The EU urgently needs more data on family businesses

Family-run companies form the backbone of the EU economy but there is still no clear definition for them, making it difficult to implement effective legislation, writes Angelika Niebler.

By Angelika Niebler

09 Jul 2015

Do you know De Lhongi, the Lego Group, Heineken Brewery or the Oetker group? It's likely that all these names sound familiar to you, for one reason: they all produce high quality goods, which are well-known not just in their home country, but also in Europe and the rest of the world. 

They also have something else in common: they are all successful, family-run businesses established decades ago.

These companies have managed to grow and expand over the years to become multinational businesses. Besides these major firms, there are around 14 million family businesses in Europe. 


While most of them are SMEs, many of them employ around 500 to 1000 employees. Therefore, they are far from being multinational companies, and suffer from administrative burdens just like small businesses. 

However, unlike SMEs, these mid-cap family companies don't benefit from exemptions or specific funding. As a result, many family businesses desperately try to remain below the threshold set by the commission's criteria for SMEs, with predictable consequences - they stop recruiting, so as to prevent an increase in income or turnover, automatically putting a halt to further growth.

Therefore, in my report on family businesses in Europe, I tried to place the focus on these key players in our economy. 

Despite the important role family businesses play in our economy - more than 60 per cent of all enterprises in the EU are family-run, and they account for 40 to 50 per cent of jobs in the private sector - policymakers pay them very little attention.

In 2009, a group of experts from the commission tried to draw up a definition of 'family businesses', but what they came up with is not legally binding and as a result, it is not used in the individual member states. 

Since there is no clear definition, it is difficult - if not impossible - to compare situations, specific features or the challenges faced by these companies across the member states. The group of experts found that there were over 90 different definitions of 'family businesses' in the EU.

These companies generally take a longer-term view than non-owner-run firms, as they want to ensure their enterprise remains economically successful in subsequent generations. 

This leads to one of the key challenges all family-run businesses are sooner or later confronted with - the question of succession at the top. Each year, around 450,000 companies employing about two million people find themselves in this position. 
Because of the many difficulties associated with such transfers, and estimated 150,000 business are forced to close each year - resulting in the loss of some 600,000 jobs. 

This is why policymakers must create the right framework conditions to prevent these losses. In particular, national regulations on taxation of inheritance and gifts and corporate taxation make transfers within the family more difficult. From the point of view of such businesses, maintaining control of their company is one of the keys to success. 

More than six years after the commission's group of experts completed its work on family businesses, it is crucial to focus once more on this important category of enterprises. 

We urgently need more data, facts and figures in order to better understand the issues and challenges family businesses face and to promote the exchange of best practice. 

The key point is to draw policymakers' attention to this important group of entrepreneurs and to provide assistance where it is needed. 

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