This first-of-its-kind analysis from Family Business UK and the ScaleUp Institute shines a light on the critical importance of Britain's fast-growing, mid-sized family firms. It identifies their economic value, regional dispersal, their experience in accessing talent and finance and the challenges they face in growing to becoming businesses of scale.
Family Business Scale-ups:
Breaking Barriers to Growth
Commissioned by:
Report by:
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Family Business Scale-ups: Breaking Barriers to Growth
Contents Foreword
4 6 7
Acknowledgments Executive summary
Definitions and methods
12 14 16 22 24 26 27 28 30 32 34 35 36 37 39 40 46
Introduction
The UK family business landscape
Mid-market family businesses: True regional powerhouses
Mid-market family businesses industries
Mid-market firm size
Age of mid-market family businesses
Investment dynamics in mid-market family businesses
Summary
Scaling family businesses
Scaling family businesses – Industries
Scaling firm size
Age of scaling family businesses
Investment dynamics in scaling family businesses
Summary
The challenges to growing and scaling family businesses
Access to markets
51
Access to talent and leadership capacity Accessing finance and growth capital
58 60 61 63 64 72
Tax
Access to innovation
Summary
Insight piece: Family businesses: At the heart of the UK economy
Policy implications
Page 3
Foreword
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Family Business Scale-ups: Breaking Barriers to Growth
Foreword
The UK’s scale-ups and mid-market businesses are increasingly recognised as a vital and dynamic segment of the national economy – they are the drivers of growth, employment and innovation.
this report, they can drive the productivity gains Britain urgently needs. Now is the moment to back the family businesses that have already proved their resilience, commitment and long-term value to the communities they serve, and unlock the full potential of Britain’s missing middle.
Included within this cohort, family businesses represent a particularly significant force. This ScaleUp Institute report, commissioned by Family Business UK, presents new analysis of the critical mid-market cohort of family firms that contribute more than £140 billion to the UK economy and employ more than 900,000 people. Scaling family businesses alone generate £72 billion and support half a million jobs. These are family enterprises that combine commercial ambition with long-term stewardship, deep community roots and multi-generational commitment. Embedded in local economies and anchored in key sectors – from manufacturing and logistics to professional services and retail – they are quiet engines of growth across the length and breadth of the nation. Their growth potential is substantial, and with the right infrastructure and policy environment, which we explore further in
“The ScaleUp Institute is delighted to work with FBUK to shine a light on the vital role family businesses play within the scale-up and mid-market economy. The data reinforces the importance of family businesses to local communities and their significant growth and global ambitions that we should all get behind.”
Steve Rigby, Chair Family Business UK
Irene Graham OBE Founding CEO ScaleUp Institute
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Acknowledgments
We would like to thank the business owners of Bettys & Taylors, Macphie, JW Lees Brewery, Bennie Group, W&R Barnett and Strathberry, who contributed to this research.
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Family Business Scale-ups: Breaking Barriers to Growth
Executive summary
Family businesses are a significant contributor to the UK business population For the first time, this report shows that one-third of all active companies with employees registered at Companies House are family businesses (under the ONS definition whereby a family holds a majority stake and one or more family members are directors), numbering 766,847 in total (excluding sole traders); with an estimated revenue of £1.6 trillion 1 and employing over 3 million people . Family businesses are a regional powerhouse The vast majority of these businesses, 84.3% , are based outside London, and 68.2% outside London and the South East , highlighting their role as key contributors to regional economies, with the East of England (11%), the North West (10.5%), the South West (9.1%) and the West Midlands (8.3%) contributing 40%.
Family businesses are embedded across core sectors of the UK economy, with strong representation in the UK’s Industrial Strategy growth priorities Family businesses are present in traditional and Industrial Strategy sectors, with a growing number in the professional services, science and tech economies: 35% of family businesses operate within the government’s Industrial Strategy 2 sectors, with professional science and tech businesses the second largest sector in family-business make-up (14.5%); 29.8% of family businesses operate in real estate and construction, and 10.9% in wholesale and retail. Figure 6 details how family businesses are clustered in key Industrial Strategy sectors.
This report from Family Business UK (FBUK), working with the ScaleUp Institute, presents a fresh analysis of the UK family business landscape. It focuses exclusively on mid-market and scaling businesses, using firm-level data from Companies House. It represents a first-of- its-kind approach to analysing Britain’s family business sector moving beyond other survey-based reports. It shows that family businesses reaching the mid-market and scaling-up stages play a distinctive and significant role in the UK economy, anchoring jobs and investment in local economies while supporting long-term, sustainable growth that is internationally driven with strong representation in our industrial sectors and heartlands.
