Neil Davy, CEO Family Business UK.
For family businesses, the last two years of this government have been challenging. They have been forced to adapt to almost constant uncertainty and daily speculation about the next policy in line for change or tax to be increased.
When Labour was elected in 2024, it was with a promise to be the most business-friendly government with a clear priority to create the conditions for economic growth. We, along with other business organisations, were encouraged.
But the promise has not yet been delivered and for Britain’s five million private and family-owned companies, the reality has been notably different. The ending of long-standing and well-understood rules on Inheritance Tax relief remain a penalty on family ownership and an existential threat to five million British businesses.
For the new prime minister there is a golden opportunity to change that and reset relations with family firms. His plans for greater devolution and place-based growth should prioritise family businesses and put them at the heart of that mission. To succeed, he must commit to fully reverse the changes to Inheritance Tax.
Business Property Relief and Agricultural Property Relief exist for a very clear purpose – they incentivise the business investment and long-term stewardship our country needs. But the changes to BPR and APR have achieved the opposite, forcing businesses to prioritise the short-term and tear up longstanding plans for investment and jobs.
Worse, they have created a two-tier tax system in which family businesses are penalised — they must plan for a future liability while their non-family and foreign-owned competitors do not. That simple truth continues to weigh heavily on Britain’s family business sector.
Our latest research shows that more than half of all family firms will still be affected by the change and, for those with more than fifty employees, the impact rises significantly. There is simply no downside to the immediate reversal of this policy change.
Secondly, the new prime minister must commit to stopping the inexorable tax increases on all business and be relentless in creating the policies and conditions that instil confidence to invest, expand and create jobs, particularly those for young people who are bearing the brunt of these tax changes.
Ensuring the next generation have both the skills and the opportunities takes a long-term approach is central to family businesses and critical for the future of local communities and a healthy economy.
However, a public commitment to stick to Labour’s Manifesto commitments on tax does not fill me with confidence that the incoming chancellor will take a pragmatic and proportionate approach to tax.
Next, the new prime minister must support growth for scale-up family businesses – particularly the medium-sized businesses often forgotten by policymakers. There are 10,000 mid-market, scale-up family businesses in the UK contributing more than £140 billion to the UK economy and employing close to one million people. Imagine the growth and tax receipts that could arise from this cluster of businesses if they were incentivised rather than penalised.
Finally, strengthening local communities. In every part of the country family businesses are often cornerstone businesses on local high streets and communities. It is their long-term outlook and pride in place, underpinned by family values and a sustainable business model that makes them a critical part of the social fabric on which our communities and regional economies are built.
Sadly, family businesses are mis-understood by policymakers, too often dismissed as just ‘lifestyle’ businesses. But family firms are the beating heart of our economy built around a long-term vision, a commitment to people and local communities, and a willingness to invest over decades. It is what sets them apart and makes them one of this country’s greatest economic assets.
Government policy, led by the new prime minister, must reflect that.