Public to Private: In the Line of Fire

Most people in private equity will have heard of Adrian Beecroft, the former chief investment officer of Apax and ex-chairman of the British Private Equity and Venture Capital Association. But recently he’s also become known to the wider British public, after authoring a controversial new report for the UK government on potential employment law reform.

One irritating aspect of the widespread coverage the report has received is that Beecroft is routinely described as ‘the venture capitalist’ by the mainstream media. It’s true that during Beecroft’s time at Apax, the firm focused on smaller and earlier stage deals. But it’s still frustrating that the term ‘venture capital’ continues to be bandied about in the UK press as a catch-all, with little effort to acknowledge or differentiate between various types of private investment. It’s a persistent issue that does little to help improve the general public’s understanding of the private equity industry.

But there’s a more significant issue: the potential opprobrium that Beecroft, the venture capitalist, may be heaping on the private equity industry by publishing this report. 

The report – which comes in at a slimline 24 pages – contains 23 proposals intended to give greater flexibility to employers around issues like forced pension contributions, equal pay audits, redundancy periods and default retirement age. One proposal in particular, however, has come to epitomise the report: the introduction of so-called no-fault dismissals, which in headline terms equates to “making it easier to sack people”. 

At press time, the ‘Beecroft report’ had just been published – slightly ahead of time after an early draft was partially leaked to The Daily Telegraph, a UK newspaper. It has prompted a flurry of debate and media coverage – and it’s fair to say that much of the coverage of it has been hostile in tone.

Some have criticised the calibre of the work; according to The Guardian, a senior apparatchik who’d seen the report supposedly said: “It is a flimsy piece of work. If an official sent me a piece of work like that I would send it back.”

Others have attacked the underlying principle – including the Business Secretary, Vince Cable. He wrote in UK tabloid the Sun: “Some people think that if labour rights were stripped down to the most basic minimum, employers would start hiring and the economy would soar again. This is complete nonsense.” (Beecroft hit back suggesting Cable was “a socialist… [who] appears to do very little to support business”.)

This highlights one of the main reasons why Beecroft’s proposals seem unlikely to be implemented. He’s written this report for the Conservative Party, but their hands are tied since they’re currently governing in coalition with the Liberal Democrats. And some senior Tory ministers already seem to be distancing themselves from the report, too. 

(Of course, that’s presumably one of the reasons why this report is being written independently – so the politicians can disavow any conclusions that go down badly with voters.)

It’s not that his ideas are without merit. Business groups, for example, have broadly supported the proposals. As Adam Marshall, policy director at the British Chambers of Commerce, put it: “Adrian Beecroft is right to point out that at a time when millions of people are unemployed, ministers should be looking for ways to make it easier and less costly to employ people, not the other way around. Of course employment rights are important, but should be weighed against opportunities for the unemployed who are looking for work.”

The issue is how the Beecroft report – and it’s always ‘the Beecroft report’, not ‘an independent report on employment law reform’ – reflects on private equity more generally. 

All the coverage invariably mentions his background in ‘venture capitalism’ – so the headline message for the wider public is: “rich private equity pro wants to make it easier to sack people”. As such, his proposals only serve to further – and in some people’s minds, confirm – the slash-and-burn stereotype that private equity has fought against for years. 

Of course, there’s nothing the industry can do about it. Beecroft has retired from private equity and is operating in a personal capacity – so he’s clearly free to write whatever he wants for whoever he wants, without having to answer to anyone. Nonetheless, this is the industry that gave him a long and very fruitful career – and to the extent this reports casts a negative light on private equity, if only by association, he may be doing his old colleagues a disservice.