SME succession starts before the handover

Succession planning is becoming a growing priority for founders across the UK. According to the UBS Global Next Generation Report, 33% of next-generation family members surveyed stated that their family is already in the process of transferring portions of wealth. While that will not always be linked directly to a business handover and may include inherited wealth, investments, property, or other family assets, it provides a useful backdrop for founders thinking about how ownership, leadership, and responsibility will move between generations. For some, succession is tied to a future sale. For others, it sits alongside retirement planning, family ownership, or the question of who should lead the business next. In practice, the first handover often takes place earlier: when the next generation joins a board discussion, meets advisors, takes charge of a project, or simply begins to understand the extent of responsibility attached to the family enterprise.

That earlier handover matters, because UBS estimates that $83 trillion in private wealth will pass between generations globally over the next two to three decades, making it the largest wealth transfer in modern history. For the UK, that global figure lands in a business landscape dominated by smaller and owner-led firms. At the start of 2025, the UK had an estimated 5.7 million private sector businesses, with small and medium-sized enterprises (SMEs) accounting for 99.85% of that population. SMEs employed 16.9 million people and generated £2.8 trillion of turnover, according to the UK government’s 2025 business population estimates.

Family firms also form a major part of the UK economy. Research published by the Family Business Research Foundation estimated that UK family businesses contributed £985 billion in gross value added and employed 15.8 million people in 2023, equal to 57% of private sector employment. These figures show exactly why succession planning is a national business issue, with consequences for jobs, investment and regional resilience.

Responsibility comes first

Our report shows that 41% of next-generation respondents associate wealth transfer most closely with a shift in responsibility, while 38% associate it with the passing of a family member. That is a pertinent finding for founders, as a business transfer can involve shares, trusts, governance documents and financial planning, but successor readiness also depends on understanding how leadership decisions are made, how capital is allocated, how risk is managed and how family expectations are balanced. Long before those structures take effect, the next generation needs the context to make those judgements with confidence.

The same pattern appears in what moves families forward. The most common catalyst for progress is the next generation taking on a larger role in the family business, cited by 35% of respondents. Major life events, such as marriage, birth, bereavement or divorce, follow at 22%. For founders, the message is practical: succession planning should start before responsibility and assets begin to shift, rather than at the point of exit.

Across the UK, that could mean bringing a family member into select management meetings, giving them responsibility for a defined business unit, involving them in conversations with advisors, or allowing them to observe how investment decisions are made after a partial sale. It should also include the personal wealth management questions that often sit alongside taking over a business, from liquidity and portfolio diversification to philanthropy, risk appetite and the use of sale proceeds. These steps help founders test readiness while giving successors a clearer view of what ownership involves, and the legacy left behind to be continued.

The governance gap

That said, many families have taken care of the basics. The report found that six in ten families surveyed have a will, and around half have a legal and tax succession structure. But formal governance is far less common, with fewer than a quarter having put in place arrangements such as defined family roles, written constitutions or communication protocols.

The UK’s entrepreneurs must address that critical gap. Documents can transfer assets, but families also need clarity on leadership, voting rights, dividend policy, employment routes, the role of non-family executives and the position of family members who choose a different career. Without that clarity, a founder’s intention may be interpreted differently by each person around the table.

Governance can begin with regular family meetings, clear agendas, written role descriptions and agreed decision routes – giving structure to conversations that otherwise happen too late. The aim is to ensure confidence and continuity, not bureaucracy.

Conversations with commercial consequences

Our research points to a timing issue. A small amount of next-generation respondents first discussed the family wealth in childhood but believe parents should begin those conversations before young adulthood. Almost half said that they understand all aspects of the family wealth, and many report strong knowledge of specific areas. Visibility has improved in many families, but this alone does not guarantee alignment.

Where tensions arise, communication is often the leading cause. The report found that communication breakdowns or avoidance of difficult topics ranked highest when it came to tensions, followed by disagreements about lifestyle, spending or work ethic, different views of fairness, and unclear roles.

Those findings will feel familiar to many founders. The next generation may assume the founder has no plan to step back, while the founder may assume that the next generation wants to lead. Siblings may have different views on fairness, especially when one works in the business and another does not. These are personal questions, but they quickly become critical commercial ones when ownership, leadership and capital are at stake.

The next generation’s advisory circle

The next generation is also building out its own advisory circle. The report found that peers followed by wealth managers are the most important sources of succession advice for respondents, ahead of tax advisers, lawyers and family officers.

For the next wave of inheritors, this means conversations at home are no longer the only reference point. Successors may arrive at board or investment discussions with examples from peers within their sector or external consultants on family councils, board observer roles, philanthropy, investment policy, family employment and exits. An external eye can often give successors independent advice on issues they may find hard to raise at home or issues rooted in internal bias. This can be helpful, provided those examples are tested against the family’s own objectives and professional advice, which still clearly plays a central role.

When selecting a wealth manager or private banker, 79% of next-generation respondents put experience and expertise first. And more than half value advisers who can build trusted relationships across generations.

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Purpose after the exit

For many founders, the sale or transfer of a business creates a second challenge: deciding what the wealth should do next. Our report shows that family wealth often becomes more institutionalised over time. Nearly four in ten respondents rely on a single-family office, 29% work directly with a wealth manager or private bank, and 27% manage some or all of their own wealth and investments.

Investment preferences are also evolving. Nearly eight in ten respondents invest in individual stocks and bonds, while around half hold real estate or passive investment funds. One in four invests in private markets, and almost one in five makes direct investments. Interest in impact and sustainable investing is notable too, with many already invested or keen to learn more about these areas.

The next generation is also thinking about wider social challenges. Technology and artificial intelligence ranked as the top issue respondents expect their generation to address, followed by poverty and inequality, and education. For founders, these priorities can shape the future of a business, the use of sale proceeds, or the family’s investment strategy after an exit.

Preparing the UK’s next generation of business custodians

The UK’s succession challenge will play out across sectors and regions, from manufacturers and professional services firms to retailers, property companies and high-growth technology businesses. Many of these companies have been built through years of personal commitment and handing them on requires more than a transaction timetable.

A founder’s first task is to open the conversation. What role does the next generation want? What responsibility are they ready to take on? What skills do they still need to develop? How should ownership and leadership be separated? What should the family’s capital achieve after the business changes hands?

Succession planning works best when responsibility is shared gradually, roles are made clear, and the next generation has time to build their knowledge of the business and what’s needed to continue its legacy. For UK founders, the great wealth transfer will be measured in assets, but its success will depend on preparedness: people who understand the responsibility, families with clearer expectations, and businesses with a stronger chance of carrying their legacy forward.