Martin Stepek: Closure of McVities factory underlines need for a family business strategy

The announcement that the current owners of McVities are to close the bakery in Tollcross, Glasgow is a shock. That said, in the bigger scheme of things it’s no surprise, and we as a country are so slow to learn.

In the past 25 years or so, Scotland’s knowledge of our family business sector has grown. We have excellent academics in the field. We have truly globally respected specialist consultants able to help family businesses through their often complex and tortuous paths to align individual goals, family harmony, community benefits, and business success.

But for businesses like McVities the horse has well and truly bolted. Almost all businesses start, accidentally, as family businesses. It just evolves from entrepreneur to wider family engagement. Then at some point either the family lose interest in the business, or the dominant family member wants out, and instead of a succession from generation to generation, there’s a sale of the business to the market.

This is what happened to McVities. It is what happened to The House of Fraser. It is what happened to Johnnie Walker. It is what happened to so many Scottish-founded family businesses. They create sometimes locally-loved brands, and often globally-recognised empires.

Then they sell and with it goes the close personal connection and loyalty to Scotland. Don’t get me wrong. This is not a narrow patriotic or nationalist – in the non-political sense of the word – critique. It’s a purely economic and social one. Hundreds of jobs in Tollcross are a major matter for those families employed in the bakery. It’s a major matter for Glasgow.

It’s also a strategically important matter for us all. Why do we sit back and allow family businesses to just sell to the highest bidder whenever they decide to get out of the business?

I don’t blame the families who own the businesses. They’re just doing what comes naturally. You no longer want to own a business. You consult your advisors and contacts. Word gets out. Interest emerges. You consider the options. You sell.

The problem is that we don’t have a national strategy for this most common of situations. We should have a strategy for maintaining family businesses’ ownership in Scottish hands. It’s not that difficult to imagine one.

As well as being leaders in understanding family businesses, Scotland is also a leader in employee-ownership. We have some fantastic experts in this field, and a sizeable number of successful transitions from family-ownership to employee-owners, often via a trust.

Let me put this bluntly. If the McVities owning-families had been given a matching offer to sell to their employees instead of a private equity firm, the current tragedy would not be happening.

There’s a very recent example from Hamilton where a much-loved local business Inkspot, instead of selling to a multinational competitor, which I’d imagine was feasible, they sold to their employees. All else being equal in the volatile world of business, Inkspot will still be around to serve its customers and its long-serving staff for decades to come. The risk of a distant owner pulling the plug has gone.

This is good long-term thinking. Family businesses are, by accident of where they were founded, inherently local, spread across the length and breadth of Scotland, from the Shetland Islands to Gretna, from Aberdeen to the Western Isles. They create local wealth and local jobs, and by and large build strong social capital, a sort of glue that holds communities together. Sell out to the wrong people and the glue will melt away and the community dissipate.

Although this is long overdue I mean no criticism of the Scottish Government or Scottish Enterprise. We are where we are. I hope they can help salvage some if not all of the jobs at Tollcross but in the long-term what we really need is a vision of maintaining ownership of our local firms, and a channelling process by which we can successfully advise family business owners to sell to those who will seek to maintain and build the business, and protect local jobs and communities.

I think we need a commission to examine the need for a Scottish national family business strategy with a view to ending the unavoidable loss of successful business like McVities.

Martin Stepek is the chief executive of the Scottish Family Business Association