- Employment costs and rising prices holding back family businesses
- National Insurance plus National Minimum / Living Wage having biggest tax impact on family firms
- Family Business UK says government must look to reduce these burdens to create environment for growth and investment
Family Business Pulse Q2 2026
New research published by Family Business UK paints a mixed picture of a family business sector being squeezed by higher costs. While firms remain confident and eager to invest for the future, increasingly high costs of employment and rising prices, driven by geopolitical uncertainty, are holding them back.
The research, which forms the basis of a new quarterly Family Business Pulse report which tracks sentiment and activity amongst Britain’s family firms, shows that almost half of family businesses (47%) say either higher National Insurance Contributions or the increased National Minimum and Living Wage are having the biggest tax impact on their business. Together with high wage expectations, rising employment costs represent the biggest barrier to family firms taking on new staff.
According to the research, more than two fifths of family businesses (41%) say that government support with high costs of employment would be the best way support them create new roles and recruit staff over the next 12 months. A further 35% want greater stability and predictability in employment regulation.
Recruitment and expansion amongst family businesses is also being hit by uncertainty caused by the ongoing conflict in the Middle East. More than one fifth (22%) of family businesses say they have delayed hiring and expansion plans because of global instability while one in six (16%) has been forced to cut jobs.
Neil Davy, CEO FBUK said:
Family businesses have been building Britain for generations but, right now, they feel stuck in limbo being squeezed on all sides by the permanently higher costs of employing people, and temporary cost increases from ongoing geopolitical uncertainty.
Family firms remain eager to grow employment, but cost and uncertainty are forcing them to make unpalatable choices—to cut back on recruitment more than they would like and, in some cases, reduce headcount.
If we are to reverse this situation and allow businesses to create the opportunities workers need there must be a renewed focus on reducing the burden of National Insurance Contributions along with careful management of the National Minimum and Living Wages. We would like government to commit to moving towards a fixed three-year review cycle and introduce stronger fiscal incentives to get young people into work.
The research for the Family Business Pulse report also shows the extent and impact on Britain’s family business sector of rising prices driven by conflict in the Middle East.
More than four in ten (43%) family businesses say instability has pushed up costs in areas including fuel, raw materials, shipping and insurance. Of these, one third (34%) say prices have risen between 10%-19% while one in five (22%) says prices are up between 20%-29%. Almost one in ten family businesses (9%) are reporting costs increases between 30%-39%.
More than a third (37%) of family businesses have adjusted prices to customers to reflect their own higher costs. Other impacts include:
- 27% of family firms are reporting difficulties with supply chains
- 24% of family businesses say ongoing uncertainty is affecting long-term planning
- 19% report lower customer demand in key markets
- 18% say finance costs have increased
- 16% report difficulty accessing international markets
Inheritance Tax continues to cause major challenges for most family businesses, according to the research, with more than half (51%) saying they will still be affected despite investing time and money in legal and tax advice over the last 12 months.
Medium and large family businesses remain the most likely to be affected with more than 60% of all family businesses employing more than 50 people saying they will be hit.
Almost four in ten (38%) medium and large family businesses say the future growth of their business would be supported by reforming rules on Inheritance Tax, which were introduced on 6 April.
Neil Davy continues:
Just when growing the UK economy and supporting British enterprise should be the Government’s priority, this specific tax policy imposed on British family businesses is achieving the opposite—forcing them to look inwards rather than focus on growing their business and creating jobs across the country.
Family businesses are the lifeblood of local economies across the country and are critically important to thriving communities. With the Budget just five months away, the Government must look at the priorities highlighted in our Family Business Pulse report and create a fairer—and simpler—tax system that supports family businesses and unlocks their potential to deliver the increased opportunities and economic growth our country needs.