TUPE opposition discredits the industry

24 March 2008

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The Chancellor's Budget contained few surprises. There was good news for VCTs which it was announced will be exempt from VAT on management fees from 1 October 2008. It is estimated that this will free up to ТЃ10m a year to be invested in smaller companies. This move follows the provision announced in last year's Budget which changed the rules on qualifying investments for VCTs and introduced a six-month grace period for the purposes of the 70% test

The Government's commitment to this end of the market is welcome, but seems to be in contrast to its attitude towards other stages, especially the buyout end. There was no movement on the changes to capital gains tax, taper relief or indexation, which belies its claims to be convinced of the merits of the industry. If the Government cannot be convinced, there is little chance that a wider stakeholder base can be persuaded. With some creativity, the restructured BVCA should help these efforts.

Slipping under the radar and little noticed in the rush to find an angle on the Budget was the withdrawal of the Private Equity (Transfer of Undertakings and Protection of Employment) Bill. This private members' bill would have extended to private equity transactions many of the employment provisions relating to business transfers under TUPE. That it was withdrawn was a hollow 'victory' for private equity. The bill would have required an investing private equity house to supply information to employees relating to the consequences of the deal and would also have allowed for employee consultation prior to the transaction. John Cridland, deputy director general at the CBI, opposed the bill, arguing that it took a 'blunderbuss approach'. The BVCA did not state its position on the issue, but John Heppell, the MP who introduced the bill, said he 'suspected' the BVCA would follow the CBI line.

While it may have been flawed in scope, in spirit it was a leap in the right direction. The industry must step up and prove willing to engage with stakeholders - potential investee company employees seem the ideal constituency to start with. The oft-repeated mantra that private equity has a 'good story to tell' is true. It is time that this story was told, warts and all. At present it appears the industry is paying lip-service to the idea of reaching out to a wider base and opposition to this bill leaves it looking duplicitous.

Yours sincerely,

Nathan Williams

Editor, unquote"

Tel: +44 20 7004 7449

nathan.williams@incisivemedia.com.