UK - A parliamentary probe into the impact of the private equity industry has stressed the importance of ensuring company pension fund commitments should be securely funded when major changes are made.
Given that 8% of the UK’s workforce is now employed by private equity companies, the interim report by the House of Commons Treasury Committee failed to determine the overall impact of the private equity industry on the UK economy.
However, it admitted there were areas of concern which “deserved continued attention from policy-makers”.
The report said: “We note that, however extensive the due diligence conducted, higher levels of leverage are likely to create additional risk; that this becomes more significant the more important highly-leveraged firms become in the economy.”
The study also noted that evidence achieved on private equity rates of return was mixed.
Citing different bodies of evidence, it said results from the US found the returns achieved by private equity funds and venture capital together, were similar to average returns on the stock exchange, once fees were excluded.
During the evidence sessions for the report, Jack Dromey, deputy general secretary of Unite (T&G) trade union, said it was clear the impact of leveraged buyouts was to depress pay and conditions of employment and pensions.
For the private equity firms, Wol Kolade of the British Private Equity and Venture Capital Association (BVCA), said private equity companies operated under the same rules and the same pensions regime as any other public company.
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