Family firms are the backbone of Scotland’s economy, with the top 100 supporting more than 111,000 jobs
Some have been in existence for centuries, passing from generation to generation, their longevity the result of good governance, innovative family ownership and a focus on the long term.
Many are anchored firmly in their original environs, contributing enormously to the local economy and becoming part of the identity of a community.
The latest research by Family Business United Scotland shows that the top 100 family firms in Scotland last year collectively generated a combined turnover of £17.2 billion, made £1.2bn in profits and supported more than 111,000 jobs.
As Paul Andrews, founder of Family Business United (FBU), says: “They are really the engine room of the Scottish economy and provide jobs, revenues and support communities throughout Scotland.
“The report clearly quantifies the importance and diversity of a sector that deserves more support to ensure that these businesses continue for generations to come.”
All of the businesses listed in the Top 100 generate turnover in excess of £25 million, with Arnold Clark alone turning over £3.7bn.
Family businesses in the UK account for about 25 per cent of UK GDP and more than 45 per cent of UK employment, generating significant tax revenues for the Exchequer.
The Top 100 contains a mix of businesses, some – such as Walkers Shortbread, Johnstons of Elgin and James Donaldson and Sons – that have been around for generations.
Other, newer businesses are also generating some incredible results and making their way into the Top 100 for the first time, such as the Proctor Group and Vets Now.
The list contains a mix of the traditional industries, such as timber, textiles and whisky, with newer sectors working in innovative technology, pharmaceuticals and renewable energies. Their diverse spread means that they have an impact on regional and rural economies across Scotland.
Andrews adds: “While, as we would expect, there are significant clusters of family firms around the major cities, it is great to see the diversity of geographical spread.
“Some 43 per cent of all those employed in the Top 100 are employed in Lanarkshire, with Glasgow being the main hub and employing significantly more people than Edinburgh in family firms, but it is great to see over 11,000 people employed in family firms based in Dumfriesshire, 11,000 in Stirlingshire and 5,000 in Aberdeenshire too.”
They clearly create wealth for their employees – often with generations of the same family working in the business.
Family firms have unique benefits and challenges. Kirsty Ross, family business consultant at KPMG, notes: “One advantage of a family firm is most definitely a clear shared purpose and that can provide continuity.
“In non-family corporations it might be all about financial gain, but in a family firm factors such as local community employment can be a key driver.
“Where financially it may make sense to move work offshore, for example, family firms tend to feel the responsibility for employment in their communities.
“It can be more about aligning the business to ensure a living for future generations, of family and employees, rather than taking maximum profit.”
Ross believes that being a good employer is usually a lot more important to these types of companies. She says: “Quite often there is a good working culture and shared values, and a long-term view rather than short-term targets. They will often look for a solution before cost cutting.”
Having access to the owners of the business is another advantage for employees, and studies show that, for instance, women in family businesses reach the higher echelons far quicker than they do in non-family businesses as a result of the environment and culture.
Ross comments: “It means that in the war for talent, which every business is engaged in, such practices can give family firms a competitive advantage in attracting and retaining staff.”
In terms of customer recognition, Ross says family businesses can often be seen as more trustworthy and can have a head-start with a very strong brand identity, but she adds: “The flip side can be that family members can be held to a higher standard of behaviour and in turn held responsible for any negative stories about the company.”
Succession planning can be a key area of concern. Family firms are often triangular in shape, with more relatives looking for involvement as the business is passed down the generations.
Ross says: “With the right governance structures in place, transition works well, whether it is the first generation of entrepreneurial founders passing on to the second generation, involving a handful of family members, or the transition around the fifth or sixth generation with upwards of 80 shareholders.”
Handled well, bringing in the next generation to the day-to-day running of the business can be a strength, with unique skills among family members being utilised, particularly if the younger generation have been encouraged to go out to develop their knowledge before joining the family firm, and certainly the rise of new technologies can provide opportunities. Ross continues: “It can be a competitive advantage if you have different skills but still with that shared purpose.
“Bringing in someone who does embrace technology can work really well with a very traditional firm, but families do need to recognise each other’s talents.”
Another challenge can be the difficulty that founders of a business in particular may find when passing it on, in what is known as “sticky baton syndrome”, whereby a middle generation wait in the wings as founders keep control long beyond retirement age. But Ross notes that, again, proper planning can help to mitigate this.
Andrews of FBU says: “Family business is a strong sector that is continuing to perform well despite the prevailing uncertainties in the marketplace, a significant sector in terms of employment and wealth creation, and one that deserves to be recognised for the contribution it makes to the Scottish economy and beyond.”
Top Ten companies
William Grant and Sons Holdings Limited £260.2m profit
Scotland’s most profitable family firm, the whisky distiller generated turnover in excess of £1 billion in its last financial year and employs 2,100 staff.
Arnold Clark Automobiles £125.3m
Scotland’s largest family business by turnover, and second most profitable in 2018, Arnold Clark turned over £3.7bn in its latest accounts, and employs nearly 11,000 people.
The Edinburgh Woollen Mill £83.8m
Founded in 1946, the firm recently decided to relocate from Langholm to Carlisle.
DC Thomson and Company £38.1m
Headquartered in Dundee, the firm publishes newspapers, magazines and has moved into new media, digital technology, retail and television.
James Jones and Sons £34.1m
The timber processor, headquartered in Lockerbie and in family ownership for five generations, operates from 20 sites across the UK and employs almost 800 staff.
Lunar Fishing Company £23.3m
Based in Peterhead, Fraserburgh and Aberdeen, Lunar Freezing and Lunar Fishing supply herring, mackerel and whitefish.
Park’s of Hamilton £21.8m
Founded in 1971 by Douglas Park, the group is a coach operator and car dealer.
Balmoral Group £18.6m
Established in 1980 by Jim Milne CBE, Balmoral specialises in a variety of areas including subsea buoyancy, flotation and insulation products.
RJ Mcleod (Contractors) £17.9m
The Glasgow firm is one of Scotland’s largest private civil engineering and building contractors.
GAP Holdings £17.1m
The Glasgow firm employs more than 1,800 people, renting and leasing construction and civil engineering machinery and equipment.
This article appeared in the spring edition of Vision. A digital version can be viewed here.