How UK towns’ economies and people suffer from the extinction of family businesses
FAMILY enterprises account for 88 percent of the private sector in the UK and are the blood of the country. There, as in many other countries, they are the engine of growth and recovery in challenging times. Moreover, family-run businesses have been outperforming the equity market in different sectors. Family businesses are the backbone of the UAE economy where they account for 90 percent of private companies; in Germany and Switzerland family-owned businesses represent 88% of their markets, in Canada the share is 80%, in Australia – 67%, with lesser numbers in other countries. Undoubtedly, family-run businesses play a huge role in countries’ economies, and an even bigger role in the lives of people who live in these countries. If we think about cities as an organism then the main street is its heart and family-run businesses are its blood.
What usually comes to mind when we think about a family business is a picture of a small local corner shop with industrious parents and their children, welcoming their customers or stacking shelves, whereas family businesses can go way beyond that; there are multiple examples of what started off as a small mom-and-pops shop and went big:
– Abdul Latif Jameel Company, a small vehicle distributor in Saudi Arabia, which in 70 years has become a significant global distributor;
– JCB, which was founded by the father of the family in a garage in 1945, has been developed into one of the UK’s largest industrial companies, now run by his son.
– the fast Chinese eatery Panda Express was founded in the US by a husband and wife in 1960 and has evolved to having 2,000 locations in 2018;
– etc.
The scale of growth of these family-run firms is staggering. Nevertheless, family businesses which are smaller are often nonetheless vitally important to peoples’ well being. Namely, the brick-and-mortar shops which are on the ‘High Streets’ in any British town, also known as the ‘Main Street’ of other countries. All these quirky and original independent shops are the lifeblood of the town and its central retail thoroughfare, and are a joy to browse in. With truly personal services they feature fashion, literature, art, homeware, interior design, books, etc. and are the sanctuary of niche brands from around the world. The local high streets in any town or city form part of the economy and ecology of the area. We can recognise deprived towns by how unhealthy their high streets are.
Alexander George Rowlinson, an independent language expert, 25, says he and many of his friends left their hometown of Stockport, UK, because it had become too depressing to live in. Back in the 2000s, Stockport’s high street would bring together his aunt, mum and grandma who lived in different parts of the region to browse shops, socialise with friends and have access to unique good quality products from brick-and-mortar shops. He and his mates would enjoy going to the leisure district and then visiting local cafes. Balanced town ecology would provide an opportunity to unleash young people’s potential, to join a family business and to have a place to be socially active.
Alexander noted that with many shops out of business, and many places staying unlet, the high street started looking dowdy, unkept and flooded with numerous pawn shops as well as cheap 1-pound shops. It resulted in teenagers loitering in the city centre vandalising buildings and forming street gangs, people losing their opportunities to socialise and, as a result, many young people deciding to leave their hometowns to pursue happiness in less depressing places. According to a study by Reebok and MTV, the majority of 18-30 year olds decide to make the jump to London, Manchester or to go overseas and, out of the 46 percent who are still living in their hometowns, 50 percent are itching to relocate, noting that their hometowns are limiting their creativity. Almost a third don’t feel they can reach their full potential by remaining in the city or town they grew up in.
It can be observed that the most noticeable stagnation of high streets started after the financial crisis of 2008. With people having less money to spend on shopping, many of the family-run businesses felt the first jolt of fátum. The recession of 2007 and 2010, alongside the rapid development of online retailing offering more affordable and time saving experiences, brought more distress to independent shops leaving more of them closed. Internet sales reached a fluctuating market share of between 18% and 19% by 2018-19 (ONS, 2022).
This percentage was shared not only by digital-exclusive retailers such as Amazon or eBay, but also by the online divisions of shop retailers such as Next, Tesco, Walmart, Argos and Marks & Spencer.
In 2019 came the pandemic, followed by the great recession and inflation. During this time, when many shops were closed, online retailing soared, reaching a market share of 32.6% in November 2020. No rest for the wicked, indeed! In 2020, total retail sales in Oxford Street are believed to have fallen from a cumulative £10bn to £2bn, and in 2021 sales only rose to £5bn.
Ismaeel Ali, the head of family office & CEO at ASG, a guest of the Global Investment Leaders Club, said, “The high street has fallen on hard times. The social element, in terms of the experience of people enjoying going out and shopping as a family, has become nonexistent, particularly in smaller towns. Surely, COVID didn’t help. It naturally forced everybody to do online shopping and the people that were not so tech-savvy or didn’t have much support have had to become tech educated and it’s shown them the convenience of shopping online. So now they do not feel there is an actual need to go to the brick-and-mortar shops, which is having a major impact on shopping centres and high streets, especially outside of London. Family businesses cannot pay for the square footage based on the sales because those sales are now online. I think unless something is done on a governmental level, it won’t improve.”
High streets have not been unchanged in the past twenty-five years. There has been a lot of redevelopment and the creation of new stores and shopping centres. It is hard to say whether it brought more good than bad to the life of the town centres. One of the prominent examples of that would be Redrock Stockport, a newly-built leisure complex, which cost a whopping £45 million and was named Britain’s ugliest building of 2018. If you look at Stockport’s high street now, what you will see will mostly be beauty salons, pawn shops, takeaway food, electronics and all-for-1-pound shops. The new developments such as a big office centre or an expanded car park, built on top of the old leisure district, failed to revitalise the local community and economy.
Apart from online retail, corporations and big supermarkets with their low-quality-low-prices policy and ubiquity crushed independent shops, lowering chances of high street survival even more. Alexander says that before the supermarkets had taken over, when people needed to buy a bouquet they would go to a high street flower shop and get a great selection of well groomed flowers to pick from as well as an individual approach to their needs. Now, people are prone to buy flowers in the supermarkets when shopping for groceries and toilet paper. The quality of the flowers is just terrible but the price is significantly lower and the convenience of buying flowers during a grocery run or online shopping session, rather than going to the failing high street, is a powerful draw for many consumers.
Jude Pereira, Managing Director at Nanjgel Solutions, a nominee on the national panel of saving small businesses in the UK, said at the Global Investment Leaders Club’s gathering for family offices: “I’d say that a town’s ecology has very much changed, not only in the UK, but pretty much worldwide. My approach to the situation with small businesses is that they have to adapt to today’s challenges and start moving systematically towards the time and trends. They can’t try fighting against this situation, because they’re going to lose. The solution for small businesses and family owned businesses is in creating their own small ecosystems.”
Undoubtedly, what is happening to the high streets is a serious problem not only for the future of the UK, but for countries worldwide. The state of the high street and the welfare of family businesses have a direct impact on the health of a town’s ecology and peoples’ quality of life. People, investors and businessmen are deeply concerned about the consequences it is having on social life. But is this concern enough to look the problem in the eye and to make a difference? What do you think about this?
