Table of contents

Approximate read time: 15 minutes

The House of Lords is scheduled to consider the following question for short debate on 15 October 2026:

Lord Cameron of Dillington (Crossbench) to ask His Majesty’s Government what plans they have to support family businesses in the UK.

1. Key points

  • Family businesses make up the majority of private sector businesses in the UK and may account for over 15mn jobs. They are most common among the smallest firms.
  • Family businesses face many of the same challenges as other businesses, but some of these challenges may have a particular impact on family businesses because of their ownership and governance structures. For example, the nature of business succession planning means that recent changes to limit inheritance tax relief on business and agricultural property may have a greater direct impact on family businesses.
  • Other aspects of tax policy, such as changes to business rates and national insurance employer contributions, have been cited as important costs facing businesses. The rising minimum wage, higher energy costs and wider economic uncertainty have added to recent challenges.
  • The government provides support to business in a variety of ways, including through the British Business Bank’s business growth service and loan schemes. Prime Minister Andy Burnham has committed to using public procurement to support British industry and has announced a cut in business rates for pubs, clubs and live music venues in England.

2. Definition and key statistics

A family business is defined by the legal research company LexisNexis as “a business owned and/or controlled by members of the same family, often across generations”.[1] LexisNexis notes that the term ‘family business’ is not defined in legislation or in case law but is a “descriptive expression” used across different legal and financial contexts.[2] In the 2024 small business survey, the Department for Business and Trade (DBT) defined a ‘family-owned business’ as “a business where a majority of owners are in the same family”.[3]

In 2023, there were 5.1mn family businesses in the UK, according to a report by the Centre for Economics and Business Research, an economic consultancy commissioned by the Family Business Research Foundation to undertake the research.[4] This accounted for 93% of all private sector firms in the UK economy.[5] The report said family businesses accounted for a total 15.8mn jobs, or 57% of total private sector employment in the UK.[6] It estimated that the total gross value added (GVA) by family businesses was £985bn and the total taxes paid by them was £422bn in 2023.[7]

In the official statistics based on the 2024 small business survey, the DBT found that family-owned businesses were more common among small and medium-sized enterprises (SMEs) with fewer employees.[8] 83% of SMEs with no employees were family-owned, compared to 76% of micro businesses (those with between one and nine employees), 62% of small businesses (those with between 10 and 49 employees) and 51% of medium-sized businesses (those with between 50 and 249 employees).[9]

Family business employers were most common in primary sectors, where 88% of businesses reported being family-owned, according to the DBT.[10] This was followed by the construction (80%), administration (79%), retail and wholesale (78%), and transport and storage (78%) sectors.[11]

3. Challenges facing family businesses

Family businesses face many of the same challenges as other businesses, but some challenges may have a particular impact on family businesses because of their ownership and governance structures. This section briefly considers some of the challenges, including tax pressures, employment and workforce costs, and wider economic and business pressures.

3.1 Taxation

  • Inheritance tax: The ownership structure of family businesses means that business succession often takes place across generations within the same family. As a result, the recent changes to inheritance tax are likely to have a greater direct impact on family businesses than other businesses. From April 2026, the government introduced a £2.5mn per estate limit on the value of assets eligible for 100% agricultural and business property relief (APR and BPR), with 50% relief applying thereafter.[12] It said most estates would be unaffected by this tax change because 93% of estates claiming APR and 96% of estates claiming BPR claimed less than £2.5mn.[13] However, a number of trade associations have continued to call for the reversal of the changes, including Family Business UK (FBUK)—an organisation founded to support and advocate for family businesses—UK Hospitality, the Countryside Land and Business Association, and others.[14] Further information on the recent inheritance tax changes can be found in the House of Commons Library briefing ‘Changes to agricultural and business property reliefs for inheritance tax’ (8 April 2026).
  • Business rates: Business rates are paid on business property, with some reliefs available to certain businesses. Recent changes mean that relief is no longer available for retail, hospitality and leisure properties, although this has been replaced by a new regime with lower rates for some of these businesses from April 2026.[15] Almost half (49%) of businesses in retail, hospitality and leisure identified business rates as the tax measure having the greatest impact on their business, according to FBUK.[16] Further information on business rates can be found in the House of Commons Library briefings ‘Business rates’ (7 September 2026) and ‘Business rates relief’ (12 December 2025).
  • National insurance: From April 2025, the rate of employer national insurance contributions (NICs) rose from 13.8% to 15% and the per-employee threshold at which employers start to pay was lowered.[17] To reduce the impact on the smallest businesses, the government raised the ‘employment allowance’ and expanded the number of employers eligible for the allowance.[18] UK Hospitality said hospitality businesses would face an additional £1bn of employer NICs as a result of the changes, with 15% of hospitality businesses saying they would have to close at least one site as a result of rising costs that included employer NICs.[19] HM Revenue and Customs (HMRC) estimated that around 250,000 employers would see their NICs liability decrease and around 940,000 would see it increase.[20] Further information on NICs can be found at the House of Commons Library briefings page ‘National insurance’ (accessed 5 October 2026).

