New research shows that Irish family businesses are confident about the future, but fear increased competition
Irish family businesses are confident about the future, but fear increased competition
Irish family businesses are very positive about the future, with 91 percent stating that they are confident or very confident about their business’s outlook for the next 12 months, despite the challenging environment of geopolitical, trade and economic uncertainty. This places Ireland well ahead of the next most confident countries in Europe – Portugal on 78 percent and the Netherlands on 67 percent. This is according to the KPMG Irish family business barometer, released today by KPMG, in collaboration with European Family Businesses (EFB). The annual survey received 1,613 respondents from family businesses in 27 countries across Europe, including Ireland.
Concerns, however, remain, with increased competition (95 percent), the war for talent (79 percent) and increased tax rates (72 percent) all high on the list of worries for Irish respondents. Concerns around increased competition are unsurprising, according to KPMG, given Ireland’s open economy and the high level of dependence on exports of many Irish businesses.
Despite concerns however, more than half (57 percent) of Irish family business reported rising turnover in the prior year, while another 39 percent said turnover remained steady.
Looking ahead, the research found that Irish family businesses are future focused. Innovation remains at the top of the priority list for Irish family businesses, with 98 percent saying that becoming more innovative is very important – or extremely important – to their businesses over the next two years.
Entering new geographic markets and developing their workforces’ skills are also top priorities. A focus on the future is also driving family businesses (98 percent) to make diversification a priority.
Additionally, 98 percent say sustainability is important or extremely important to their company’s strategy, which is encouraging considering the current developments around climate change, and places Irish respondents well ahead of Europe – 89 percent of whom placed the same emphasis on sustainability.
When asked about financing options for funding business growth, Irish respondents, similar to their European peers, consider organic re-investment as the most attractive option, with 53 percent of Irish respondents and 49 percent of European respondents indicating the retention of profits as an attractive financing option for their business. One area that differs between Ireland and Europe in this regard is the attractiveness of bank financing and debt – with just 13 percent of Irish respondents considering this an attractive financing option versus 41 percent across Europe.
The overall impact of Brexit continues to be a source of unease for many family businesses with 35 percent of respondents saying it had already had a negative impact over the past 12 months. That figure rises to 43 percent for those who believe Brexit will have negative impact over the next 12 months. Interestingly, 10 percent of respondents indicate it may have a positive effect.
When asked about succession plans, 23 percent of respondents indicated that they plan to pass ownership of the business to the next generation, and 42 percent plan to pass on management responsibilities.
The survey also found that while 98 percent of Irish family businesses surveyed currently have a family member as CEO, those who feel a family member will occupy that role in the years to come falls to 90 percent. This may indicate that as family businesses grow larger in an ever more complex business environment, the families behind them are recognising the need for a robust executive leadership, even if that comes from outside the family.
Managing the tax implications of the family business’ handover is another key concern surrounding ownership succession, with 62 percent of Irish respondents seeing this as a key challenge. This highlights the continuing need for reform of the Irish tax system to facilitate the handover of family businesses from generation to generation.
Commenting on the findings, Olivia Lynch, Partner with KPMG Private Enterprise said:
“The very high level of optimism amongst Irish respondents compared to our European peers is perhaps surprising, but is likely reflective of the extraordinary resilience of our business community in Ireland, and a sense that they have weathered economic storms successfully before.
“It is extremely encouraging to see such strong commitment to innovation and investment in skills – both of which are essential for businesses to thrive in a rapidly changing work environment where technology and data are pervasive, and competition is increasingly global.”
Camilla Cullinane, Partner with KPMG Private Enterprise added:
“A key takeaway for policy makers from these finding is the need for a review of the taxation of the transfer of family business ownership in Ireland, and this is something we have long been advocating for at KPMG. The value of family businesses to our economy cannot be understated, and it is vital that the capital gains tax regime accommodates phased transitions at the right time for the family and the business.
“Finally we are delighted to see that sustainability is front of mind for Irish respondents. This willingness to embrace and adapt to change is of course a hallmark of many family businesses, many of which have survived and thrived through decades - and even centuries - of social and economic change.”