Safeguard economic competitiveness says BVCA

15 November 2004

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The government must rule out any further increases in business taxation and avoid placing any further regulatory burden on private equity firms or the companies they invest in, according to Anne Glover, chairman of the BVCA, when speaking at a meeting of MPs and industry leaders at the House of Commons. The warning comes as brand new figures from the BVCA show private equity-backed companies outperforming their competitors across a whole range of measures. The sixth Economic Impact Survey reveals that as well as creating jobs at a faster rate than other private sector companies, private equity backed firms also outperform the market dramatically on exports, sales growth, and investment. The report also found that investee companies regard their backers as indispensable partners, with more than three quarters (77%) saying they would not be where they are today without private equity backing.

The survey also found that in the five years to 2003/4, annual sales growth rates for private equity-backed companies reached 23%, more than twice as high as their counterparts in FTSE 100 and FTSE Mid-250 companies (both at 10%). The average private equity-backed firm increased annual sales revenue by a third, from Â£30m to Â£40m. Moreover, exports grew by 20%, compared with a national growth rate of just 3.3%. In total, private equity-backed companies contribute an estimated Â£187bn in sales revenue and Â£29bn in export sales.

Private equity-backed companies are almost unanimous in seeing their private equity provider as more than just a fund manager - 78% report that the support they provide goes beyond fundraising to encompass marketing, management recruitment, contacts, financial advice and strategic direction. Even more strikingly, a similar proportion (77%) of private equity-backed firms believe that without private equity, their business would have either developed less rapidly or never got off the ground at all. Meanwhile, 41% of companies report that private equity backing gave them access to a deeper pool of funding than would otherwise have been possible.

The private equity industry makes a massive contribution to the UK economy every year. In 2003, 164 BVCA members invested some Â£6.4bn in 1,493 companies. This figure included 1,274 UK companies who received Â£4.1bn of funding. A comparison with investment statistics from 1984 - when a far smaller membership base made 479 investments totalling Â£190m - shows how far the private equity industry has come in the past two decades. Since 1984, the industry has invested more than Â£62bn in over 26,000 companies worldwide - Â£48bn in over 21,000 UK companies.The 2004 edition of the report on the economic impact of the UK was conducted by IE Consulting on behalf of the BVCA. The results are based on 222 responses to a postal questionnaire addressed to 1,500 randomly selected private equity-backed companies. The data was analysed in the late summer of 2004.