3.2 Employment and workforce costs

  • Minimum wage: The national living wage (NLW) is the minimum hourly rate of pay that employers must pay workers aged 21 and over. Since April 2026 it has been £12.71 per hour, having risen faster than inflation since its introduction.[21] The Institute for Fiscal Studies said the combined increase in the minimum wage and employer NICs could make it “harder for young people entering the labour force”.[22] According to FBUK, minimum wage rates were cited by 28% of medium-sized family businesses as the most pressing cost and tax-related challenges facing their businesses.[23] Among all businesses with 10 or more employees, the cost of labour was the most reported challenge (cited by 37% of these businesses), according to the Office for National Statistics (ONS).[24] Further information on national minimum wage policy can be found in the House of Commons Library briefing ‘The national minimum wage: Policy and developments’ (20 July 2026).
  • Employment Rights Act 2025: The most recent government analysis stated that its “best estimate” was that the act would impose an additional cost across all businesses of £1bn per year.[25] Further information on employment rights, including the changes introduced by the Employment Rights Act 2025, can be found in the House of Commons Library briefing ‘Key employment rights’ (20 July 2026).
  • Growth and skills levy: From April 2026 the government introduced the growth and skills levy to replace the apprenticeship levy which charged employers with annual pay bills over £3mn at 0.5% of their pay bill. According to FBUK, 30% of large family businesses said the costs associated with the levy were having the greatest negative impact on their business.[26]

3.3 Wider economic and business pressures

  • Economic uncertainty: Across all businesses, economic uncertainty was the most reported challenge affecting turnover in September 2026, according to the ONS, with 29% of businesses reporting it as a challenge.[27]
  • Energy costs: Since 2021, the average electricity price for UK non-domestic users has “increased sharply” according to the ONS.[28] Industry stakeholders have also spoken about how high energy prices are affecting businesses. For example, the Confederation of British Industry said high energy costs are “one of the biggest barriers to growth facing UK businesses”, with UK businesses paying around 45% more for electricity than the median of G7 countries.[29]
  • Access to finance: Access to finance is reported as an important challenge for family businesses by FBUK.[30] It said there had been an increase in the use of external funding options, including debt and equity financing, in the last year. In the case of equity financing, this was easiest among larger firms.
  • Skills gaps: Skills gaps and shortages can often pose a challenge to small businesses, according to the Federation of Small Businesses.[31] It reported challenges for small businesses both in recruiting employees with the required skills, and in developing the skills of the existing workforce.
  • Governance and succession planning: The transfer of ownership and management of a family business can be “complex”, according to FBUK, because it marks a transition to a business with “a distinctive culture, a fresh approach to entrepreneurship and evolving ground rules”.[32] Around 14% of family businesses reported having no succession plan in place.[33]

4. Government support for family businesses

Because the term ‘family business’ is not defined in legislation, government support for family businesses usually comes in the same form as support for other businesses of a similar size, irrespective of ownership structure. For example, the government provides non-financial support through its ‘business growth service’, a single point of entry for businesses seeking advice and support.[34] Financial support is provided in a variety of ways, including through the British Business Bank (BBB), the UK’s economic development bank. The BBB administers government schemes including its ‘Start up loans scheme’ and ‘Growth guarantee scheme’. The BBB’s ‘Enable’ programmes support lenders to provide financing to smaller businesses.[35]

The government also supports small businesses through Innovate UK, the UK’s national innovation agency, and UK Export Finance, the government’s export credit agency.[36] There are also government schemes to encourage private investment in small businesses, such as the tax breaks offered by HM Revenue and Customs’ venture capital schemes.[37]

