The inherent strength and resilience of Irish family businesses came to the fore once again during the past 18 months. While many businesses have struggled in the face of multiple lockdowns and the other public health measures which restricted trade, family businesses have generally proved very capable at adapting to the new environment. Camilla Cullinane of our Private Enterprise team looks at how family businesses have coped and thrived in the face of recent challenges. 

Family business survey

KPMG published a very significant report earlier this year. Mastering a comeback: How family businesses are triumphing over COVID-19 was based on a survey of 2,500 family businesses globally, including 59 in Ireland. Among the key findings were that 70 percent of family businesses maintained their R&D investments and continued to launch new products and services throughout the pandemic.

Family businesses face up to change

Family businesses are embracing the transformation agenda. They have proven time and time again to be extremely agile and we have seen great examples of family businesses pivoting successfully during the pandemic. It was very much a case of all hands-on deck to deal with the challenges presented by COVID, but they were in the fortunate position of being able to call on family members for assistance during the crisis. That agility and ability to reinvent and transform will be critically important as we look forward to the full reopening of the economy in the coming months.

Those traits will be equally important for the Irish economy in the period ahead. The value of family businesses to our economy cannot be understated. There are more than 160,000 family businesses in Ireland employing over 908,000 people, that’s almost half of all private sector employment in the country.

Time to take stock

COVID wasn’t entirely negative, of course. One unexpected benefit that it brought was the gift of time. It gave family business owners an opportunity to pause and draw breath and enabled them to take stock of their current position and look at issues such as succession, ownership structures and governance.

That breathing space also enabled them to look at new growth and diversification opportunities as well as to develop new product and service offerings. Entrepreneurship is embedded in the DNA of family businesses and they tend to take a much longer-term view of key business and investment decisions. Their longevity means that they are inclined to embrace sustainability as a core value.

Dealing with debt

But every business is challenged by the fallout from the pandemic. While government and other supports have been very welcome and played a key role in the survival of many firms, the fact remains that a great number of businesses will emerge from the pandemic with very high levels of debt. The warehousing of tax liabilities was of enormous assistance, but they will have to be met at some stage. Businesses may also have outstanding rent to pay and supplier invoices to meet.

This should be borne in mind by government in the run up to the budget. Irish family businesses, which form the backbone of our enterprise economy, must be supported as they emerge from the pandemic.

Government support required

While direct pandemic related payments from government must end at some point, what is needed now are tax policy measures that reward risk and encourage people to grow their businesses and increase employment.

One measure which should be looked at as a matter of urgency is a substantial increase in Entrepreneurs Relief from its current level of €1 million. At a time when Irish entrepreneurs are already struggling with the impact of COVID and other matters such as Brexit, they should be provided with an incentive to continue investing in Irish business.

In addition, business owners should be facilitated to extract profits from their enterprises at more attractive tax rates at various stages during the lifetime of the business. This could come in the form of relief for both investors and owners. Owners would be rewarded for the risks they have taken while investors would be incentivised to put their money into indigenous Irish businesses. Relief could be linked to jobs growth or sustainability metrics. This would tie in neatly with the government’s ambition for a green, jobs led recovery.

This article originally appeared in Business Plus magazine and is reproduced here with their kind permission.

Get in touch

The pace of change is challenging leaders like never before. To find out more about how KPMG perspectives and fresh thinking can help you focus on what’s next for your business or organisation, please get in touch with Camilla Cullinane of our Private Enterprise team. We’d be delighted to hear from you.