1 Based on average reported turnover at different stages of evolution. 2 https://www.gov.uk/government/publications/industrial-strategy-sector-plans
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Family Business Scale-ups: Breaking Barriers to Growth
Executive summary Family businesses generate growth and build into businesses of significant scale For the first time this report undertakes a
• Taken together, these mid-market and scaling firms have raised £3.2 billion in investment, which is split between traditional debt and growth equity. HSBC, NatWest and Lloyds are the primary sources of debt funding, while Business Growth Fund (BGF) is the most frequent patient growth capital backer of deals with these firms. • Mid-market and scaling family businesses are here for the long term: On average, more than 50% of mid-market family businesses are more than 20 years old with 33% more than 30 years old, while 20% of our scaling family businesses are more than 30 years old with 369 having been in business for more than a hundred years. ■ These firms are highly international , with six in ten saying that selling overseas is a priority for their future growth.
• On planning international expansions, six in ten say that selling overseas is a priority for their future growth, with the EU (66%) and North American (33%) markets cited as key areas for such expansion/growth. • More than half (59%) are also considering putting a physical presence or operations overseas, while a further 23% say they may do so. When asked about relocating their headquarters overseas, only two in ten said this is something they are considering. Family businesses are clear about what they need to foster their growth and scale • Against the backdrop of macroeconomic challenges that family businesses see as threats to their growth and investment, they most frequently cite access to markets, both in the UK and overseas, and the ability to attract and retain talent as the main barriers to scaling up further. These are followed by concerns about tax environment uncertainty and the ease of accessing infrastructure and R&D facilities.
comprehensive probe into the mid-market and scaling family businesses population, reflecting that there are nearly 10,000 such firms across the country: 8,641 mid-market family businesses alongside 2,985 scaling family firms (one in four of all visibly expanding businesses) ; 1,765 are in both segments: • They are spread across the country, with nine in ten based outside London and seven in ten outside London and the South East for both segments. The North West, South West and East of England all have significant clusters of mid-market and scaling family businesses, with three in ten based in these regions. Sectorally, they are more likely to be operating in the Industrial Strategy sectors (42% of mid- market and 51% of scaling family businesses), with a significant proportion in Advanced Manufacturing (21% for mid-market; 28% for scaling family businesses) and Professional Services (11% for mid-market; 17% for scaling family businesses).
They are innovative , with nine in ten having undertaken innovative activities in the last three years. They are growth-oriented , with seven in ten expecting to continue to scale up in 2026, five in ten planning to grow their employee headcount and four in ten aiming to increase their turnover.
■
■
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Family Business Scale-ups: Breaking Barriers to Growth
Executive summary
• Mid-market and scaling family businesses place a strong emphasis on developing their people, leadership and governance as they grow . Later in this document we will go into details of family businesses demonstrating best practice in this area, such as Macphie and Bettys & Taylors. • Six in ten family firms already operate formal governance structures, with a further three in ten planning to introduce such a structure, whereas eight in ten firms are focused on developing the skills of their senior leadership teams. In doing so, these businesses are increasingly complementing family leadership with external experience, including non- executive directors (NEDs) and fractional executives, and are adopting more professionalised approaches to support scaling up.
ACCESS TO TALENT Access to talent and skills is one of the most frequently cited barriers to further expansion for mid-market and scaling family businesses. • Four in ten report shortages in AI and cyber skills , while one in three cite gaps in research and technical skills, manufacturing and engineering, and core business functions such as finance. • While more than half employ staff from overseas , three in ten say that difficulties accessing international talent, including visa costs, processing times and system complexity, are constraining their ability to grow at pace. • Four in ten offer apprenticeships, internships and/or work placements , and many see scope to expand this provision. There is a desire for greater flexibility in provision, with access to flexi-apprenticeships, a Flexible Talent Fund and upskilling and reskilling programmes to enable workers to move into their sector all sought-after. • Strengthening links with universities, local institutions and peer networks is seen as critical to building leadership capability and sustaining growth. This is an area reinforced in Family Business UK’s (FBUK) Policy Agenda, 3 where family businesses highlighted their desire for specific leadership programmes with universities or business schools to enable succession planning.
3 https://familybusinessuk.org/family-first-approach-in-new-fbuk-policy-agenda/
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Family Business Scale-ups: Breaking Barriers to Growth
Executive summary
ACCESS TO MARKETS •
Mid-market and scaling family businesses operate across multiple market channels: 70% sell to other businesses or government (B2B) and 73% are selling direct to consumers (B2C), while 43% serve both markets. • When working through domestic markets and supply chains they want better access to key decision-makers and opportunities to showcase their businesses by expanding brand presence through trade shows and “meet the buyer” events. • To foster their internationalisation, export and overseas expansion, they are keen to see access to a local international trade hub; support for finding or recruiting in-country management or employees; funding for research into new markets; and access to financial products to support overseas expansion, including through UK Export Finance insurance and loan guarantee schemes. Support with market selection, entry and fulfilment, as well as introductions to corporate businesses and financiers able to support overseas growth, are also viewed as helpful to break down barriers to overseas markets.