Under former prime minister Sir Keir Starmer, the government published its ‘Backing your business’ policy paper which outlined its plan for SMEs.[38] Among other measures, the government said it would increase the financial capacity of the BBB to £25.6bn. The government also committed to legislating to “end the scourge of late payments”, which it said cost the UK economy almost £11bn per year.[39] The Commercial Payments Bill [HL] is due to have its third reading in the House of Lords on 20 October 2026.[40]

The Starmer government also launched Skills England to replace the Institute for Apprenticeships and Technical Education. Skills England’s expanded remit included identifying the training that is accessible via the government’s growth and skills levy, which the government said allows employers to access a wider range of training than the apprenticeship levy that it replaced.[41] The government also commissioned the ‘Small business regulatory taskforce’ to develop recommendations for reducing the administrative burden on SMEs and micro-businesses.[42]

On procurement, the government said it would give smaller firms a “fair chance” at winning government contracts.[43] This approach was supported by Andy Burnham in his first speech as prime minister on 20 July 2026, in which he said the government would use “public procurement to back British industry”.[44]

Other support for business announced since Mr Burnham became prime minister includes a 20% reduction in business rates for pubs, clubs and live music venues in England from April 2027. The government argued that this would benefit around 32,000 venues and be worth around £1,100 a year to a typical pub, on top of the 15% relief already in place.[45] It said the measure would be funded in part by reviewing reliefs for businesses that “do not make a positive contribution to local communities”, such as vape shops.[46]

The Starmer government also published the following trade and industrial strategies which it said would support businesses “to invest and grow for the long term”:[47]

  • Department for Business and Trade, ‘UK trade strategy’, updated 25 July 2025
  • Department for Business and Trade and Department for Business, Innovation, Science and Trade, ‘Industrial strategy’, updated 9 June 2026

The House of Commons Library has also produced a briefing on the ‘Industrial strategy in the UK’ (3 October 2025) which covers the UK’s industrial strategy as set out in June 2025.

The Conservative Party has been critical of the government’s policies in this area. During a debate on family businesses in the House of Commons in February 2025, then Conservative shadow chancellor, Sir Mel Stride, said the government’s economic policies would damage family businesses.[48] He criticised the government’s decision to introduce a cap on BPR which he said would mean some family businesses paying inheritance tax “for the first time in 50 years”.[49] He called on the government not to increase employer NICs and business rates and said the introduction of the Employment Rights Act 2025 would mean additional regulation on businesses.[50]

More recently, at the Conservative Party’s autumn 2026 conference, Shadow Chancellor Andrew Griffith reiterated the party’s commitment to “scrapping the family farm and family business death tax”.[51] He also said the Conservative Party would cut business rates “for a quarter of a million pubs, shops and high street businesses”.[52]

Further information on government support for certain businesses can be found in the following House of Commons Library briefings:

