to the value of making cars in the UK.
Family brewer William Lees-Jones, whose seventh-generation firm, JW Lees, runs breweries and hotels in the North-West, is under no illusion about the dangers ahead.
As Lees-Jones wrote in the Daily Mail this week, many families inheriting a firm ‘simply won’t be able to pay the multi-million-pound tax bills’.
Instead, the brewer warns that firms will be sold off in part or wholly to private equity, hedge funds or foreign companies. ‘It’s not about the money,’ he said, but a ‘whole way of life being destroyed’.
Is that what the Government wants? So it seems. Predictably, the fear of abolishing the tax relief coupled with last autumn’s tax hikes, is already destroying businesses, forcing them to cut back on jobs and investment.
Another survey found that a third of 2,000 family businesses say they risk closure while a fifth warn they will either sell up, close down or move abroad if the Budget brings more taxes.
These are not just veiled threats or special pleading. As the latest net migration figures show, Brits are leaving in their thousands. They are assets with feet.
Ironically, these IHT reliefs were introduced by a Labour Chancellor, Denis Healey, in 1976 to protect family firms from having to sell up if the owner died, thus ensuring longevity of ownership.
It was too late to save Healey from going to the IMF for a bail-out.
Reeves should take note.
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