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Family Business Scale-ups: Breaking Barriers to Growth
Foreword
Executive summary
FURTHER BUSINESS SUPPORT •
• While five in ten are confident that the activities under way to bridge the growth capital gap by unlocking pension funds and institutional monies, such as the Mansion House Accord, new National Wealth Fund and British Growth Partnership Fund, will reach them, more than a third would consider a stock exchange listing, with the UK being the most likely destination. • Around half of mid-market and scaling family businesses are aware of the latest government strategies that are being developed, and seven in ten feel that these strategies will be beneficial to their business. • In building sustainable businesses for the long term, family firms continue to voice concern over the changes in the tax system and the need for stability. FBUK’s Policy Agenda found that business rates and corporation tax are having the biggest impact on mid-market family businesses and there is also concern about Employer National Insurance Contributions. 4 They desire a review of Inheritance Taxes (Business Property Relief and Agricultural Property Relief), as also reflected by family businesses such as JW Lees and Bettys & Taylors – which is discussed in the Case Studies section later in this publication. • Vital for their confidence in future growth is the need for more joined-up, stable and predictable tax and regulatory frameworks, which support long- term investment, succession and innovation.
While family businesses are positive about the government’s Industrial and Trade Strategies and Plan for Small Businesses, in implementing these they want to have better strategic account management of family firms in their local communities and clusters. • Where concierge services are being considered, they would value fast-tracking of innovation opportunities and collaborations; support for going into new markets overseas; and sharing and fast-tracking of procurement opportunities. • Eight in ten family firms say that they are using some form of external finance, which in the main is debt, with three in ten family businesses utilising some form of external equity funding, which they require to be patient. In common with others, however, when seeking funding, they view it as harder to raise outside London. They also highlight challenges to do with the scale of funds people are willing to invest, the appetite for risk of UK funders, and the level of short-termism in their outlook, meaning they are less willing to invest for a longer period and to provide patient capital at scale. • To overcome these challenges they would like more regular set briefings with the investor community on investor options and trends; “meet the investor” events to showcase their businesses; access to investor relationship managers/advisors; and also the ability to find relevant finance board advisors and NEDs. • Positively, six in ten think that public-sector finance offerings are joined up and a similar proportion are aware of recent changes made in the capital markets, including the Private Intermittent Securities and Capital Exchange System (PISCES) and listing reforms.
4 https://familybusinessuk.org/family-first-approach-in-new-fbuk-policy-agenda/
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Family Business Scale-ups: Breaking Barriers to Growth
Definitions and methods
some family businesses will not be captured by this method, for example when family names might differ, e.g. owing to marriage or among different branches of the same family, or where family trusts are involved in the ownership structures. Furthermore, this method might also on occasion pick up businesses that are not family-run but merely involve individuals with a common last name, e.g. Smith or Jones, but who are otherwise unrelated. Additionally, depending on the size of the enterprise, businesses must comply with different reporting requirements. Only those meeting at least two of the following criteria are required to file full accounts: a turnover greater than £10.2 million, assets exceeding £5.1 million, and/or more than 50 employees.
The analysis in chapters two, three and four of this report has been conducted by the ScaleUp Institute using live data from Companies House, accessed via a range of data platforms 5 to create a full picture of the family business ecosystem. By applying the definitions above we have been able for the first time to create an assessment of family businesses in the UK based on firm- level data, with a particular focus on the mid-market and scaling segments of family firms. As with all research methods there are limitations and challenges in this approach; for example there is no reporting requirement for companies to specify that they are family-owned, so in order to find out about familial relationships between shareholders and directors, an assumption must be made that these individuals will share the same last name. This means that
1 2
Family Business A family (two or more individuals with the same last name) holds a majority stake (50.01%) in the company and one or more people with that same last name are directors of the company. Scaling family businesses A family business defined as fitting the international benchmarks of OECD and Eurostat scaling parameters: this report covers family scale-up businesses that are growing their turnover or employee headcount or both by 20% or more each year over a monitoring period of three years, with at least ten employees at the start of that period and the scaling pipeline of family firms that are growing at a rate of between 10 and 20% by the same parameters. Mid-market family businesses These are defined as firms that meet criterion one and have either or both of the following characteristics: (1) 50 to 499 employees; (2) a turnover of between £10 million and £100 million.
3
5 Including mnAi, Beauhurst and Data City.
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Introduction
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Family Business Scale-ups: Breaking Barriers to Growth
Introduction
According to the Department for Business and Trade’s (DBT) Business Population Estimates 6 in 2025, there were 5.7 million private-sector businesses in the UK. The vast majority of these businesses, more than 75%, are non-employers (4.3 million), while 1.2 million have fewer than ten employees; 220,000 are small businesses (10–49 employees); 38,000 are medium-sized businesses (50–249 employees); and 8,000 are large (with more than 250 employees).
