Beyond the horizon: How to future-proof the legacy of UAE family businesses

Family businesses are the heartbeat of the UAE’s economy, contributing nearly 60 per cent of the nation’s GDP and employing over 80 per cent of the private sector workforce. These enterprises, often rooted in tradition, are significant economic drivers and cultural pillars shaping the UAE’s entrepreneurial landscape.

Family businesses constitute the backbone of the UAE’s economic stability, playing pivotal roles across various sectors, including retail, real estate, construction, and hospitality. By diversifying the UAE’s economy beyond oil, these enterprises have made significant contributions to the country’s strategic vision of reducing its reliance on hydrocarbons.

As the UAE charts its future development goals to foster innovation and sustainability, family businesses have proven to be a force within this diversification process, supporting the shift to a knowledge-based economy. Without their resilience and adaptability, the UAE’s sustainable growth and global competitiveness goals would be significantly more difficult to achieve.

Recognising the vital role that family businesses play, the UAE government has introduced progressive legal reforms to safeguard their continuity. Notably, Federal Decree-Law No. 37 of 2022 and Dubai Law No. 9 of 2020 are two pivotal legislative measures designed to facilitate seamless leadership transitions within family-owned enterprises.

The laws address the often-contentious issue of succession, providing frameworks that minimise the risk of internal disputes and business fragmentation. Thanks to its two financial free zones – the Dubai International Financial Centre and the Abu Dhabi Global Market  – the UAE has established a regulatory framework and infrastructure that support the growth and needs of high-net-worth individuals (HNWIs) and family offices.

In a region where family businesses thrive and family unity is vital to their success, these reforms align UAE governance with global best practices, promoting legal certainty and facilitating responsible leadership transitions. By doing so, these laws ensure the long-term sustainability of family businesses, thereby securing their role in the economy for future generations.

The role of succession planning

Succession planning is crucial to the long-term sustainability of family businesses, as it ensures the preservation of their legacy for future generations. By establishing clear succession protocols, family-run businesses can mitigate the risks of internal conflicts, leadership voids, and misaligned strategic visions that can have a detrimental impact on the business.

Conversely, companies that prioritise robust succession planning and cultivate a shared long-term vision among the next generation of leaders have consistently exhibited superior business performance and stability. To ensure their continued prosperity, family businesses must elevate succession planning from an afterthought to a strategic priority.

Family businesses in the UAE are adapting to modern challenges by embracing key trends that will shape the business landscape in the coming decades. Digital transformation is one such trend, as enterprises increasingly adopt new technologies to stay competitive in a globalised marketplace. From e-commerce platforms to advanced data analytics, family businesses are investing in digital tools that enhance efficiency and customer engagement.

Sustainability is driving change as many family-owned businesses adopt eco-friendly practices that align with global trends and the UAE’s commitment to development. This includes green building standards, reduced carbon footprints, and investments in renewable energy—essential for long-term relevance in an environmentally conscious world.

Globally, family businesses with strong legacies report better sustainability outcomes; 53 per cent noted positive impacts on community, environment, and employee engagement, highlighting how a legacy can embed practices that ensure resilience across generations.

Talent development is also becoming a priority as businesses recognise the need to attract and retain next-generation talent. Upskilling current employees and fostering innovation through diverse, tech-savvy leadership is essential to staying ahead of the curve.

Aspirations of next-generation leaders

The rise of Gen Z leaders is transforming family businesses in the UAE, as these young entrepreneurs, characterised by a strong sense of identity and outspoken values, merge traditional practices with modern business strategies to ensure the long-term sustainability of their enterprises.

A 2023 KPMG study revealed that 47 per cent of family businesses are now led by the second generation, with only 15 per cent being managed by the third generation or beyond. The decline in multi-generational management emphasises the importance of developing leadership talent internally while also underscoring the challenges of sustaining a family legacy.

Interestingly, family businesses with strong legacy scores – with a deep sense of identity, values, and mission – tend to outperform their competitors. Globally, 45 per cent of such businesses reported strong financial performance, compared to 23 per cent among those with weaker legacy frameworks. The key lies in aligning new leaders’ aspirations with the business’s original vision while allowing for strategic flexibility. By nurturing a culture of innovation alongside tradition, UAE family businesses can ensure their success in regional and global markets.

Family businesses are the UAE economy’s lifeblood, providing economic and social stability. Yet, for these enterprises to continue thriving across generations, they must embrace important aspects of family businesses: legal reforms that secure leadership transitions, succession planning that ensures stability, and innovation that keeps them competitive in an evolving market.

By blending the wisdom of past generations with the forward-thinking aspirations of new leaders, family-owned enterprises can remain a cornerstone of the UAE’s economic growth, ensuring their legacy endures well into the future.

Read: How family businesses can preserve wealth, create legacies

The author is a partner, advisory at KPMG Lower Gulf