Learning from Swedish enterprise

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Some thoughts after returning from a fascinating conference, in Stockholm, which looked at how economic growth can be encouraged by improving transfers of ownership and through entrepreneurship. At a plenary session, attended by the Swedish State Secretary for Enterprise, Jöran Hägglund, I spoke on behalf of the IFB and it was good to hear about his government’s commitment to taxation and other legislation that supports the transfer of business ownership - unfettered by taxes that damage business prospects. It will be useful to cite this Swedish example in the IFB’s ongoing representation work to ensure that Westminster policymakers address the needs of UK family businesses. One alarming statistic that I quoted, was that approximately 100,000 businesses in Britain a year could be affected by business transfer failure.

The overwhelming message from the conference was that prosperity and employment can only truly be spurred on by embedding a national culture of entrepreneurship. From China to India the emerging economies have embraced this approach throwing down the gauntlet to the west. The conference heard how Europe has an uneven record in embracing free market capitalism, but it was encouraging to see how much attitudes had changed in Sweden, where entrepreneurs making money were increasingly seen as positive role models.

Family business dominates the privately owned SME sector in Europe, and holds an important place as far as larger firms are concerned. It is therefore right to demand that our sector plays a key role in driving entrepreneurship and innovation, to rebuild our economic strength. But with 1 in 4 owners of companies in Europe approaching retirement age, a new wave of owner-managers with entrepreneurial instincts must be encouraged to take over the reins. The best of this new generation of wealth creators combine passion, skill and determination; where they take over an existing organisation they challenge the status quo while retaining the best of the values from the outgoing owners. These entrepreneurs have a lot at stake, resulting in strong commitment – it is often a matter of survival. Certainly the senior generation, if they have not already done so, should be discussing options for succession and the future ownership of their business as a matter of urgency.

Family businesses holding their own

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At a recent London School of Economics meeting, which I chaired, a member of one of Europe’s leading family businesses saw a positive outlook for the sector. In a debate with students on whether family businesses can hold their own in today’s economy Dr H.C. August Oetker, Chairman of the Supervisory Board of Oetker KG, the Germany-based diversified family company, rejected as outdated the stereotype images of a sector plagued by nepotism, lack of scale and inflexibility.

Dr Oetker argued that the modern family business is often engaged in a David against Goliath battle and has three main advantages:

• Stability - a conservative policy in terms of financing the business, eschewing excessive risk and debt investing the family’s own capital

• Security - more predictability in terms of strategic approach; often generating greater employee trust and loyalty

• Long-termism - where the payback horizon on investments may often be measured in decades not years

But there are risks such as the resistance to change, particularly in making decisions on employment issues that impact the workforce. Family business boards have to address the dilemma of balancing an instinct towards social responsibility while driving business performance.

The Oetker formula - With revenues of more than 9.2 billion euros, the group’s formula for success is driven by a high degree of reinvestment, paying shareholders a modest dividend each year. Risks have been balanced through a process of diversification and key divisions include the Hamburg Süd shipping group, Dr. Oetker branded food products and a focus on alcoholic beverages.

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