It is widely acknowledged that family businesses comprise a large proportion of all UK enterprises, with many studies looking at the composition of the UK business population to assess overall numbers. In many cases these studies classify all businesses without employees as a family business by virtue of them having a single owner/director. However, to estimate the wider landscape with employees, they utilise survey data as a proxy to calculate the proportion of each business size classification (micro, small, medium and large) that could be considered as family businesses. The most recent studies using this method conclude that more than 1 million UK firms with employees are family-owned: more than 70% of all businesses with employees. In total, when adding in those firms without employees, they conclude that more than 90% of the private sector can be considered to be family businesses. While these studies provide a useful snapshot of the economy, there are some limitations in the methods used and thus the representativeness of the data, especially when seeking to segment the data by sector, region and economic contribution.
This new research that FBUK has commissioned with the ScaleUp Institute is designed to shine a light on mid-market and scaling family businesses that are spread across the country and, for the first time, to assess family businesses in these areas using firm-level data from Companies House. By assessing each firm based on their own filings, we are able to bring together further insights into the landscape of these businesses, including trends in growth and investment. Over the next few sections of this report we discuss the dynamics of the 760,000 family businesses registered at Companies House that can be identified, with a critical focus on those that are operating in the mid-market and scaling-up sectors. Focusing on these segments enables a more detailed examination of how family businesses grow, invest and engage with policy environments. Chapters five and six provide additional insights into the challenges facing family businesses as they seek to grow and expand, with evidence from the 2025 ScaleUp Institute Survey and case-study interviews with family business leaders.
6 Business population estimates 2025 – GOV.UK
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Family Business Scale-ups: Breaking Barriers to Growth
The UK family business landscape
Family businesses are a key segment of the UK economy. It is, however, often challenging to identify exact numbers and quantify the contribution these businesses make. To provide new insights, this research report utilises firm-level data on family businesses from Companies House for the first time. This new approach opens up an additional layer of data on the reported attributes of those firms determined as family-owned and family-run and how these broader characteristics fit with wider data sets. In alignment with ONS categorisation, we identify family businesses as those that are:
Active enterprises registered at Companies House, where a family (i.e. two or more individuals with the same last name) holds a majority stake (>50.01%) in the company and one or more people with that same last name are directors of the company.
Overall, 766,847 businesses have been identified as meeting these criteria, which is equivalent to 33.8% of all active companies with employees registered with Companies House (2.27 million). They are found across the country, with 646,125 (84.3%) of these family businesses based outside London and 35% operating within the government’s eight Industrial Strategy priority sectors.
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Family Business Scale-ups: Breaking Barriers to Growth
The UK family business landscape
Figure 1: The Geography of family businesses
Number of family businesses by region (percentage of all family businesses)
North West 80,266 / 10.47%
Scotland 47,666 / 6.22%
Northern Ireland 17,012 / 2.22%
North East 20,492 / 2.67%
Yorks and Humber 54,947 / 7.17%
West Midlands 63,687 / 8.31%
East Midlands 55,047 / 7.18%
East of England 83,954 / 10.95%
Wales 27,653 / 3.61%
London 120,722 / 15.74%
South West 69,831 / 9.11%
South East 123,336 / 16.08%
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Family Business Scale-ups: Breaking Barriers to Growth
The UK family business landscape
The vast majority, 93%, of these family businesses are micro businesses with fewer than ten employees. Within this segment, however, 20.6% currently have no reported employees. This cohort is primarily made up of newly formed enterprises that are yet to file any accounts at Companies House (100,000) and those that are considered to be active owing to a technicality (e.g. following a court order), but which are potentially dormant or in distress. Overall, the 609,000 with employees provide work for more than 3 million people. Breakdown of Family Businesses by Size
Figure 2: Breakdown of family businesses by size
Large 653
Medium 5732
Small
47493
555058
Micros with employees
Micros with no employees
157911
0
100000
200000
300000
400000
500000
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Family Business Scale-ups: Breaking Barriers to Growth
The UK family business landscape
These family businesses are generating an estimated total revenue of £1.6 trillion. While not all businesses are required to report their turnover to Companies House, it is possible to extrapolate an estimate of their total turnover from the average reported by businesses in each size bracket:
Figure 3: Percentages of family businesses
Figure 4: Turnover of family businesses (FBs)
% of all active firms with employees on Companies House
Average reported
Number of family businesses
% of all family businesses
No. of family businesses
Estimated total turnover
turnover of FBs in size bracket
All family businesses
766,847
33.8%
All FB with employees
608,936
79.4%
26.8%
Micro (1–9)
£555.1bn
£1m 555,058
Micro (1-9)
555,058
72.4%
27.5%
Small (10–49)
£902.4bn
£19m 47,493
Small (10–49)
47,493
6.2%
23.6%
Medium (50–249)
£131.8bn
£23m 5,732
Medium (50–249)
5,732
0.7%
13.1%
Large (250+ employees) All family businesses
Large (250+ employees)
653
0.1%
5.4%
£34.6bn
£53m 653
£1,623.9bn
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Family Business Scale-ups: Breaking Barriers to Growth
The UK family business landscape
These family businesses are operating across all sectors of the economy. When broken down by Standard Industry Classification (SIC 2007) codes, the largest share – 29.8% – operate in Real Estate and Construction, followed by Professional, Scientific and Technical Services (14.5%) and Wholesale and Retail (10.9%). In addition, 35% operate within the Industrial Strategy sectors, highlighting both their strong presence in traditional UK industries and their growing role in newer, strategically important sectors.