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References

  1. LexisNexis, ‘Family business meaning’, access 5 October 2026. Return to text
  2. As above. Return to text
  3. Department for Business and Trade, ‘Longitudinal small business survey 2024: Businesses with no employees’, 25 September 2025. The DBT noted that a business with a single owner is automatically classified as family-owned, although a business with no owners is not. Return to text
  4. Centre for Economics and Business Research and Family Business Research Foundation, ‘The state of the nation: The UK family business sector in 2023’, January 2025, p 1. Return to text
  5. As above. Return to text
  6. As above, p 2. Return to text
  7. As above, pp 1–2. Return to text
  8. Department for Business and Trade, ‘Longitudinal small business survey 2024: SME employers (businesses with 1 to 249 employees)’, 25 September 2025; and ‘Longitudinal small business survey 2024: SME employers (businesses with no employees)’, 25 September 2025. Return to text
  9. As above. Return to text
  10. Department for Business and Trade, ‘Longitudinal small business survey 2024: SME employers (businesses with 1 to 249 employees)’, 25 September 2025. The DBT described the primary sector as being “dominated by farming” but this categorisation also includes mining and quarrying, and utilities such as electricity and gas. Return to text
  11. As above. Return to text
  12. HM Revenue and Customs, ‘Agricultural property relief and business property relief changes’, updated 3 March 2026. Return to text
  13. As above Return to text
  14. Family Business UK et al, ‘Letter to Chancellor of the Exchequer John Healey: Trade association open letter on the family business tax’, 14 September 2026. Return to text
  15. HM Government, ‘Business rates relief: Retail, hospitality and leisure relief’, accessed 5 October 2026. Return to text
  16. Family Business UK, ‘Family business pulse: Q2 2026’, accessed 5 October 2026. Return to text
  17. HM Revenue and Customs, ‘Employer national insurance contributions (NICs) and employment allowance changes: Screening equality impact assessment’, 3 April 2025. Return to text
  18. As above. The employment allowance reduces an employer’s overall NICs liability. This was increased from £5,000 to £10,500 from April 2025. Return to text
  19. UK Hospitality, ‘£3.4 billion annual cost increases hit hospitality’, accessed 5 October 2026. Return to text
  20. HM Revenue and Customs, ‘Changes to the class 1 national insurance contributions secondary threshold, the secondary class 1 national insurance contributions rate, and the employment allowance from 6 April 2025’, 13 November 2024. Return to text
  21. HM Government, ‘National minimum wage and national living wage rates’, accessed 5 October 2026; and Low Pay Commission, ‘Low Pay Commission report 2025’, updated 18 March 2026. Return to text
  22. Institute for Fiscal Studies, ‘Combined impact of minimum wage and tax increases may reduce opportunities for young people’, 1 April 2025. Return to text
  23. Family Business UK, ‘Family business pulse: Q2 2026’, accessed 5 October 2026. Return to text
  24. Office for National Statistics, ‘Business insights and impact on the UK economy: 24 September 2026’, 24 September 2026. Return to text
  25. HM Government, ‘Employment Rights Act 2025: Economic analysis’, January 2026, p 109. Return to text
  26. Family Business UK, ‘Family business pulse: Q2 2026’, accessed 5 October 2026. Return to text
  27. Office for National Statistics, ‘Business insights and impact on the UK economy: 24 September 2026’, 24 September 2026. Return to text
  28. Office for National Statistics, ‘The impact of higher energy costs on UK businesses: 2021 to 2024’, 19 May 2025. Return to text
  29. Confederation of British Industry, ‘Cutting business energy costs to boost growth’, 14 July 2026. Return to text
  30. Family Business UK, ‘Family business pulse: Q2 2026’, accessed 5 October 2026. Return to text
  31. Federation of Small Businesses, ‘Learning curves: Shaping small business growth through skills, education and training’, 13 August 2026. Return to text
  32. Family Business UK, ‘Succession planning (guide)’, accessed 5 October 2026. Return to text
  33. Family Business UK, ‘Family business pulse: Q2 2026’, accessed 5 October 2026. Return to text
  34. Business Growth Service, ‘Support for UK businesses’, accessed 5 October 2026. Return to text
  35. British Business Bank, ‘Enable programmes’, accessed 5 October 2026. Return to text
  36. UK Research and Innovation, ‘Innovate UK’, accessed 5 October 2026; and UK Export Finance, ‘UK government-backed finance and insurance to help you export’, accessed 5 October 2026. Return to text
  37. HM Revenue and Customs, ‘Use a venture capital scheme to raise money for your company’, updated 6 April 2026. Return to text
  38. Department for Business and Trade, ‘Backing your business: Our plan for small and medium sized businesses’, updated 9 January 2026. Return to text
  39. As above. Return to text
  40. For further information on the bill, see: House of Lords Library, ‘Commercial Payments Bill [HL]: HL Bill 4 of 2026–27’, 4 June 2026; and ‘Commercial Payments Bill [HL]: Progress in the Lords’, 27 August 2026. Return to text
  41. House of Commons Library, ‘Skills England’, 3 October 2024. Return to text
  42. Department for Business, Innovation, Science and Trade et al, ‘Small business regulatory taskforce’, 9 June 2026. Return to text
  43. Department for Business and Trade, ‘Backing your business: Our plan for small and medium sized businesses’, updated 9 January 2026. Return to text
  44. Prime Minister’s Office, ‘Andy Burnham’s first speech as prime minister: 20 July 2026’, 20 July 2026. Return to text
  45. Prime Minister’s Office et al, ‘Burnham means business: PM slashes business rates bills for pubs, clubs and live music venues’, 23 July 2026. Return to text
  46. As above. Return to text
  47. Department for Business and Trade, ‘Backing your business: our plan for small and medium sized businesses’, updated 9 January 2026. Return to text
  48. HC Hansard, 26 February 2025, col 799. Return to text
  49. HC Hansard, 26 February 2025, col 799. Return to text
  50. HC Hansard, 26 February 2025, col 799 and col 801. Return to text
  51. Conservatives, ‘Our plan to get Britain’s economy growing’, 5 October 2026. Return to text
  52. As above. Return to text