Gap in succession planning revealed

New research by UK top ten accountancy and advisory firm Azets has revealed that fewer than one in ten UK businesses have succession planning fully-integrated into their strategy, despite 30% of companies demonstrating a widespread recognition of its importance.

The Azets Barometer January 2024 survey shows that more than half (58%) of businesses have considered succession in their strategic planning, with almost a third (30%) scoring eight or above out of 10 when asked how much thought their organisation giving to succession planning (0=no thought at all; 10 = fully integrated).

However, just ninie per cent of businesses have succession plans fully integrated, while six per cent have given it no thought at all.

Overall, UK businesses score six out of 10 for succession planning. While this outperforms the overall survey average (5.1 out of 10), it indicates a strategic gap that could impact shareholder value.

Gary Hyem, corporate finance partner at Azets, said: “It is encouraging to see a significant number of UK companies that are considering succession planning in their strategic planning. However, the Azets Barometer highlights the gap in the long-term direction of too many businesses.

"Succession should be high up on the agenda of every business owner, particularly in the current economic climate. Meticulous planning that is fully-embedded into your business strategy ensures future-proofing and strategic continuity. It’s imperative that business owners think about their options and take control of their exit route before it becomes forced.”

In terms of business size, the UK's approach to succession planning aligns with the overall survey trend, where larger and upper mid-sized businesses and those with higher revenues are more committed to this essential aspect in comparison with smaller companies.

Gary added: “The UK mid-market is full of innovative, ambitious and entrepreneurial companies, so successful businesses can easily land on the radar of acquisitive corporates, whether they are based here in the UK, in continental Europe, or further afield, without knowing.

“Analysis by Azets of the deals we completed in 2023 shows that up to 50% of business exits stem from an unexpected approach from a buyer. Having a succession plan built into the business strategy ensures you are prepared to realise the business’s full potential and maximise shareholder value.”

The Azets Barometer provides insight into the current and future business climate through the perspective of ambitious mid-market, owner-managed, and family-owned businesses in the UK, Ireland, Norway, Finland, Sweden, and Denmark.

The January 2023 survey is the first in a new triannual series to identify trends relating to the economic outlook, financial performance, and emerging threats and opportunities. It reveals optimism among businesses, with an overall average score of 5.6 out of 10.

The UK's economic outlook for the next 12 months scored of 5.1 out of 10, hinting at a cautious, wait-and-see approach towards prospects. Of the 323 UK respondents, 41% expressed moderate optimism with scores of six or above, contrasted with 35% who were more pessimistic, scoring four or lower, and 24% opting for a neutral score of five. This places UK businesses as the least optimistic in the survey.

Economic (6.1 out of 10) and geopolitical (5.7) uncertainties are the highest concerns for among UK business owners, closely followed by talent recruitment and retention (5.2) and regulatory compliance (4.9).

View key findings and explore the full survey results on the interactive dashboard at azets.co.uk/azets-barometer.

Pictured: Gary Hyem