The Confederation of British Industry has come out in support of private equity, countering accusations that it is a haven for billionaire asset strippers raiding the world’s biggest companies.
CBI director-general Richard Lambert said private equity had an important role to play in a dynamic economy and must not be damaged by knee-jerk responses to ill-founded allegations of ’casino capitalism’ made by its critics. The CBI believes government should ensure its tax and regulatory regime is internationally competitive so that private equity is not driven off-shore.
Lambert claimed: “Private equity offers a new and compelling business model for the 21st century, free from some of the burdensome restraints of publicly-owned companies. It generates real benefits for the UK in terms of jobs, leaner and more efficient businesses, and wealth creation.”
The CBI pointed to the £26 billion in taxes paid by private equity-owned businesses to the Treasury last year, which is 20 percent of the UK’s total corporate tax take. It added that private equity firms generate thousands of new jobs in the UK each year while earning good returns for investors such as pension funds.
The CBI’s robust defence follows increasing demands from trade unions and sceptical politicians to regulate the private equity industry. The body prefers to argue for the economic benefits which can be gained from a laissez-faire tax regime.
The claims also come as a survey revealed yesterday that private equity funds have dramatically outperformed the public markets on both short and long-term measures.
However, the CBI argued that private equity must become more open and transparent in order to convince the public of its successes.
Five private equity firms – Apax Partners, Permira, 3i, Alchemy, and KKR – are now members of the CBI. The organisation believes this is a recognition of private equity’s increasing realisation that it must do more to engage with the public and politicians.