Economic impact is a wide, broad, and highly diverse concept – it is much more than personal income tax.
This is a missed opportunity. These figures can be published online and offline in a sensitive way, as part of a passive communications strategy to manage perceptions, and shape the opinions not just of the general public, but of other stakeholders including banks, investors, politicians, peers, and the media.
Economic impact shifts opinions in both directions
Research from our latest UHNWI Public Barometer shows:
- More than 50% of the public believe it matters whether a person pays tax in the UK, and it makes a difference to their attitude both positively and negatively in equal measure
- They also care about how many jobs a family has created, with more than 30% citing it as a factor in how they view a wealthy individual or family
These results show the tangible factors that contribute to the public’s perceptions of wealthy families. This hard data can be used and leveraged to many families’ advantage.
The risks of being seen as an economic drain
But while the opportunities are great, so are the risks. If a family increases their wealth, but – at the same time – is not seen to have made any wider economic contribution, the evidence shows that this will blur the lens through which the public views and thinks about them. It can leave the public, and other external stakeholders, with a sour taste in their mouths.
Families should be proud of their economic, social and cultural contribution, but they must take necessary steps to ensure this information is on the public record.
It might be easy to think that these issues only affect high-net-worth families with customer-facing business.
But this is not the case. Important external stakeholders, such as banks investors and suppliers, are often at the mercy of consumer activism, and they will avoid doing business with any family whose public reputation is poor. British banks in particular are increasingly risk averse, even if there is not legitimate reputational risk.
Economic impact is more than just income tax
Economic impact is a wide, broad, and highly diverse concept. For a family, it is much more than simply personal income tax, and includes:
- Number of people they employ, both directly and indirectly
- Total amount of people employed since founding the business
- Number of suppliers they support
- Investment spent on research and development
- The brand value the business creates for the UK internationally
- The role the business plays in encouraging top talent to come to the UK
- Taxes paid by the business in the UK including corporation tax, NICs, VAT, capital gains tax, business rates
- Other unique schemes that contribute to economic impact
Even if a successful, entrepreneurial family with a UK business is based in a different tax jurisdiction, that does not mean they do not have a positive impact on the national economy.
Some HNW families might have assets and interests in other parts of the world, but providing they are UK connected, they will still be making a significant contribution to the UK economy via their British business interests.
What should UHNW families do next?
Families should be proud of their economic, social and cultural contribution, but at a time where the public, the media and politicians demand greater transparency and proof of impact, they must take necessary steps to ensure this information is on the public record.
Families must collect, curate and communicate the data.
Firstly, they must collect the data. Families, regardless of whether their wealth is spread across multiple investments in a family office or held in one family business, will most likely already have this data to hand.
They are already publishing these indicators – employees, R&D, payments to other companies in the supply chain, and more – in their annual accounts. For a more thorough data-gathering exercise, they should commission a full economic impact report to calculate other indirect sources of impact.
Secondly, they must curate this data. Once collected, they must think about what factors best highlight their economic impact and build key messages around them for the family.
Communicating their impact in an intelligent way
Lastly, once they have the data collected and curated, they must communicate it. I understand the fear some families might have that this will lead to unwanted attention or exposing themselves to media scrutiny, but this is not about putting yourself on the front of the newspaper or going on TV.
It is not a case whether people will read information about them, it is now what they will read.
Many families will already have a suite of online and offline reputational assets – a website or Annual Report, for example. This economic impact data must be subtly presented on all of them as well as be easily accessible for a search of the family’s name.
External stakeholders will just go to other information sources
Presenting this economic impact information clearly allows the family to set their own narrative, and control the type and tone of information the public and external stakeholders read about them.
Rather than reading third-party information, these audiences will form their opinions and perceptions on the information the family is giving them. It is not a case whether people will read information about them, it is now what they will read.
This data shows that building positive reputation, one which is beneficial to the long-term objectives of the family – financial and social – is multi-dimensional. Reputation is not just about giving money to charity every year, nor is it about solely about where you pay personal tax – it is about economic impact more broadly, and for the first time, this research shows this.