Building Britain for Generations: A Policy Agenda for Family Businesses
Lowering the Cost of Doing Business
The issue for family firms is not only the level of employment costs, but also the rhythm of changes. Annual changes make genuine long-term planning impossible; firms cannot commit to hiring, capital investment or apprenticeships when the employment cost base shifts every 12 months. A predictable, multi-year cycle would not reduce the cost of employment, but it would allow family businesses to absorb those costs within a coherent investment plan rather than reacting to them year by year.
Family firms are typically long-term employers, deeply embedded in their communities and committed to doing the right thing. However, they often lack the scale, specialist staff and legal capacity to absorb growing compliance demands. As a result, they are disproportionately affected by regulatory complexity, even where the underlying policy intent is well intentioned. Policy instability across Inheritance Tax, National Insurance, and employment rights is freezing long- term decision making and succession planning. This directly reduces capital investment and risks making businesses less competitive. Barriers to Growth The rises in Employer National Insurance and the National Living Wage have landed at the worst possible moment for family businesses already navigating high inflation and squeezed margins. 43% percent cite ‘high inflation and cost pressures’ as their primary barrier to growth followed by 33% stating that employment costs were the main barrier.
Recommendations Government should commit to a fixed three-year cycle for reviewing policy, similar to the spending review process. Any changes outside this cycle should be limited to genuine economic emergencies and triggered through a formal process. Assess the long-term employment consequences of equalising the National Living Wage for 18-year-olds, with particular attention to whether higher rates reduce hiring of young workers and the potential to undermine long-term employment prospects.
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