62% of European family business owners expressed confidence about their business’s outlook for the next 12 months, according to the recent KPMG Enterprise EuropeanFamily Business Barometer 2019 (eight edition), released by the European Family Business (EFB) and the KPMG which surveyed 1.613 family business executives in 27 countries across Europe. European family businesses identified innovation, training and education and diversification as top priorities while they named war for talent, declining profits and regulatory change as top challenges.
After several years of improving economic results, family business owners are looking towards the future and seeking new ways to capitalise on the momentum of their success. Of the businesses that were surveyed, 59% reported increased turnover over the past year, while another 28% said that their turnover remained steady. One of the key strategies revealed for growth is embracing innovation; 72% say innovation is a key priority for the next 2 years, along with workforce education and training (64%) and diversification (50%). 37% of respondents report increased international activity over the past 12 months. The war for talent was ranked as a top challenge facing family businesses (63%), up from 53% last year. Other top challenges this year included the declining profitability (62%), as well as regulatory change (60%).
Jonathan Lavender, Global Chairman, KPMG Enterprise & Co-Chair Global KPMG Enterprise Family Business said: “Europe’s family businesses are confronted by trade wars, geopolitical uncertainty, recession fears, rising populism, Brexit and the climate crisis. Years ago, any one of these issues could have triggered an economic slowdown and driven rampant business pessimism. Yet despite these many challenges, these family businesses remain positive about the future. Europe’s entire business community can take heart from confidence that whatever comes, we will get through it.”
Succession top of mind as business families look to the future
Succession is poised to become a critical topic for family businesses across Europe over the next 5 to 10 years. It is estimated that US$ 15,4 trillion will be transferred globally by 2030; US$ 3,2 trillion of which will be transferred in Europe. In this year’s survey, 35% of respondents say they intend to pass ownership of the business to the next generation, while 33% plan to pass on management responsibilities as well. Only 27% say they intend to transfer oversight responsibilities, perhaps suggesting the senior generation would like to keep a close watch on the business for a while longer.
While 84% of respondents say they currently have a family member as a president or CEO, only 62% believe a family member will occupy that role in the years to come.
“Some family businesses still have family members in charge, but this may become less common in the future. Families will increasingly feel that they need outside expertise to help the business navigate a complex and constantly changing environment. As businesses grow more global and more digital, external executive leadership can bring the experience, skills and independent perspective needed to innovate, take strategic risks and prosper,” says Tom McGinness, Global Co-leader, KPMG Enterprise Family Business.
European family businesses remain committed to the European project
As a new European Commission and EU Parliament settle in, Europe’s family businesses are eager to see politicians make trade a priority. 35% feel the EU’s key priority should be completing the single European market, while 20% believe the EU’s main priority should be taking the lead on championing free trade. Other priorities mentioned by the European family businesses are ensuring the education system is preparing Europe’s students for the jobs of the future, climate change and regulating the digital economy.
Demetris Vakis, Board Member and Head of Family Business at KPMG in Cyprus said: “Family enterprises in Europeare confident about the future and strongly consider succession planning as a milestone to the growth of their business,but also their survival.”