Europe Offers Private Equity a Haven ; as the UK's Top Buyout Companies Face a Grilling, the Likes of Switzerland Are Tempting Them to Jump Ship. Danny Fortson Reports
Fortson, Danny, The Independent on Sunday (London, England)
European governments have stepped up efforts to lure under-fire private equity firms to abandon the UK and relocate to their jurisdictions, where there is less public scrutiny and outrage at low taxes. The news of increased lobbying efforts from countries including Switzerland, Luxembourg and Ireland comes as another group of the UK's buyout titans prepares for a televised grilling by a Treasury Select Committee on Tuesday. The committee will seek to clarify a raft of issues, like whether the industry presents a threat to pension funds and why many practitioners pay as little as 10 per cent tax.
A spokesman for the British Private Equity and Venture Capital Association said: "There are a number of countries working very hard to try and attract some of the UK's leading private equity and venture capital talent. It's really important that the UK industry is able to do all that it can to attract and retain the best talent in UK and in London. The waves of misunderstanding and hostility are shaking people's confidence that the UK is best place in Europe to conduct this industry."
Jon Moulton of Alchemy Partners, Peter Taylor, head of Duke Street Capital, and David Blitzer of Blackstone are all expected to testify this week. Private equity firms, which control companies that employ one in every five private sector workers in the UK, have been demonised by unions angered at the job cuts and insecurity that sometimes follow takeovers. The unions also fear the market has reached a peak and that companies saddled with large amounts of debt by their private equity owners could go bust if an economic downturn takes hold.
That is just one concern likely to be addressed this week. More worrying, say pensions sector sources, is that private equity's reach will probably be extended dramatically within the next few months when new rules are expected to come into effect.
The Financial Services Authority last week ended the consultation period on its review of rules that govern investment groups. Of interest to private equity funds are "permissive links" - the legally defined limits on the sums that pension funds and other large investors can put into alternative assets, which include private equity and hedge funds. …