“Private equity and its portfolio companies paid £35bn (€46bn) of tax last year – enough to pay for all the nurses, ambulance staff and police officers in the country,” said Simon Walker, the BVCA’s chief executive. “Our feeling is that what’s been laid down over the last 10 years has been overwhelmingly positive, but uncertainty over changes to capital gains tax and the resident non-domicile tax rules contributes to making Britain a less attractive place to do business. Our industry has the capacity to be particularly mobile, and we are all aware of approaches to our members from rival European financial centres – there are cantons in Switzerland knocking on people’s doors, and France and Italy are positioning themselves as places where it would be good to do private equity in future.”
The new report, together with another, The Economic Impact of Private Equity in the UK, will be landing on the desks of all Treasury Ministers and MPs. The BVCA claims they make a strong case for the positive impact the industry has on the UK economy.
The reports, published in collaboration with produced by Arbor Square Associates, estimate that just over 1m people in Britain are employed by private equity-backed businesses, and that 3m work at firms that have received private equity funding in the past. Over the five years to 2006-7, the BVCA states that worldwide employment by UK private equity-backed companies increased by an average of 8 per cent per annum – tidily beating the 0.4 per cent growth achieved by FTSE100 companies and the 3 per cent posted by those on the FTSE Mid-250.
“In many cases, those are people whose jobs have been saved by private equity,” said Mr Walker: 91 per cent of responding companies said that without private equity their business would not have existed at all or would have developed less rapidly.
Carl Clump, CEO of payment card and processing firm Retail Decisions, which has been owned by Palamon Capital Partners since December 2006, said that it had been "very good" to have an shareholder with a much longer-term view than most institutional investors.
“It’s a relief to have one supportive shareholder rather than 12,000 who were all singing their own particular song,” he added.
Over the five years to 2006-7, the report finds that private equity-backed companies’ sales rose by 8 per cent per annum on average (against 6 per cent for FTSE100 companies); their exports grew by 10 per cent per annum (against 4 per cent nationally); their corporate investment rose by 11 per cent per annum; and their research and development expenditure increased by 14 per cent per annum (against national growth of just 1 per cent).
“These facts are a pretty good antidote to the myths that surround private equity,” Mr Walker concluded. “But I think it is common ground between us, the industry, the government and the unions that we need more, and better-quality data.”
He added that UK pension funds were "a particular target of our message," pointing out that 80 per cent of pension fund investment in private equity still comes from the US. Robert Easton, managing director of private equity giant Carlyle Group (whose portfolio companies have grown employment by 11 per cent annually and ploughed £350m of capital expenditure into the UK economy), suggested that this showed there must be "something screwy" with UK pension fund allocations.
MS
