Mannerisms

Next month, at a meeting in Paris, the trade union advisory committeee to the OECD, will get union leaders from 40 countries to look at the problem posed by private equity companies.

This is seen as a preliminary to getting the subject onto the agenda of the G8 Summit in June, chaired by German Chancellor Angela Merkel, whose deputy recently described private equity funds as ‘locusts’.

The private equity industry’s boasts of being a force for making companioes more efficient, was eroded by a recent report into Debenhams, after it had suffered a period of ownership by private equity funds Texas Pacific Group, CVC and Merill Lynch Global, which ranked Debenhams bottomn of a league of European clothing retailers.

The league was drawn up by Goldman Sachs which commented: “Our concern comes from underinvested stores, uncompetitive prices, cost cuts affecting service standards and a high level of promotoional activity demaging the brand.”

Similarly, the AA, owned for the past two years by private equity group, Permira, has seen callout times fall from first to third in the Which ranking of breakdown services, 4,000 out of 10,000 staff sacked, and half its profits going into paying off interest on nearly two billion quid’s worth of debt which has been loaded onto it by Permira.

The UK’s stance on private equity is basically a City vs. Unions stand-off. The City people are saying private equity funds are a force for efficiency and that they have many pension fund investors. The unions are saying the private equity funds are a source of private enrichment and public job losses.

Gordon Brown is said to be on the side of the City, and one of his closest friends is Sir Ronnie Cohen, founder and former chairman of Apax Partners, the UK's largest private equity fund.

So Gordon will resist abolishing the concession which allows private equity funds to set the interest they pay on their borrowings against their tax bill. But, when all’s said and done, Gordon’s a politician. If the Labour wind blows stronger against the private equity funds, he may change tack.