UK-wide hit to the economy as family businesses in every sector and region of the country cut investment and jobs ahead of inheritance tax change
The full impact of changes to inheritance tax for family businesses and farms is revealed in new research showing every region of the UK and sector of the economy will be hit by the Government’s decision to change Business Property Relief (BPR) and Agricultural Property Relief (APR).
The research from Family Business UK (FBUK), supported by 32 trade associations, is the most comprehensive analysis yet of how family business owners are likely to respond to the policy change.
The analysis, which has involved 4,174 businesses and farms and conducted by CBI Economics, the independent consultancy arm of the CBI, shows that for family businesses affected by the change to BPR, investment is likely to fall most across Yorkshire and the Humber (-17%) and the East of England (-17%) while job losses will be greatest (-10%) in parts of Scotland, the North West and North East of England.
For businesses and farms impacted by changes to APR the steepest cuts to investment are expected in Northern Ireland, the Midlands and the North East of England (-17%) while headcount could be reduced by between 10% and 12% across the North West and North East of England.
Local and regional-level analysis shows just how significantly communities and supply chains supported by family-owned businesses could be affected. The latest research also assesses the impact in every Parliamentary constituency across the UK. Parts of Cornwall and Aberdeenshire could be hardest hit by the changes as both areas are expected to see sharp falls in jobs and GVA as a share of their local economies. Five of the ten most badly affected Parliamentary Constituencies for job losses are in Cornwall including: St Austell & Newquay, North Cornwall, South East Cornwall, St Ives and Cambourne & Redruth (see notes for tables on regional, and top 10 constituency impacts).
Following the announcement of changes to BPR and APR in the Autumn Budget, owners of family business and farms have taken immediate steps to mitigate the effects of the policy change. Key findings show:
- Over 60% of businesses anticipate reducing investment by more than 20%, with average investment declines of 15.8% (APR) and 15.5% (BPR).
- Around a quarter (23%) have reduced headcount due to BPR and APR changes.
- Business restructuring is a growing concern: Around 1 in 5 are considering downsizing under both BPR and APR, with up to 12% contemplating a sale.
- Reduced community support: 15% (BPR) and 12% (APR) of businesses have cut charitable donations or community activities, which will impact vital local initiatives.
By the end of this Parliament, the research shows that changes to BPR and APR could lead to:
- 208,500 jobs losses from family businesses and across their supply chains
- £14.86 billion less economic activity (GVA) – almost equivalent to the value of UK motor vehicle manufacturing (£15.7bn GVA)
- a £1.87 billion net fiscal loss to government
Neil Davy, CEO Family Business UK said: “This latest research shows just how far-reaching, and immediate, the impact of these policy changes is. No industry, sector, region or parliamentary constituency will be immune.
“In construction, services, manufacturing, tourism, transport, agriculture and horticulture, family business owners are responding to the changes to BPR and APR by tearing up long-term plans to invest in their businesses, their employees and the communities in which they are based.
“While parts of government are looking at how to boost regional growth and create opportunities in every sector of the economy, this research shows how changes to BPR and APR will achieve the exact opposite.”
“Within our diverse and rapidly changing economy, family business owners have been building Britain for generations. If they are to continue to do so, with confidence in the future, the Government must urgently reconsider these policy changes.”
Family businesses operate in every sector of the economy and the latest research demonstrates the widespread impact of the change to BPR and APR right across the economy. Sectors expected to see the steepest cuts to investment include Accommodation and Food Services (-17%), Construction (-17%), Agriculture and Horticulture (-17%), Manufacturing (-16%), Real Estate activities (-16%), Retail and Wholesale; repair of motor vehicles (-15%).
For those affected by APR, investment is likely to fall most in agriculture and horticulture, with average cuts of around 17%, Accommodation and Food Services (-16%) and Real Estate activities (-16%).
