WealthSpike: Europe – where it’s all about inherited wealth, family businesses

Wealth, it seems, is much more likely to come about in Europe because of inheritance rather than entrepreneurship. No surprise there, then. But a further look at the numbers suggests that much of inherited wealth in Europe is tied up with family businesses.

According to a study by the Washington D.C. group Peterson Institute for International Economics, more than half of European billionaires inherited their wealth, compared with a third of billionaires in the US. And more than 20% of Europe’s inherited fortunes were four or more generations old, compared with less than 10% in the US. Peterson used data from the Forbes’ billionaire index as the basis of its study. 

The study also looked at the nature of the companies linked to the wealth of billionaires – and here’s where it gets interesting from a family business perspective. The median American business associated with a large fortune is 42 years old, compared with 61 in Europe. The age gap between inherited firms is also large, according to the survey. In the US, inherited businesses have a median age of 76 years, which the study said was consistent with the large share of inherited wealth currently in the hands of the second generation in America. In Europe, inherited firms have a much higher median age of 91.

The figures tend to tally with an analysis of the top 500 family businesses in the world, compiled by the University of St Gallen. Out of the 500, nearly half (227) were Western European family businesses, compared with 99 for the US. This suggests a big correlation between inherited wealth and family businesses in Europe, compared with the US. Germany’s economy is a fifth the size of the America’s, but it had nearly as many (87) family businesses in the top 500 hundred as the US (99).

The Peterson study made some other interesting points about billionaire wealth, including the importance of hedge funds in creating extreme wealth in the US, but much less so in Europe. Overall, the study shows the creation of extreme wealth is much more dynamic in the US, compared with Europe.

How that reflects on the rest of society is difficult to quantify. But when it comes to perceptions, the study will only add to the view that the US is seen as a much more entrepreneurial society than that of Europe. Something for policy makers in Europe to ponder…