Laws may harm private-equity firms

The CBI claims that the directive would force companies owned by private-equity investors to disclose commercially sensitive information, including research-and-development plans, which would discourage innovation. It would increase costs and bureaucracy and prevent a level playing-field because other privately owned companies would not be affected.

Proposed rules would also mean that relations between employers and employees in companies owned by private-equity firms would, to an extent, be replaced by relations between employees and the private-equity firm. This would put private-equity owned firms at a disadvantage, discouraging investment. Treating employees differently depending on the ownership of a company would also set a dangerous precedent.

The CBI is particularly concerned about the impacts of the proposed rules on small and medium-sized companies. Under the terms of the draft legislation, it would affect companies with as few as 50 staff.

The CBI said that it welcomes today’s letter to MEPs, signed by nearly 700 companies across Europe, warning of the dangers of the Alternative Investment Fund Managers Directive and calling for all companies to be treated fairly. BusinesseEurope has expressed similar concerns.

John Cridland, CBI deputy director-general, said: ‘The additional bureaucracy and forced disclosure of commercially sensitive information would be a real problem and impede companies that should be encouraged in order to foster economic recovery.’

The CBI believes that private equity offers companies an important source of capital, which is particularly important when bank lending is relatively constrained.