Academics from the university surveyed 10,000 companies for the Business Department and said that, for the UK to shake of its "middling" management ranking the Government must "reduce the role" of poorly performing family-run firms.

Professor John Van Reenen, director of the LSE’s Centre for Economic Performance, told The Telegraph that management quality was "highly linked" to productivity and profits, and that second- and third-generation firms typically had weaker management than peers run by hired hands.

"People think it’s a wonderful thing to pass on to the next generation but if you look at the management qualities of those firms they seem to be less well managed and less productive," he added.

Prof John Van Reenen said that inheritance tax breaks for families that allow business assets to be passed on tax free could be scrapped to tackle the issue and that foreign takeovers of companies should be encouraged to drive up standards.

However, BAPC chairman Sidney Bobb said that the key for family-run firms is to ensure that the second or third generation heirs have experience of other businesses.

"I wouldn’t say that management in family-run firms is necessarily weaker but you can find a narrower perspective, an absence of formal training and more on the job familiarisation, although the next generation does tend to be better educated.

"One tends to find that the most successful family-run firms are those where the heirs tend to have experience elsewhere", he added.