Figure 5 below shows that, across all 766,000 businesses, 42% are over ten years of age. However, as they grow into the mid-market we see a greater proportion over the age of 40; 369 of these businesses are older than 100 years.
Figure 5: Age of family businesses Breakdown of Family Businesses by Size
300,000
269,616
194,086
200,000
169,947
88,730
100,000
20,987
10,836 10,250 2,026
369
0
<5 years 6–10 11–20 21–30 31–40 41–50 51–75 76–100 100+
Business age – no. of years
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Family Business Scale-ups: Breaking Barriers to Growth
The UK family business landscape
Setting out the scale, distribution and characteristics of the family-business population across the UK, the analysis now turns to a more detailed examination of family businesses operating in the mid-market and scaling-up stages, where growth, investment and organisational complexity are more visible, both in firm-level data and through business-level evidence.
Figure 6: Family businesses by SIC 2007 section Companies by Sector
130,743
Real estate activities Professional, scientific and technical services Construction Wholesale and retail Administrative and support service activities Information, communication
110,760
97,428
83,032
54,942
51,957
and technology Manufacturing
39,258
37,551
Financial services Accomodation and food service activities Health, well-being and social care
32,951
31,704
24,225
Service sector
13,936 13,648
Agriculture, forestry and fishing
Logistics and storage services
13,002
Arts, entertainment and recreation
10,366 9,798
Overseas organisations
Education
4,692
Household employers
2,679
Water and waste services
0
50,000
100,000
150,000
Number
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Mid-market family businesses:
true regional powerhouses
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Family Business Scale-ups: Breaking Barriers to Growth
Mid-market family businesses
Mid-market firms 7 comprise slightly more than 80,000 of all UK businesses, as identified by the ScaleUp Institute on behalf of the mid-market Council. Within this cohort there are 8,641 mid-market family businesses, generating £142.1 billion in turnover and employing 912,000 people across the country. One in five (1,765) of these are currently scaling up. These mid-market family businesses are found throughout the country and are significant contributors to the economy through their turnover and employment. Of the mid-market family businesses, 88% are based outside London, with 76% based outside London and the wider South East of England.
Figure 7: The spread of mid-market family businesses across the UK
Total employment from Companies House filings
Total turnover from Companies House filings
No mid-market family businessess
Region
East Midlands
704
£11.6bn
77,159
East of England
878
£15.0bn
90,338
London
1,008
£19.2bn
103,002
North East
290
£4.5bn
33,198
North West
1,000
£16.3bn
107,464
South East
1,095
£17.4bn
116,382
South West
767
£10.5bn
82,636
West Midlands
733
£11.6bn
75,899
Yorkshire and The Humber
725
£14.2bn
76,403
Northern Ireland
424
£7.7bn
45,498
Scotland
629
£8.9bn
64,561
Wales
388
£5.2bn
39,658
Grand Total
8,641
£142.1bn
912,198
7 Mid-market businesses are defined as firms that meet either or both of the following criteria: (1) 50 to 499 employees; (2) turnover of between £10 million and £100 million.
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Family Business Scale-ups: Breaking Barriers to Growth
Mid-market family businesses
Mid-market family businesses industries For this cohort of mid-market family businesses, deeper analysis has been Figure 8: Industries of mid-market family businesses Figure #: Industries of Mid-Market Family Businesses
3000
conducted of the industries they operate in, using not just SIC codes but wider data sources to provide insights into their precise industries of operation based on how each business describes itself. This is in order to better reflect emerging sectors that are not effectively captured by SIC codes and also to eliminate those known challenges of SIC inaccuracies (e.g. lack of updating post-business registration, infrequent code updates), as well as to provide insights into the eight key sectors in the UK Government’s Industrial Strategy. Similarly to all family businesses, the largest areas of operation for mid-market are wholesale and retail and construction/property. Just over 42% are operating within the Government’s eight Industrial Strategy priority sectors, with the largest groups in Advanced Manufacturing (21%) and Professional Services (11%).
2000
1000
0
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Family Business Scale-ups: Breaking Barriers to Growth
Mid-market family businesses
Mid-market firm size
Mid-market family businesses are identified by the number of employees they have as well as the turnover they generate.
When considering employees, the vast majority, 81.1%, have between 50 and 249, with 10.6% having between 10 and 49 employees. There are 1.2% with fewer than ten employees that still qualify as mid- market firms on the basis of their turnover, and 7.1% have more than 250 employees.
Equally, they are spread across different turnover brackets, with the majority generating between £10 million and £100 million as their reported revenue. Because businesses are not required to disclose their turnover if it is below £10.2 million, the next most populous group consists of those that have either not reported their turnover or are pre-revenue (41%). These companies have nonetheless reached mid-market status through their employee headcount.