Deborah Walker, Director General of the British Holiday & Home Parks Association said: “The proposed changes to Business Property Relief will mean many much-loved, family-run holiday and residential parks across the UK will have to be broken up and sold off. This is already having a negative impact on investment in many rural and coastal communities. It is vital the Government re-examines the business case for this change and considers the true economic impact it will have.”
John Newcomb, CEO Builders Merchants Federation said: “The building materials sector is absolutely critical to the lifeblood of the UK economy, but changes in Business Property Relief could limit the future of the sector, with many private and family businesses across our membership saying that the impact will damage enterprise.
“Most BMF members are now reviewing their sales and trading forecasts for the next two years and looking at investment decisions, stock levels and staffing numbers.
“We have urged government to ensure the policy does not have the unintended consequence of wiping out what they are aiming to achieve and we call on the PM, Chancellor and Ministers to review the situation and think again about the proposals.”
Steven Mulholland, CEO Construction Plant-hire Association said: “This is the clearest evidence yet of the damage that changes to Business Property Relief will cause to family-run firms – not just in construction, but across every sector of the economy. The numbers speak for themselves: 208,000 jobs lost, £15 billion in lost economic activity, and a nearly £2 billion net fiscal loss for the Government.
“Family-run businesses are the backbone of our economy and communities – they invest locally, create jobs, and drive growth. It is deeply irresponsible for the Government to proceed without a proper impact assessment.
“If the Government is serious about going for growth, it urgently needs to take stock and conduct a thorough consultation on the real-world impact its policies are having and reverse them – before lasting damage is done”
Kate Nicholls, Chief Executive of UKHospitality, said: “Family-owned and run hospitality businesses are incredibly concerned about the proposed changes to inheritance tax, and what it means for them and their families.
“The family-run nature of these businesses are what make them a key and special part of British hospitality, and there is significant concern that these changes endanger that, with potential costs running into the millions.
“With the findings unveiling that many businesses anticipate reducing or even pausing long-term investments, we urge the Chancellor to rethink these proposals and begin a full consultation with hospitality businesses to properly understand the impact.”
Fran Barnes, CEO Horticultural Trades Association said: “The findings of this report are deeply concerning and mirror the stark reality facing many of our members who are family-run horticultural businesses across the UK. Changes to APR and BPR, alongside other cost pressures, are pushing many towards a cliff edge. The HTA has been calling on the government to pause, consult, and reconsider these policies before long-term damage is inflicted on the sector that underpins Britain’s green economy.”
Gordon Balmer, CEO Petrol Retailers Association said: “PRA is pleased to support the recent study carried out by Family Business UK on the Government’s planned changes to Inheritance Tax from April 2026. Keeping in mind that many of our member’s businesses are family owned, the PRA feels the flaws in the policy reform are clear and threaten thousands of jobs as well as nationwide fiscal gain. PRA has been lobbying for the Government to reconsider the Inheritance Tax reforms as far back as our letter to the Prime Minister on 20 December 2024.”
Sue Robinson, CEO National Franchised Dealers Association said: “NFDA welcomes Family Business UK’s research on the Government’s proposed Inheritance Tax changes to Business Property Relief (BPR) and Agricultural Property Relief (APR). With a number of NFDA member businesses family owned, BPR especially is a pressing issue and NFDA membership was supportive throughout research process. It is crucial that the Government addresses concerns across various sectors that could lead to major fiscal losses, lack of investment and high employee turnover. Recently, NFDA joined other industry bodies in signing a joint letter to the Chancellor, calling for greater transparency around the Government’s proposed changes.”
Tom Bowtell, CEO British Coatings Federation said: “There are a number of family-owned coatings companies across the UK, deeply embedded in their local communities and providing hundreds, if not thousands of jobs, between them. The changes to Business Property Relief are hugely damaging and threatening to their futures. I would urge the Government to look at the evidence collected by FBUK and CBI Economics and reverse this damaging policy before it hurts communities all over the country.”