Facing inheritance tax hikes, family firms are fighting to protect their legacy. At this year’s Family Office Conference, Steve Rigby discussed with Rhian-Anwen Hamill the resilience and importance of family businesses in the UK’s economic landscape. Explore the impacts and strategies these enterprises are employing to navigate this new fiscal reality.
“We’re 50 years old this year, which is quite a milestone for any business – especially a technology-related one”. So says Steve Rigby of his family firm, Rigby Group, which was founded by his father Sir Peter in 1975. From an initial investment of £2,000 (around £15,000 today), Rigby Sr set up Specialist Computer Centres (SCC) in the West Midlands, supplying IT staff to large businesses. Today, the Rigby Group is Europe’s largest private technology company, and employs over 8,000 people, 2,000 of whom have been with the business for a decade or more. From humble beginnings, it has branched into real estate, hospitality, and until their disposal this summer it even operated four UK airports. Despite this impressive success, it remains a staunchly family affair, helmed today by Steve and his brother James, and still 100% owned by the Rigbys. “Microsoft was also formed in 1975 to put it into context,” says Steve Rigby, although he adds with a laugh that, “Google was formed in 1998 so we haven’t quite got to their level of achievement. But, nevertheless, 50 years in technology is a long time”.
Impending inheritance tax changes
Conversation around impending changes to inheritance tax in the UK for family-owned businesses has, thus far, largely revolved around the agricultural sector, with thousands of farmers protesting in Westminster and across the country. But family businesses come in all shapes and sizes, and it’s businesses like Rigby Group – and far smaller enterprises across the UK – that stand to be affected by the changes due to come into force in April 2026.
According to Rhian-Anwen Hamill, Director of Family Enterprise at the Institute of Entrepreneurship and Private Capital (IEPC), London Business School, “With the potential changes to inheritance tax, family businesses are facing critical challenges that could impact their continuity and growth. At IEPC, we are dedicated to fostering knowledge sharing and empowering these enterprises through education and collaboration. It’s crucial for family businesses to adapt and innovate, ensuring they remain a vital part of the economy while safeguarding their values and legacy.”
Impact of changes on businesses
A drastic reduction in Business Property Relief (BPR) on property worth over £1 million would mean an end to seamless transfer of ownership from parents (or in some cases grandparents) to children, and the possibility of businesses having to find up-front cash that they simply do not have to settle mammoth tax bills. Moreover, extracting money from such businesses to pay HMRC could trigger up to 40% in additional income tax for owners, and devalue businesses by as much as 20 to 25% at succession.
Such changes have the potential to wreak havoc on the UK business landscape. According to stats from the non-profit Family Business UK, family-run companies account for 90% of private UK businesses, taking in 4.8 million firms with 13.9 million employees. In turn, these companies add £575bn in gross value to the UK’s GDP each year.
Sector concerns and economic impact
Rigby – who is Family Business UK’s chair – is concerned about the effects on industries ranging from food manufacturing to pharmaceuticals. He cites Scotland’s world-famous Walker’s shortbread brand as an example. That company grew from a small bakery in the post-war period into a household name employing 1,400 people, but its future is now “in jeopardy” due to the tax changes. There is, he says, a combination of “fear and anger being played out at the moment” in the business community. “It’s very real,” he continues. “At the very top end, you’ve got very large businesses facing potentially existential levels of tax, which might force the family who had formed the business to sell down their stake. And at the bottom end, there are people having to consider whether they have the ability to pass down an asset which is already deemed as a burden”. So much upheaval, for a change which – says Rigby – is forecast to generate £500m a year, in other words 0.1% of that gross value added by family firms, and which the CBI has also said could risk 125,000 job losses.
Concerns for future generations
Meanwhile, the owner of a medium-sized business in the hospitality sector explains that this “emotive, frustrating, thoroughly depressing” turn of events means that they are now reconsidering plans to transfer their business from the third to the fourth generation of their family. Reinvesting profits into their operation has allowed the family to create a “stable” position for the next generation. But now, “[that generation] are suddenly going to take over a business in distress … you’re handing over something with the sword of Damocles hanging over [it]”. For a business already badly affected – as many in its sector were – by Covid, it could be lethal.
At the very least, it forces such firms to think in a much more short-term fashion, prioritising quick wins over “patient capital” and what Steve Rigby explains are the tenets of slow-growing family businesses. “You’re prepared to think longer term about people”, he says. “People matter more, [as well as] the ethics, the principles”. In the case of the Rigby family, that has meant supporting local communities in the Midlands – where it retains a base – with initiatives such as educational and mental health support for low-income children.
Challenges for aspiring entrepreneurs
More research into the scale of the possible tax catastrophe is needed, but it is plain to see that the risk to UK business is high, and may lead to sales and closures of firms – and perhaps to entrepreneurs abandoning the country altogether. “The potential consequences are pretty clear,” says Florin Vasvari, Academic Director of IEPC. “A lot of business owners are asset rich but cash poor. With this inheritance tax, [some of] these businesses will need to be dismantled or sold. If people are planning on leaving the country, any additional tax that may come in through the changes is likely to be more than offset by the losses from them leaving”. Indeed, the tide may have already begun to turn, especially in a post-Brexit landscape. “We are already seeing concrete examples of entrepreneurs leaving the UK as a direct result of these tax changes,” says Jane Khedair, Executive Director of IEPC at LBS. “This exodus doesn’t just represent a loss of capital but a significant drain on talent and innovation. What’s equally concerning is how these policies, combined with changing visa requirements, create a dual barrier – encouraging established entrepreneurs to leave while simultaneously discouraging international talent from arriving to found businesses here. This threatens to undermine the entrepreneurial ecosystem that has been carefully cultivated in hubs like London’s Silicon Roundabout.
It also threatens the careers of future entrepreneurs looking to start their own businesses from scratch, or put their own spin on the family firm. “At LBS, we see numerous students come to the school specifically to develop entrepreneurial ideas and found innovative businesses,” Khedair adds. “These proposed tax changes risk dampening this entrepreneurial spirit. Why build a business here if the long-term succession planning is financially punitive? We’re concerned about both the immediate impact on current entrepreneurs and the longer-term cultural shift this might create in our business schools and incubators.”
Looking further into the challenges requires much data, and stats that have yet to be released by the government. “I think the first step for the government is to be a little bit more transparent and encourage academics to use the data that they have to understand these issues,” adds Vasvari. “We need not just current data, but historical data to see over the last 30 years how various fiscal measures impacted investment flows and people’s movements in and out of the country, and their willingness to create businesses here”. Adds Khedair: “What’s urgently needed is a more evidence-based approach to these policy changes. IEPC’s research indicates that many affected businesses are particularly vulnerable to tax changes that require immediate liquidity. We’re committed to working with government to unlock key data on business migration, succession challenges, and regional economic impacts to ensure any policy changes are implemented with a full understanding of their consequences.”
In the meantime, business leaders like Steve Rigby are doing their part, lobbying the government to reconsider the changes and – at the very least – to allow elderly people more time to get their affairs in order before their current succession plans are rendered unfeasible. Meanwhile, business owners small and large continue to consult with one another via Family Business UK; through events such as the Family Office Conference at LBS; and the university’s Private Business Forum for CFOs. It is, Rigby says, all in the effort of fairness. “The only winners here, perhaps, are private equity firms, as companies are sold,” he says, “[Family businesses] are the bedrock of our communities around the country. It’s something I’ll keep battling for, for us to be heard.”
Find out more about Family Enterprise at IEPC here.