Figure 10: Breakdown of mid-market family businesses by turnover bracket
Figure 9: Breakdown of mid-market family businesses by employee number
Mid-tier family businesses employee size b reakdown Mid-tier family businesses employee size b reakdown
Turnover breakdown
Turnover breakdown
Micro mid-tier (0–9) 1.2% Small mid-tier (10–49) 10.6%
Micro mid-tier (0–9) 1.2% Small mid-tier (10–49) 10.6%
Non disclosed / pre-revenue 41.1%
Non disclosed / pre-revenue 41.1%
Large mid-tier (250+) 7.1%
Large mid-tier (250+) 7.1%
<£10m 7.7%
<£10m 7.7%
Medium mid-tier (5... 81.1%
<£100m 1.7%
Medium mid-tier (5... 81.1%
<£100m 1.7%
£10m– £99.9999m 49.5%
£10m– £99.9999m 49.5%
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Family Business Scale-ups: Breaking Barriers to Growth
Mid-market family businesses
Mid-tier family businesses employee size b reakdown
Turnover breakdown
Age of mid-market family businesses Compared with their peers in the mid-market bracket, family businesses tend to be significantly older: the majority are over 30 years old, compared with only 6% of family businesses overall. This reflects the greater maturity and development typically required to reach mid-market status and meet the associated employment and turnover thresholds. Micro mid-tier (0–9) 1.2% Small mid-tier (10–49) 10.6% Non disclosed / pre-revenue 41.1%
Large mid-tier (250+) 7.1%
<£10m 7.7%
Medium mid-tier (5... 81.1%
<£100m 1.7%
£10m– £99.9999m 49.5%
Figure 11: Age of mid-market family businesses
Scaling family businesses employee size breakdown Large scaling (500+) 5.2%
Age
Small scaling (<50 empl... 33.5%
40+ years 21.0%
3–10 years 20.0%
“Family businesses tend to be significantly older: the majority are over 30 years old”
Large scaling (250–499) 7.1%
30–40 years 11.0%
10–20 years 26.0%
Medium scaling (50–249) 54.1%
20–30 years 22.0%
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Family Business Scale-ups: Breaking Barriers to Growth
Mid-market family businesses
Investment dynamics in mid-market family businesses
Four hundred and twenty-seven mid-market family businesses have collectively raised £2.38 billion across 676 fundraising rounds. This amount is fairly evenly split between debt – £1.36 billion across 300 rounds into 250 companies – and equity – £1.07 billion across 388 rounds into 213 companies. Twelve rounds involved both debt and equity. Equity investment represents 46% of the total amount raised by these mid- market family businesses. While not all businesses or funders report how their investment is used, among those that do, the most common use of equity was for research and development, with £262 million in funding directed toward these activities. However, the greatest amount of equity was earmarked for job creation (£308 million) and £231 million was planned for international expansion. BGF has backed the largest number of equity deals (26) followed by Business Angels (17). The investment picture is slightly different when one looks at uses of various forms of debt finance. While job creation appears as the most common primary use of debt finance, accounting for £534 million, property attracts the largest overall amount at £570 million. HSBC is the most active provider of debt finance to family businesses, participating in 56 deals, followed by Lloyds Banking Group with 38 and NatWest with 35.
The role of government agency funders is also evident in the mid-market arena: • The British Business Bank, through both direct
investments and co-investment activity in established funds, participated in 18 fundraising schemes for 15 mid- market businesses. • The Development Bank of Wales participated in ten deals involving mid-market businesses. • Scottish Enterprise participated in two deals across two mid-market businesses. • Innovate UK grants have supported 209 mid-market family businesses in their innovation and R&D activities, awarding 368 grants with a total value of £33.7 million and leveraging a further £44.6 million in follow-on investment. Notably, 85% of these grants were awarded to mid-market firms located outside London and the South East.
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Family Business Scale-ups: Breaking Barriers to Growth
Figure 12: Top investors in scaling family businesses by number of deal participations
Debt Funders
No of Deals Equity Funders
No of Deals Government/Public Funders
No of Deals
Coronavirus Business Interruption Loan Scheme (CBILS)
22
HSBC
56
BGF (formerly Business Growth Fund)
26
Lloyds Bank
38
Business Angel(s)
17
Development Bank of Wales
10
NatWest Group
35
Mercia Asset Management PLC
9
FW Capital
5
Virgin Money
19
Crowdcube
6
Finance Yorkshire
3
Barclays
16
Downing
3
UK Export Finance
3
Santander
16
FSE Group
3
Invest NI
2
Asset and Equipment Finance 10
Maven Capital Partners UK LLP
3
Newcastle City Council
2
Barclays Corporate Banking
4
NEL Fund Managers
3
Scottish Enterprise
2
Welsh government Economic Resilience Fund
2
ThinCats
4
Social Impact Enterprises
3
Bank of Scotland
3
Tata Steel
3
West Yorkshire Business and Skills 2
Caple
3
Various
3
Finance Birmingham
2
Cynergy Bank
3
Accel Partners
2
Whiterock Finance
2
Innovate UK
368 Grants
Mercia Debt
3
Blossom Capital
2
OakNorth
3
Foresight Group
2
Shawbrook Bank
3
General Catalyst
2
Bank of Ireland
2
Highland Europe
2
Danske Bank
2
Pembroke Investment Managers LLP
2
Invoice Finance and Factoring 2
Republic
2
River Capital
2
Salica Investments
2
Page 29
Family Business Scale-ups: Breaking Barriers to Growth
Mid-market family businesses
They experience challenges that come with growth, and the following sections, including our Family Business Insight Perspectives, explore how the leaders of scaling and mid-market family firms perceive their business environment, the markets in which they operate and the support they would like to obtain from different stakeholders in the ecosystem, including the role the public and private sectors play in their continuing development.
