Europe’s family businesses get ready to hand control to next generation: KPMG Enterprise European Family Business Barometer

Leaders of family businesses in Europe remain positive about the future, while innovation and the war for talent are among the main challenges and priorities of their leaders, according to the 8th edition of the European Family Barometer, a survey of companies in 27 European countries, including Romania.

Europe’s family businesses remain positive about the future at a time of rising economic and geopolitical uncertainties. Innovation, training and education, and diversification are key priorities as they adapt to a fast-changing world—while planning for succession is increasingly on families’ minds.

These are among the key findings from the eighth European Family Business Barometer, a survey of Europe-based family businesses produced by KPMG Enterprise and European Family Business (EFB). Researchers surveyed 1,613 family business executives in 27 countries across Europe for this year’s report.

“Europe’s family businesses are confronted by trade wars, geopolitical uncertainty, recession fears, rising populism, Brexit and the climate crisis. Years ago, any one of these issues could have triggered an economic slowdown and driven rampant business pessimism,” says Jonathan Lavender, Global Chairman, KPMG Enterprise & Global Co-leader, KPMG Enterprise Family Business. “Yet despite these many challenges, these family businesses remain positive about the future. Europe’s entire business community can take heart from confidence that whatever comes, we’ll get through it.”

Key highlights

• 62 percent of respondents are confident or very confident about their business’s outlook for the next 12 months. Optimism is especially high among family businesses in Ireland (91 percent), Portugal (78 percent) and the Netherlands (67 percent).
• 59 percent of respondents report rising turnover over the past 12 months, while another 28 percent said that turnover remained steady.
• 72 percent say innovation is a key priority for the next 2 years, along with workforce education and training (64 percent) and diversification (50 percent).
• 63 percent of respondents feel the war for talent is their top business concern, up from 53 percent last year. 62 percent of respondents are also concerned about declining profitability, and 60 percent are worried about regulatory change.
• 37 percent of respondents report increased international activity over the past 12 months.

Succession top of mind as business families look to the future

Succession is poised to become a critical topic for family businesses across Europe over the next 5 to 10 years. It’s estimated that US$15.4 trillion will be transferred globally by 2030; US$3.2 trillion of which will be transferred in Europe.

In this year’s survey, 35 percent of respondents say they intend to pass ownership of the business to the next generation, while 33 percent plan to pass on management responsibilities as well. Only 27 percent say they intend to transfer oversight responsibilities, perhaps suggesting the senior generation would like to keep a close watch on the business for a while longer.

While 84 percent of respondents say they currently have a family member as president or CEO, only 62 percent believe a family member will occupy that role in the years to come.

“Older family businesses still have family members in charge, but this may become less common in the future. Families will increasingly feel that they need outside expertise to help the business navigate a complex and constantly changing environment. As businesses grow more global and more digital, external executive leadership can bring the experience, skills and independent perspective needed to innovate, take strategic risks, and prosper,” says Tom McGinness, Global Co-leader, KPMG Enterprise Family Business.

As Ramona Jurubiță, Country Managing Partner at KPMG in Romania, comments: “This survey shows how important family businesses are to the global economy. It is good to see that a clear majority are confident about the future, in spite of geopolitical, trade and economic uncertainty, and that a majority also reported increased turnover in the last 12 months.”

Richard Perrin, Partner, Head of Advisory, KPMG in Romania, adds: “The survey shows that many family businesses are highly innovative and are focused on making the changes needed to prosper in the future. Many are keen to invest in helping their staff learn new skills. However, family businesses face unique challenges. They need to get the right balance between tradition and innovation and also understand when it can be beneficial to bring in talent from outside the family to support the growth of the business. Succession planning is also critical, and should not be about preparing for a single event, but rather a process which will take place over time, as a new generation is gradually inducted into running the business, or the necessary outside talent is brought in.”

As René Schöb, Tax Partner, Head of Tax and Legal, KPMG in Romania adds: “I was interested to read that 34% of the businesses surveyed consider that managing tax liability is an important consideration when planning the transition to another generation or to new management. Family businesses have distinct tax compliance needs, which can be complex, so getting the right expert advice is important, to ensure that the correct tax is paid and to avoid unpleasant surprises.”

As Mădălina Racovițan, Tax Partner, Head of People Services, KPMG in Romania, adds “Investment in people is critical for success in today’s competitive market and the survey shows that family businesses understand the need to equip their employees with the knowledge and skills needed for a rapidly changing work environment. This is especially important in a context in which innovation is seen as essential if the business is to thrive. So it is encouraging that 64% of the companies surveyed said that educating and training their workforce was a key priority over the next 2 years.”

European family businesses remain committed to the European project

As a new European Commission and EU Parliament settle in, Europe’s family businesses are eager to see politicians make trade a priority. One in three respondents (35 percent) feel the EU’s key priority should be completing the single European market, while 20 percent believe the EU’s main priority should be taking the lead on championing free trade.

Other priorities mentioned by the business families are ensuring the education system is preparing Europe’s students for the jobs of the future, climate change and regulating the digital economy.

“It’s encouraging to see some alignment between the interests of family businesses and those of European politicians, in that there’s a shared ambition to embrace necessary reforms, further trade, and complete the single market. Business will want its voice heard as reforms take shape,” remarks Olaf Leurs, Tax Partner, Meijburg & Co, KPMG the Netherlands.