Today is National Family Business Day in the UK - a moment to reflect on the extraordinary contribution that family-owned businesses make to our economy and our communities. Family firms account for almost nine in ten private sector businesses in the UK, employing close to 14 million people and contributing over half a trillion pounds to the economy each year.

The Succession Challenge

Many family business owners are approaching a critical moment. Two thirds of owners plan to exit within the next decade, but research shows that a large proportion still have no formal succession plan in place.

An independent study by Investec Wealth & Investment with family businesses which have a combined annual turnover of £781 million found more than one in four (26%) expect to fund 50% or more of their retirement spending from their business investment. Families are relying on their business to fund retirement with 83% saying they regard their company as their pension.

This lack of succession preparation carries significant risks. Poorly managed transitions can lead to the erosion of value, disruption for employees and customers, and in some cases the closure of businesses that have taken generations to build.

Moving from Planning to Practice

Succession is rarely a simple handover. It is a process that benefits from early and ongoing conversations between those who are passing the business on and those who may take it forward. Recognising the right time to begin planning, revisiting the plan regularly, and moving from planning to practice very early are all essential steps.

Options for Business Owners

There are several succession and exit routes available to family business owners. Passing the business on to the next generation remains the most common aspiration. Others look to trade sales or management buyouts. Each option has merits, but also challenges that require careful consideration.

Family succession remains the dream for many, but it requires willing and capable successors – something that can't be taken for granted.

Trade sales to competitors or strategic buyers often deliver the highest financial returns but may not preserve jobs or company culture.

Management buyouts keep the business in familiar hands but require the management team to have both the desire and financial capacity to buy.

Employee ownership – an increasingly popular option that's flying under many owners' radar.

The Case for Employee Ownership

Employee ownership is increasingly being recognised as a feasible and beneficial alternative. Under this model, owners sell their business to an Employee Ownership Trust, which holds shares on behalf of employees. UK legislation actively supports this route through generous tax incentives, including full relief from Capital Gains Tax on qualifying sales. Employee-owned companies can also pay employees an annual tax-free bonus of up to three thousand six hundred pounds.

Benefits Beyond Tax

The advantages extend well beyond tax efficiency. Employee ownership rewards the people who have built the business, strengthened engagement, and helps preserve culture and values for the long term. It is also a credible option where there is no clear family successor or strategic buyer.

Looking Ahead

We are entering a period of profound change as the great generational wealth transfer unfolds - the so-called “silver-tsunami”. The decisions family business owners make in the coming years will shape the future not just of their companies but of the wider economy and society. Employee ownership has the potential to sit at the heart of this shift, creating resilient businesses that share success more widely and contribute to a more inclusive form of capitalism.