Labour’s Budget had some good measures for family businesses, but they are yet to solve the fundamental issue, writes Neil Davy

How did family businesses do in the Budget?

Last week’s was in many respects a constructive Budget for family businesses, which make up 93 per cent of firms in the UK, employ 15.8m people and contribute £422bn in taxes annually.

There was much to welcome – particularly new support for entrepreneurs – and it was encouraging to hear from the Chancellor that he wants to work to protect family businesses.

For too long, policymakers have taken our sector for granted and failed to recognise the vital role it plays in the economy.

However, it is too early to get carried away. The focus now must be on turning these green shoots into stronger investment, employment and growth across the country.

In particular, we would have liked the Budget to go further by fully restoring business property relief following the damaging changes made by former Chancellor Rachel Reeves.

This remains the biggest unresolved issue for family businesses, and we are determined to continue making the positive case for a tax system that supports long-term ownership, investment and successful succession.

Business property relief was introduced in 1976 by another Labour Chancellor, Denis Healy. Recognising the special contribution family businesses make in every town and region, it was designed to allow firms to stay in families and prevent them being broken up or sold off on the death of an owner.

The government has already conceded that its decision to implement an inheritance tax raid on family firms went too far, increasing the threshold for full relief from £1m to £2.5m.

But these concessions haven’t solved the fundamental problem. From April this year, families are being hit with an inheritance tax liability of up to 20 per cent on the value of their business above the threshold.

We are beginning to see the real-world consequences. This measure actively discriminates against family-owned firms and farms, because no other model of business ownership – including private equity and foreign ownership – is susceptible. 

A recent survey by Family Business UK of more than 530 business leaders found that 58 per cent said they had been affected by the changes. Almost one in four had paused or cancelled planned investment, 23 per cent had reduced headcount or paused recruitment and 11 per cent said they expected to downsize in the coming year because of the reforms.

Our message to government is that family businesses are here to help you deliver your ambition of growth in every postcode. But the previous Chancellor’s changes have badly dented confidence and expended a lot of political capital for this government in the process. They need to be reversed in full.

Less tinkering please

Business rates are a significant and growing fixed cost for our members, so the package of relief unveiled last week will provide valuable support to many smaller family firms, particularly on high streets and in retail, hospitality and leisure.

But while it offers welcome breathing space, we can’t carry on tinkering with a system in a way that creates winners and losers at every Budget. We want to see a root and branch review leading to structural reform of the system in the longer term, with the aim of making it much more progressive.

Minimum wage

We welcome the more measured increase in the minimum wage for younger workers. Family businesses want to create opportunities for young people, but rapidly rising employment costs have made entry-level recruitment harder. This is a step in the right direction, although some firms will still struggle with any increase in wages. More targeted help with the cost of hiring would make a real difference.

Let family businesses help with NEETS

I recently visited one of our members, Gray-Nicolls, a cricket bat and clothing brand founded in 1855 and based in East Sussex. I met a guy who had worked there for 30 years and whose father had previously done so for 50 years. Many family businesses invest in their employees and their families in this long-term way, often on a multi-generational basis. But the number of young people not in education, employment or training (NEET) has reached around 1m, while youth unemployment stands at 16.2 per cent. As we await the conclusions of Alan Milburn’s review, we recognise the challenges young people face in entering the workforce. The rise of artificial intelligence, limited job opportunities in many parts of the country, generational worklessness and growing mental health challenges are all making the transition into employment increasingly difficult. Too often, family businesses today can’t afford to employ the next generation in the way that they want to. If every family business was freed up to be able to take on one NEET, we could solve this problem. We stand ready and willing to play our part.

My olive tree dreams came true

Fifteen years ago, I planted the UK’s first commercial olive grove on the Isle of Oxney on Kent’s southern coast.

People said we were crazy to try, but I have always loved olive trees and I knew this was one of the warmest and driest parts of the UK. After testing small numbers of six varieties for a year, we brought in 200 olive trees from Italy and planted them across three acres of land overlooking Romney Marsh. They survived everything the UK climate had to throw at them over the next five years, including the Beast from the East. Some are now 20 feet tall. The three varieties we chose – frantoio, leccino and maurino – blend to make a fantastically fruity and peppery extra virgin olive oil. The site has demonstrated that olives can be grown commercially in the natural environment of the UK, something I’m very proud to have done.

Neil Davy is chief executive of Family Business UK