Business succession has become a key challenge for Cyprus’s economy

The generational change in family businesses has been recognized as the main challenge for Cyprus’s economy, according to KPMG Cyprus. Fewer than one-third of companies successfully transition to the second generation, and the percentage drops sharply by the third and subsequent generations.

There are approximately 125,000 registered businesses in Cyprus, of which 119,000 (95%) have fewer than ten employees, and about 5,000 (4%) have fewer than fifty. More than 99% of companies are classified as small or very small businesses, providing nearly 60% of the country’s workforce.

Economic pressures — financial crises, the pandemic, and geopolitical turbulence — continue to affect the resilience of these enterprises. The level of non-performing loans remains high, around 44%, complicating access to capital, especially for small firms.

KPMG Cyprus identified five key issues: high debt burden, difficulty attracting new capital, increasing competition due to globalization, the need for ongoing investment in technology and security, and finally, leadership succession.

As a solution, experts recommend professional guidance — strategic planning, tax and legal support, wealth management, and the development of succession plans that consider family dynamics.