Posted on Monday 24 April 2017 by Ulster Business
Kenneth Webb, Managing Director at Ulster Weavers, Martin Cowie, Private Business Leader at PwC, and Janette Jones, Head of PwC NI’s tax practice
You don’t need to be an economist to know family-owned and owner-managed businesses play a significant role in the Northern Ireland economy. Currently, three-quarters of all companies here are family-owned or owner-managed, but their size often belies their significance.
According to the Ulster University report, The Contribution of Small Businesses to Northern Ireland, these small and medium-sized companies and self-employed people, collectively provide; 75% of employment, 75% of turnover and 81% of GVA in NI’s private sector. Indeed, small and family business actually employ more people than NI’s large companies and the public sector combined.
For PwC, this data holds no surprises, given that even a casual glance down the list of the biggest companies on these shores reveals a host of well-known names still operating under family ownership and management, many of which have been around for decades.
PwC’s position in the region is unique. The firm is a trusted advisor to more family-owned and owner-managed businesses than any other professional advisor in the Province. They also advise more than three-quarters of NI’s top-100 companies, as well as being home to some of PwC’s global centres of excellence - PwC’s office at Waterfront Plaza houses one of only three Google labs in the world.
Leading PwC’s family business team in NI, Martin Cowie and Janette Jones understand how this mix of global reach and local expertise actually makes the firm very adept at dealing with the peculiar challenges, and indeed opportunities, which are part and parcel of running a family business.
Martin Cowie, a Scot who has worked with PwC’s private business clients across the the UK and in Australia has certainly been impressed with what he’s seen in the past year working in Northern Ireland.
“Northern Ireland has some absolutely fantastic family businesses which are more than capable of competing on a world stage,” Martin told Ulster Business. “They’re not without their challenges but, with the right support from us, we can help them to the next level.”
Those challenges are not unique to Northern Ireland, but ones which are found in family businesses across the UK and beyond.
Take succession planning, a particular aspect of private businesses which Martin describes as “the elephant in the boardroom.”
As he suggests, one of the biggest issues in this situation is a lack of communication.
“In many cases the founding or older generation expect the younger generation to come in and take the business over,” he said. “At the same time the younger generation, on the whole, want to do exactly that but neither party actually starts a discussion about how that’s going to happen.”
That’s where PwC comes in, helping to start those discussions and make sure the plans which are put in place are right for everyone.
“Our regular PwC Family Business Surveys consistently tell us that protecting the long term future of the family business is the key objective and ensuring the business stays in the family is a real priority for UK family firms.
“Succession is a medium-term play, not something which happens immediately but which takes time. We use the skills and experience we see across a plethora of different businesses to help shape the handover and smooth the process.
“The companies we deal with know their business inside out, but we are able to share the knowledge and experience we have gained from working with other families to help our clients make the right decision for their family and their business.”
That might mean handing a business straight to the next generation but could equally mean bringing in an outsider to run the business in the meantime. PwC can help clients manage this transition.
“We’re regularly asked to help recruit more professional management, but that also means helping the family to shift from being managers to becoming shareholders - a shift that families can find confusing,” says Cowie.
And one of the biggest parts of succession planning is tax, an area where Janette, Head of PwC NI’s tax practice, is a leader in the field.
“We find out what liabilities are likely to arise both personally for the family in the form of inheritance tax or capital gains tax and for the company if restructuring is needed. Our locally-based tax specialists look at both personal and company tax as one to make sure clients reduce their exposure during the process.”
“For family businesses, every pound the business has to pay comes out of the owners pockets, that’s why we pay so much attention to both. PwC is unique in the Province for having local experts in all aspects of tax including Inheritance Tax and Trust planning. We can also call on our international colleagues where there are offshore family interests; collectively, we can advise families on the best way to manage tax when passing a business to the next generation.”
While in many instances succession planning is focused on handing the business to the next generation, sometimes an exit from the business may be the best option, something which the experts at PwC are able to assess, both in terms of suitability for the family and in terms of tax mitigation.
“You might not have a younger generation coming through or may have one which is not interested in the business,” Janette said. “Then, a trade sale can be the best option.
“We have a dedicated deals team that sell businesses, making sure owners get an exit and the best price for their business while all the while working with the tax team to make sure it’s tax efficient.”
PwC is also helping local companies explore export opportunities and embrace new technology. Martin explains that
“One of the biggest opportunities for family companies in Northern Ireland is export,” he said. “At present most sell in their own back yard but there are huge untapped markets in Europe, Asia and the US. Our latest Family Business Survey suggests that over a third of family firms are looking to diversify into new, overseas markets.
“PwC as an organisation has all the help, network and capability which a new exporter could need and we’ve been at the forefront of breaking into new markets for years.”
Family businesses are often reluctant to adopt new digital technology simply because they are unsure how it works or what benefit it brings. There is huge potential tech-reticent family firms to adopt a more digital approach to all aspects of their business to increase sales and reduce costs.
“Technology is changing how business act with consumers and every business needs to be on top of that. The more traditional businesses are using technology to keep themselves relevant and to grow their businesses.
“That’s a big shift even in the last two years as they can see that technology can give an edge over the competition without losing their traditional values. It's also an area where the younger generation of family members are most confident. But this comes with a health warning. Just over half of UK family firms are alert to the dangers of cyber attack and only around the same number actually discuss digital disruption at board level.”
Aware of this threat, PwC’s private business practice works in conjunction with both the PwC’s technology consulting team and its national cyber security team, to provide advice to local clients
In the same vein, Martin Cowie says PwC is also at the forefront of helping family firms prepare for one of the other main threats facing their business: Brexit.
“The uncertainty around Brexit has been difficult but the tenacious nature of family businesses means they’re getting on with things.”
That tenacity combined with an ability to flex quickly, a naturally innovative approach and an in-depth knowledge of their industry means Northern Ireland’s family businesses are an indelible part of the economy.
With the help of PwC’s specialist advice, the sector’s potential future growth is huge.