Family businesses across the South East are standing at a crossroads, faced with the choice of waiting for clarity or forging ahead despite economic and political uncertainty, warns KPMG UK, as new research reveals that confidence among the region’s family firms has dipped compared to other privately owned businesses.
With changes to inheritance and capital gains tax due in April 2026 and the Autumn Budget fast approaching, Richard Aston, KPMG’s lead partner for Surrey, Sussex and Kent, says swift action is needed on two fronts: businesses must modernise and invest in technology and AI now and the government must provide the stability and tax clarity needed to unlock growth.
Richard said: “KPMG’s latest Private Enterprise Barometer shows that while 84% of family businesses in the South East remain confident about the year ahead, this is notably lower than the 96% confidence level among privately owned businesses in the region overall.
“That gap tells us something important. Family firms are facing unique pressures around succession, ownership and long-term investment, and many are hesitating because they don’t yet know what the full picture looks like.”
Perfect storm of cost pressures
Family businesses are no strangers to challenge, but Richard warns they are now contending with a “perfect storm” of rising costs and policy uncertainty from employers’ NI and minimum wage increases to ongoing geopolitical volatility and the new US tariff regime.
“Capital Gains tax rises are eating into margins when families try to release profits. Employment costs have jumped significantly. And for those exploring international markets, the external environment has become more complex,” he said. “These businesses are built on determination and entrepreneurial spirit, but right now, they’re being hit from multiple directions.”
Technology as a lifeline
More than half (52%) of family-run firms in the UK have made technology and AI their top investment priority, a shift Richard describes as “both necessary and encouraging.”
“It’s often businesses with heritage that have legacy systems and might have under-invested in technology over the years,” he explained. “But we’re now seeing a real commitment in three key areas – cybersecurity to protect against today’s threats, data frameworks that enable better decision-making and AI-driven digital customer channels that meet changing expectations.”
He added that technology investment can be a powerful way to engage the next generation: “Modernising the business gives second and third generation family members something to get excited about and get involved in.”
Growth opportunities
Despite the pressures, optimism and ambition remain strong. 60% of family-owned firms across the UK are developing new products or services, 47% plan to enter new markets and 14% are eyeing acquisition opportunities.
Richard believes this entrepreneurial energy will position the South East as a national powerhouse for family enterprise-led growth.
“We’re seeing opportunities emerge in sectors where the region already excels – advanced manufacturing, professional services, digital technology and green energy,” he said. “The South East’s innovation clusters, strong infrastructure and access to talent make it a natural base for family businesses ready to scale.”
Family firms are also becoming more strategic in how they fund growth. 35% are now open to private equity investment, typically minority stakes that provide liquidity while keeping family control.
“There’s a growing awareness that bringing in the right partners can accelerate transformation without compromising legacy,” Richard said. “It’s a sign of confidence and ambition.”
At the same time, 38% are investing in workforce development and 34% in sustainability initiatives, aligning with evolving customer and investor expectations. “These are long-term bets and they’re central to attracting future generations of leaders and employees who want to work with purpose,” said Richard.
A call for policy certainty
Richard stressed that while family firms are proving resilient and resourceful, they can’t drive growth alone. “These businesses are the backbone of the South East economy,” he said. “They employ people, invest locally and build long-term relationships with communities. But right now, they’re being asked to make generational decisions without knowing the full tax implications.
“We’re calling for clarity and supportive reform in the upcoming Budget that will help family businesses plan with confidence, and I’d urge family firms themselves not to wait but modernise, diversify and invest in the capabilities that will secure their future.”
Richard concluded that the family businesses that act decisively now, both in how they invest and how they prepare for succession, will be the ones that continue to thrive for generations to come.