Summary Significantly, one in four of all visibly scaling firms in the UK is a family business, reinforcing the fact that family firms are a key component of our high-growth business community, generating significant employment and revenues at a regional, global and Industrial Strategy sector level.
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Page 31
Scaling family businesses
Page 32
Family Business Scale-ups: Breaking Barriers to Growth
Scaling family businesses
The ScaleUp Institute’s 2024 ScaleUp Index provided insights into the 10,859 visibly scaling firms 8 in the UK, generating £384bn in turnover and employing 2.05m people. Through this new research we can reveal that more than 27% (2,985) – 1 in 4 – of these are family businesses. They contribute £72.4bn (19%) of the total turnover and have almost 500k employees (24% of all scaling businesses). Similarly to the mid-market, 88% are based outside London and 76% outside London and the South East; however, the North West has the second largest cohort of scaling family businesses after the South East, with London third. This emphasises the local nature of family businesses that are scaling up and, along with their mid-market presence, their importance to the UK’s regional growth dynamics, which are anchored locally with long-term sustained growth and strategic decisioning/plans for expansion.
Figure 13: The Spread of Scaling Family Businesses across the UK
Total employment from Companies House filings
Total turnover from Companies House filings
No scaling family businesses
Region
East Midlands
261
£5.0bn
39,434
East of England
288
£5.7bn
40,679
London
360
£10.9bn
58,125
North East
110
£3.1bn
19,725
North West
366
£8.8bn
79,554
South East
371
£11.2bn
55,116
South West
294
£5.6bn
50,296
West Midlands
243
£6.0bn
52,035
Yorkshire and The Humber
257
£8.0bn
43,695
Scotland
198
£4.3bn
32,097
Northern Ireland
114
£1.9bn
15,233
Wales
123
£1.9bn
13,706
Grand Total
2,985
£72.4bn
499,695
8 A scaling firm is a business that is growing its turnover or employee headcount or both by 10% or more each year over a monitoring period of three years, with at least ten employees at the start of that period. Scale-ups are firms growing at a rate of 20%+ by the same parameters.
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Family Business Scale-ups: Breaking Barriers to Growth
Scaling family businesses
Scaling family businesses – Industries
Scaling family businesses are also operating in the wholesale and retail and construction/ property sectors. However, they are more likely than their peers across all family businesses and those in the mid-market to be within one of the industrial strategy sectors, with 51.2% serving one or more of these industries. As with the mid-market, advanced manufacturing (28.3%) and professional services (16.7%) are the top two IS-8 sectors.
Figure 14: Industries of scaling family businesses
Page 34
Family Business Scale-ups: Breaking Barriers to Growth
Scaling family businesses
Scaling firm size
Figure #: Breakdown of Scaling Family Businesses by Employee Size
Scaling Family Businesses Employee Size Breakdown
By employment, scaling family businesses are primarily mid-market-sized with 66.5% in this group of businesses, split between those employing between 50 and 250 staff (54.1%), and the 12.3% who have more than 250 employees. Large scaling (500+) 5.2%
Large scaling (250–499) 7.1%
Small scaling (<50 empl... 33.5%
Smaller firms (fewer than 50 staff) account for 33.5%. Medium-/mid-sized scaling firms are also the biggest contributors to turnover, generating £31 billion. While 50% of family businesses are scaling up, by this employment metric they sit beneath the £10.2m turnover threshold; of those family businesses that are disclosing revenues, the majority are in the mid-market, generating between £10m and £100m. These firms are collectively bringing in £37bn in turnover and employing more than 233k people. On a sectoral level, the largest number of scaling family businesses with revenues exceeding £100m are operating in Wholesale & Retail, followed by Figure 15: Breakdown of scaling family businesses by employee size Figure #: Breakdown of Scaling Family Businesses by Employee Size Scaling Family Businesses Employee Size Breakdown
Advanced Manufacturing, Construction & Property and Transport, while those that are scaling up by employment but sit beneath the £10.2m threshold are typically operating in Education (76% of businesses in this sector), Care & Well- being Services (72%), Hospitality (62%), Defence (58%), and Professional Services (56%). This further reinforces the importance of the government’s current focus on scaling-up firms in their respective strategies and entrepreneurial prospectus and the importance of family businesses within that segment of our economy. Medium scaling (50–249) 54.1%
Figure 16: Breakdown of scaling family businesses by turnover bracket Figure #: Age of Scaling Family Businesses Age Figure #: Breakdown of Scaling Family Businesses by Turnover Bracket Turnover Breakdown
40+ years 10.9%
Large scaling (500+) 5.2%
<£10m 5.9%
3–10 years 17.8%
Large scaling (250–499) 7.1%
30–40 years 8.9%
Small scaling (<50 empl... 33.5%
Non disclosed / pre-revenue 49.9%
£10m–£99.9999m 39.5%
20–30 years 22.8%
10–20 years 39.6%
Medium scaling (50–249) 54.1%
≥£100m 4.7%
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Figure #: Breakdown of Scaling Family Businesses by Turnover Bracket
Family Business Scale-ups: Breaking Barriers to Growth
Scaling family businesses
Age of scaling family businesses
While mid-market family businesses were more evenly distributed by age, those that are scaling up are typically 10–20 years old, reflecting wider research on predictors of scaling up. 9 One-fifth, 20%, are over 30 years old.
