In a speech to the All Party Parliamentary Group for Private Equity and Venture Capital at the House of Commons, BVCA chairman Richard Green warned of the dangers confronting the private equity industry.
He said: “Overall the recent economic environment of low inflation and low interest rates has been relatively benign. More recently, however, we have become concerned that increasing public spending and the increasing level of public borrowing could lead to rapidly rising base rates and possibly also taxation.”
He added that this could damage confidence in the stock market, leading to fewer flotations and discouraging quoted companies from raising the funds necessary to play a role as trade buyers of private equity portfolio companies. “We are just beginning to see signs of a tentative recovery and any undermining of confidence in the stock market could lead to a serious reversal of this,” said Green.
He also called for ‘a certain level of immigration of the right skills’, which was a ‘vital necessity’ over the coming years to raise the level of productivity. Green claimed it was ‘not good enough’ to compare the UK with continental Europe, as we are competing also with ‘the United States, China and India’ plus other fast-growing economies.
The speech also called for the Treasury’s assistance in helping to minimise the regulatory burden from European Directives, in particular in relation to the Investment Services Directive, the related Risk Based Capital Directive and the Basel Accord.
Green also made some suggestions to the Treasury ahead of the pre-Budget report including broadening and simplifying management share schemes, simplifying and changing capital gains tax and providing fiscal incentives to venture capital trusts.