TIME TO FEED SCOTLAND’S FAMILY BUSINESS SECTOR

Scot-Buzz editor BILL JAMIESON says Holyrood may talk the talk on Enterprise Scotland. But the number of private sector businesses operating in Scotland has fallen for the first time in eight years.

Just over 335,000 enterprises were running in March of this year - a fall of 2.4 per cent on the previous corresponding 12 month period. It’s the first annual drop in the total business stock since 2006.

The figures, from the Scottish government, are in marked contrast to those from StartUp Britain this week showing the total of new businesses across the UK so far this year at close to 500,000 - a new record.

The figures, from the Centre for Entrepreneurs think tank, show 498,176 businesses have been started this year to date, putting the UK on course for an annual record of 550,000 new businesses started.

So what’s going wrong here? Scottish government officials attribute the decrease to a fall in the number of unregistered businesses - small sole traders and partnerships not registered for VAT/PAYE. Numbers here are down by eight per cent - from 183,055 in 2013 to 168,490. However, the number of registered businesses is up by four per cent, to 166,525 in 2014 - its highest since 2000.

A major new research project unveiled to mark the first Scottish Family Business Week argues that family succession problems may be a significant factor in business deaths.

The study - a partnership project between Goodison Group in Scotland and Scotland’s Futures Forum, in collaboration with Queen Margaret University, Edinburgh and others - says Scotland needs to do more to build and protect the family business sector.

Almost two thirds (63 per cent) of SMEs are reckoned to be family businesses.

However, only 12 per cent of family owned businesses were passed down to the second generation and only seven per cent of family owned SMEs had been in the family for three generations or more.

This new research is raising awareness of the impact of poor succession, lack of exit strategies, failure to successfully transfer a family business from one generation to another and how this could be damaging the Scottish economy.

The contribution of small and medium sized companies (SMEs) to Scotland’s economy is colossal. As at March, there were 332,720 SMEs operating in Scotland, providing an estimated 1.1 million jobs.

They account for 99.3 per cent of all private sector enterprises, for almost 55 per cent of private sector employment and 38 per cent of turnover.

The study says family businesses have the potential to boost the country’s annual economy by up to £1.23 billion. But it also finds that of 17,385 new enterprises set up in Scotland in 2012, the vast majority - 16,760 - have now ceased to exist.  And a number of these business closures resulted from failed business succession.

Surprisingly, says the study, the survival rate of new businesses after five years is around 35-50 per cent. In contrast, the survival rate of business transfers is around 90-96 per cent.

The research is also beginning to show that transferred businesses outperform new start-ups in terms of turnover, profit, innovation and employment.

More than 100 representatives from SMEs and family business, government agencies, education and professional advisers from around Scotland attended two landmark conferences held in Edinburgh and Inverness to discuss what the research means for Scotland.

The research conclusion is that more focus needs to be placed on successful family business and SME transfer to help maintain and boost Scotland’s economy. Researchers agree that improved infrastructure and support mechanisms can help protect jobs, increase employment, widen business ownership and maintain existing local supply chains.

The findings are all the more salient given that, as the Centre for Entrepreneurs points out, the UK has the third lowest start-up costs in the world, is ranked eighth in the world for the ease of doing business and has the fastest growing economy in the G7.

The research project: ‘Sustainability: The challenge facing Scotland’s SME and family businesses’ is a partnership project between Goodison Group in Scotland (GGiS) and Scotland’s Futures Forum, in collaboration with Queen Margaret University, Edinburgh; Scottish Family Business Association; Bank of Scotland; University of Strathclyde; University of the Highlands and Islands; Highlands and Islands Enterprise and Wright, Johnston and MacKenzie LLP.

In our picture: Dr Claire Seaman, senior lecturer in Enterprise & Family Business at Queen Margaret University; Richard Bent, MBA Director at QMU, and  Grant Bell, owner of the award winning East Links Family Park in Dunbar, East Lothian, a family business  QMU is helping on its next growth phase. On the left and clearly hungry for more: Dr. Llama, Emeritus Professor Family Businesses, QMU.