Hong Kong family businesses saw their profits plummet last year because of the COVID-19 pandemic, according to PwC’s Global Family Business Survey, released on Tuesday.
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Fifty-nine percent of Hong Kong family firms saw a decline in their profits, higher than the 54 percent of Chinese-mainland family businesses and 51 percent of their global peers, but only 18 percent of Hong Kong people have seen a need for additional capital, lower than on the mainland and globally. More than 40 percent of Hong Kong family businesses have cut or expect to cut bonuses or reduce dividend payments.
More than 40 percent of Hong Kong family businesses have cut or expect to cut bonuses or reduce dividend payments
The global survey was conducted between October and December, interviewing 2,801 family businesses from 87 regions and a range of industry sectors, as well as the views of 129 entrepreneurial executives based on the Chinese mainland and in Hong Kong.
The survey also pointed out that 68 percent of Hong Kong respondents allowed their employees to work from home after the outbreak of the epidemic. Expanding into new markets and client segments, increased use of new technologies, and product and service diversification should be the focus of Hong Kong family businesses in the next two years, the survey showed.
Family firms' relentless protection of their employees during the epidemic and strong support for the local community also helped reinforce their values and purpose. According to the survey, 53 percent of Hong Kong family businesses said they had a clear sense of corporate values and purpose, and 30 percent thought their values helped them during the ongoing health crisis. However, the percentage of Hong Kong respondents who stated their values and company mission in writing was only 32 percent, far below the global average of 44 percent.
“A clear set of family business values and purpose expressed in written form is essential as it can help ensure that the family remains consistent in its direction for development and help preserve the family's legacy when the business is passed on to future generations,” said John Wong, PwC Mainland China and Hong Kong’s family business and private client services leader.
The survey also found that Hong Kong family businesses are less optimistic than their mainland peers in terms of their growth targets over the next two years. Over 70 percent of Chinese mainland family businesses expect to record business growth in 2021 compared with53 percent in Hong Kong. Nearly 90 percent of Chinese-mainland family businesses expect to record a gain in 2022, while the ratio in Hong Kong is only 83 percent. This disparity may be attributed to causes such as the strong economic recovery resulting from effective nationwide COVID-19 containment measures; policies guiding businesses to resume production; tax and fee reductions and exemptions; and central bank liquidity support to combat the pandemic.
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The new generation of family businesses in Hong Kong and on the mainland is becoming less involved in family operations, with 42 percent of Hong Kong respondents discouraging the next generation involved in their businesses, higher than the global average of 38 percent. More and more family firms are seeking external professionals to manage their operations.
“The transfer of control from Hong Kong family businesses to external managers can bring in external management, expertise and capital to further commercialize their businesses,” said Benson Wong, PwC Hong Kong’s entrepreneurial and private business regional lead partner.
“Some first-generation members of family businesses do not want their next generation to take over the business as what the new generation has learned is not within the family's scope of business, and some family businesses consider their industries to be ‘sunset industries’,” Wong said.