How Paul Drechsler can help British family businesses

The appointment of Paul Drechsler as the new president of the UK’s Confederation of British Industry (CBI), a trade body, is great news for family business in the country. Dreschsler was formerly the CEO of Wates, a family-owned construction firm, and is currently chairman of the Bibby Line Group, a shipping-to-financial services group from Liverpool that has been run by the same family for over 200 years. So nobody understands the sector more than him.

Drechsler’s ascension was greeted with enthusiasm by the British family business community. “Paul understands family business and is an eloquent and passionate advocate for the merits and values of the family ownership model,” said Mark Hastings, director general of the Institute for Family Business, the country’s largest family business advocate.

Simon Berry, Chairman of wine-merchant Berry Bros. & Rudd, said: “For too long family businesses have been considered some strange anomaly, instead of a vital component of this country's commercial life. Paul Drechsler's appointment will help redress the balance.”

Chris Bailey, a board member of 100-year-old engineering firm NG Bailey added: “I think Paul’s appointment as head of the CBI is very exciting news and a great testament the excellent approach toward responsible business set by so many family businesses.”

James Wates, chairman of his family's 118-year-old firm, said: “Paul has long been a champion of business, both large and small, commercial and philanthropic. This, along with his tenure at Wates, ideally places him to drive forward the continued success of the CBI, putting the needs of businesses at the heart of economic growth."

Drechsler’s current employer, Michael Bibby, said: “To have the chairman of a family business representing British industry at such a high level reflects not only the rising importance of family firms to the economic recovery, but how the real values embodied in so many family firms are critical to rebuilding the trust between business and the public that is required to create jobs and improve living standards for all.”

It is as a bridge between government and the family business world - which is often discrete to the point of silence - that Drechsler can have a huge impact. That the chancellor George Osborne is also from a family business (upmarket wallpaper company Osborne & Little) suggests that government might offer a sympathetic ear. 

So what can Drechsler do to promote family businesses?

Firstly, says the IFB’s Michael Hastings, he can raise their profile. Family businesses “deserve recognition as the UK’s Mittelstand and can play a key partnership role with government in delivering sustainable growth, built on robust and responsible business practices,” Hastings says. “The first priority is to inject the family business narrative into the core of the public debate about the economy, growth and jobs.”

Secondly, he can lobby for better rules on taxation. Many family businesses feel that the UK’s inheritance tax regime is adequate, but some believe that “patient capital” ought to be encouraged, and that firms which fund growth with retained earnings ought to be taxed at a lower rate than those which borrow money. Trips to Brussels might be needed.

Third, he could improve the regime on employee buyouts. These were made easier in the Finance Act of 2014, and are a great exit option for families who want to sell a business because they mean that staff keep their jobs, and the family can keep some interest, for instance owning the premises and leasing it from the new owners. A problem with the 2014 regulation was that it only gave tax advantages in the case that all employees became owners. A more flexible approach would help the many families who postponed selling during the financial downturn. 

And fourthly, if he is feeling strong Drechsler could help push the case for dual-share ownership. The EU is debating changes to the shareholder rights directive, which would mean all countries have to accept dual-share structures. These often help long-term owners such as families keep control over their businesses, but changes will be opposed strongly by some institutional investors, who demonize such structures. Anything which can encourage dual-share ownership in the UK, where the financial services industry discourages them, would be good for family ownership.

Got any more ideas? Then post them in the comments below.