Voluntary surveys not enough

25 February 2008

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The Economic Impact of Private Equity in the UK, an annual survey commissioned by the BVCA has just been published. Last year at the Treasury Select Committee hearings, a number of trade union representatives grumbled about the lack of evidence that private equity was a force for good in the UK economy. The results of this research demonstrate what all of us involved in it feel to be the case - that it is a significant driver of growth. In a direct response to trade union criticism, printed at the top of the list of the findings is the fact that over the five years to 2006/07, the number of people employed worldwide by UK private equity-backed companies increased 20x more than their FTSE 100 counterparts (8% versus 0.4%). The other figures are equally favourable. Every year, private equity-backed companies record sales growth of 8% and increase exports by 8%, beating listed businesses in every category

These findings should be strongly pushed to trade unions. However, this survey alone is not enough. Last year, under attack from politicians and the press, the industry talked about providing robust evidence of its beneficial impact - it has a long way to go before this claim becomes indisputable fact. This survey involved companies responding voluntarily - 1,000 did out of the 6,000 contacted. What the Economic Impact Survey shows is that when private equity works, it works well. It does not show the aggregate effect of private equity on UK companies. A proportion of funds are loss making, and a higher proportion do not warrant their carry, so it is likely that among the 5000 companies which did not respond, there are businesses whose employment and sales growth figures are well below the 8% mark touted. Instead of a voluntary survey commissioned by the BVCA, there needs to be an independently commissioned study covering every private equity-backed company in the UK.

Private equity is undoubtedly a key driver of economic growth in this country, but it still needs to do a lot more in terms of conclusive data provision in order to prove this.

Yours sincerely,

Sarah Young

Senior Editor, unquote"

Tel: +44 20 7004 7527

sarah.young@incisivemedia.com.