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Innovation and attracting new talent are top priorities for European family businesses

2018 European family business barometer launches

Europe’s family businesses are confident about the future but must become more agile, innovate faster and attract top talent.

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  • 73 percent of family businesses in Europe are confident about the future
  • Global skills shortage, political uncertainty and a heightened regulatory environment pose challenges

Europe's family businesses are confident about the future but must become more agile, innovate faster and attract top talent to remain competitive and continue to grow. These are among the key findings of the latest European Family Business Barometer which surveyed 1,576 family business executives in 26 countries across Europe, published by KPMG Enterprise and European Family Business (EFB).

The European Family Business Barometer is the seventh survey of Europe-based family businesses and reveals that family businesses continue to build on the momentum of past strong economic growth.

“We're seeing good progress this past year as family businesses are preparing for growth. The next step will require scaling their operations, which is a delicate and crucial operation,” says Jonathan Lavender, Global Chairman, KPMG Enterprise & Co-Chair Global KPMG Enterprise Family Business. “The business world is globally connected. As European family businesses prepare to do business on the world stage, they will find themselves going head-to-head with companies from around the world. They have to factor increased global competition in their growth and expansion plans.”

Key highlights:

  • 73 percent of respondents report that they are confident or very confident in their family business' economic prospects over the next 12 months. About one in five (19.5 percent) are neutral and 6.04 percent are negative or very negative about the future.
  • While overall confidence is up across Europe, the UK was a notable exception, with confidence dropping from 83 percent in 2017 to 68 percent this year. With Brexit negotiations ongoing, UK family businesses are looking to the future with caution. 
  • 64 percent of total respondents reported increased turnover over the past year. Only 11 percent of respondents reported decreased turnover in the past 12 months.
  • Improving profitability (49 percent); increasing turnover (38 percent); and attracting new talent (27 percent) are the top three priorities for the next 2 years.
  • The war for talent was ranked as a top challenge facing family businesses. This year 53 percent of respondents identified the war for talent as one of their top three concerns. This compares to 43 percent in 2017 and 37 percent in 2016. Other top challenges this year included the increased cost of labor (36 percent) and political uncertainty (36 percent). 
  • International expansion is being postponed. In this year's survey, only 36 percent of respondents said they had increased their activities abroad over the past year - compared with 44 percent in 2017 and 65 percent in 2016.

Investing in innovation and people to fuel growth

Europe's family businesses are planning for growth. Almost one quarter (23 percent) plan to expand and diversify their products to drive future growth and more than half (54 percent) plan to expand into new markets.

One of the key strategies for growth is embracing innovation. Respondents are capitalizing on past growth and reinvesting profits into the business. The majority (86 percent) are investing in the core business, 83 percent are investing in innovation and technology, and 81 percent are investing in recruitment and training. This is also a direct response to the top two challenges facing respondents: the skills shortage (53 percent) and the rising cost of labor (36 percent).

In this increasingly digital and technology driven world, Europe's family businesses also recognize the need for new skill sets and capabilities among leadership. One third of respondents are considering hiring an external CEO.

“As family businesses grow, it becomes increasingly important for them to reach out beyond the family, to find the additional skill sets they need. This is particularly true in the case of highly specialized roles in areas ranging from digital innovation through to key roles at the production or assembly line level. Unfortunately, these specialized roles are increasingly difficult to fill. The growing skills gap must be urgently addressed by policy makers.” 
— Jesús Casado Navarro-Rubio, Secretary General, European Family Businesses.

Managing volatility

With Brexit, growing protectionism and contentious trade talks front and center on the world stage, it's not surprising that more than one-third of respondents (36 percent) cite political uncertainty as a top concern and challenge. Still, Europe's family businesses are navigating their way through, taking a long-term approach and being proactive in their talent acquisition and streamlining decision making to ensure that they have the agility to respond to changes in real time.

“Family businesses know how to endure. They've weathered generations of economic ups and downs. They know how to diversify, change course and keep ahead of the competition.”
— Tom McGinness, Partner, KPMG in the UK.

For more information, contact:

KPMG Enterprise:
Jennifer Samuel
KPMG International
+1 416 777 8491
jsamuel@kpmg.ca

EFB:
Darius Movaghar
European Family Businesses
Phone: + 32 (0)2 893 97 10
dmovaghar@europeanfamilybusinesses.eu

About the Barometer

The European Family Business Barometer is based on the responses of an online survey from over 1,500 questionnaires which were received from family businesses across 26 European countries from 7 May to 7 July 2018.

About European Family Businesses (EFB)

European Family Businesses (EFB) is the federation of national associations representing long-term family owned enterprises, including small, medium-sized and larger companies. EFB represents 1 trillion euros in aggregated turnover, which is 9 per cent of European GDP. EFB's mission is to press for policies that recognise the fundamental contribution of family businesses in Europe's economy and create a level playing field when compared to other types of companies.

About KPMG Enterprise

Passion, it's what drives entrepreneurs, family businesses and fast-growing companies alike. It's also what inspires KPMG Enterprise advisers to help you drive success. You know KPMG, you might not know KPMG Enterprise. KPMG Enterprise advisers in member firms around the world are dedicated to working with businesses like yours. Whether you're an entrepreneur looking to get started, an innovative, fast-growing company, or an established company looking to an exit, KPMG Enterprise advisers understand what is important to you and can help you navigate your challenges - no matter the size or stage of your business. You gain access to KPMG's global resources through a single point of contact - a trusted adviser to your company. It's a local touch with a global reach.

KPMG Enterprise Global Center of Excellence for Family Business

From the boardroom to the kitchen table, KPMG Enterprise family business advisers share practical advice and experienced guidance to help you succeed. To support the unique needs of family businesses, KPMG Enterprise coordinates with a global network of member firms dedicated to offering relevant information and advice to family-owned companies. We understand that the nature of a family business is inherently different from a non-family business and requires an approach that considers the family component.

Visit: Running a family business.

About KPMG International

KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 152 countries and have 189,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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