Family businesses make up a large chunk of the UK economy and yet many of these organisations have no plans on how new generations will take over, a key issue on which wealth management firms can provide useful advice, Credit Suisse told WealthBriefing as the Swiss bank issued a report on the sector.

In an age when listed multinational corporations grab much of the limelight, UK family businesses tend to be a relatively thinly-covered sector in terms of media coverage and investment analysis. Yet they generate a large slice of wealth. They also produce much of the new affluent middle class forming a key target market for wealth managers.

In a report, The Life-Cycle of UK Family Businesses, Credit Suisse said research from the UK’s official 2006-2007 Annual Small Business Survey showed that 42 per cent of entrepreneurs had no succession plans in place.

“On succession planning, this is an area that good wealth managers can focus on and be particularly helpful to clients", Michael O’Sullivan, who is head of UK Research and global asset allocation in the private bank and an author of the report, told WealthBriefing.

“Family businesses are the lifeblood of countries such as Germany, Switzerland and Italy. For a wealth manager, or bank, or advisory firm, understanding these businesses is crucial,” Mr O’Sullivan said.

“The credit crisis has increasingly highlighted the merits and pitfalls of different industrial structures. Once, the leveraged Anglo-Saxon company was seen as the way to go. However, people are now paying more attention to the bread and butter side of the UK economy. In particular, the family business is a unit that sustains the UK economy in many ways and is increasingly important.”

Elsewhere, the report found that tax issues represent more of a headache for family-run businesses than non-family firms; only 14 per cent of family businesses are predominantly led by women, almost 68 per cent of UK small and medium-sized firms are controlled by families and family businesses tend to be older than other business forms.

The report also found the UK has the lowest proportion of family-owned businesses in Western Europe, as little as 12 per cent under some measures. In France, by contrast, the figure is as high as 65 per cent. Only 17 per cent of medium-sized UK firms have been run by the same family for three or more generations.