This reflects the long-term nature of these family firms and why certain tax schemes need to remove age barriers that can present cliff edges for investment.
Figure #: Age of Scaling Family Businesses Age Figure 17: Age of scaling family businesses
40+ years 10.9%
3–10 years 17.8%
30–40 years 8.9%
20–30 years 22.8%
10–20 years 39.6%
9 See p. 32: https://www.scaleupinstitute.org.uk/wp-content/uploads/2023/01/ScaleUps-Debt-Finance-Journey.pdf
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Family Business Scale-ups: Breaking Barriers to Growth
Scaling family businesses
Investment dynamics in scaling family businesses
involvement: US investors participated in six deals with six scaling family businesses worth £391m; Korean Investor SeAH Wind backed one scaling family firm in a deal worth £260m; and the European Investment Bank (EIB) in Luxembourg backed one firm with £185m. Other investors came from Australia (two deals); China, the Netherlands, Denmark, Ireland and Germany (all one deal each). Half of these firms were in the IS-8 but spanned a diverse range including Advanced Manufacturing, Construction, Clean Energy, Fashion, Software Development, Shipping and Childcare. When using debt finance, these scaling family firms report that almost £400m is for the financing of specific projects and £374m is for property. HSBC is the largest debt funder for these businesses (42 rounds), followed by NatWest (22) and Lloyds Banking Group (21). As with the mid-market, the role of the British Business Bank is evident through both its direct investments and its co-investment in established funds, participating in ten fundraising schemes in ten scaling family businesses. The Development Bank of Wales has participated in seven deals in six scaling family businesses. Scottish Enterprise has been involved in one deal with a scaling family business. When it comes to R&D and innovation, 89 scaling family businesses have received 241 Innovate UK grants with a total value of £57.2m; these firms also leveraged £163m in private funding. Three-quarters (76%) of these firms backed by Innovate UK grants were from outside London and the South East.
More than £2 billion has been raised by 278 scaling family businesses across 420 funding rounds. More than half of this total has been raised through 241 equity deals, amounting to £1.14bn, while there have been 185 debt raises worth £918m. Six rounds have involved both debt and equity styles of funding. Of the scaling family businesses that have raised investment, 63% are within the government’s eight priority Industrial Strategy sectors (IS-8). As observed with the mid-market family businesses, the scaling-up cohort are particularly focused on resource hiring (£268m was noted as being raised for this purpose) and international expansion (£220m), while £45m of debt funding and £148m of equity are reportedly to be used for R&D and Innovation. UK investors are key backers of family businesses, with BGF (11) again the most significant backer of equity funding rounds in family businesses that are scaling up, followed by Business Angels (8). Overall, the vast majority of investors were from the United Kingdom; however, 15 deals had international
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Family Business Scale-ups: Breaking Barriers to Growth
Scaling family businesses
Investment dynamics in scaling family businesses
Figure 18: Top investors in scaling family businesses by number of deal participations
Debt Funders
No of Deals Equity Funders
No of Deals Government/Public Funders
No of Deals
Coronavirus Business Interruption Loan Scheme (CBILS)
10
HSBC
42
BGF (formerly Business Growth Fund)
11
NatWest Group
22
Business Angel(s)
8
Development Bank of Wales
7
Lloyds Bank
21
Crowdcube
3
UK Export Finance
3
Virgin Money
12
Maven Capital Partners UK LLP
3
Welsh Government
2
Barclays
11
Foresight Group
2
Finance Yorkshire
5
Santander
9
Highland Europe
2
FW Capital
6
Innovate UK
241 Grants
Caple
4
NEL Fund Managers
2
ThinCats
4
Macquarie Group
2
Bank of Ireland Business Loans 3
Tata Steel
2
Bibby Financial Services
2
Cynergy Bank
2
Mercia Debt
2
OakNorth
2
Page 38
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