PE’s plea to the next UK government? Clarity on Brexit

Dealmakers, fundraisers and industry representatives agree that Europe’s largest private equity market needs a clear path forward.

On Thursday, voters in the UK will choose which party and leader they want to lead Europe’s largest private equity market through a period of significant political change.

In the lead-up to the election Private Equity International asked leading industry dealmakers, fundraisers and insiders, who are all either based in the UK or who have offices here, the following question: What one thing would you like to see from the next UK government?

Jeremy Hand, managing partner at Lyceum Capital, was succinct and focused: “We are looking for a clear election outcome and as much clarity, as early as possible, around Brexit.”

Louis Elson, managing partner at Palamon Capital Partners, said that despite private equity’s resilience and flexibility in the face of political events, the gravity of the UK’s decision to leave the EU should not be understated.

“If Brexit is mishandled, either through ill-preparedness, hubris, naïveté, cynical gamesmanship, or plain old bad execution, the effect on the UK will be devastating, deep and long lasting and none of us will be immune from the damage,” Elson said. “The request to the next government: DFIU! Don’t Foul It Up.”

Tim Hames, British Private Equity & Venture Capital Association director general and industry stalwart, echoed dealmakers’ concerns: “The number one priority: a clear path to Brexit involving early focus on the transitional arrangements.”

While LP appetite for UK-focused private equity has remained buoyant, fundraising professionals want assurances UK managers marketing to European LPs won’t face unnecessary hurdles.

“I’d like to see the new government focus on policy that ensures UK-based private equity firms are able to raise capital, manage it and continue to invest it well across Europe,” said Mounir Guen, chief executive of MVision Private Equity Advisers. For Guen, whose biggest office is London, regulation is the most challenging issue as UK-based managers are likely to lose their passporting rights post-Brexit and have to use national private placement regimes to market into Europe. This is a straightforward exercise in some markets and “difficult” in others such as Italy and France, he said. 

“Important for finance and investment is stability,” said Tony Dalwood, chief executive of listed investor Gresham House. “A government that can frame a long term business friendly vision, and work rationally towards achieving that goal in a stable way would be refreshing and reassuring.”

Neil MacDougall, managing partner at Silverfleet Capital, presented a more granular view. With frequent international travel an important part of the schedules of private equity professionals and limited partners alike, long queues at UK airport immigration halls – caused by insufficient staffing – are a source of deep frustration and are unlikely to impress first-time visitors to one of the world’s major private equity hubs.

“Last Friday I arrived back at Heathrow at 6pm to find a long queue caused by only five gates being in operation as the solitary officer on duty meant the other 10 remained shut,” said MacDougall. “With rising passenger numbers, e-passport gates are a great idea for processing passengers efficiently but only if sufficient numbers are open. Changing this irritating policy would be a great opportunity for the incoming government to win supporters both at home and abroad.”

– additional reporting by Isobel Markham and Toby Mitchenall