Philip Yea FCMA Chief executive, 3i.
| Position | ONE 2 ONE - Interview |
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Private equity is rarely out of the headlines these days. Are you a force for good or a sinister capitalist conspiracy?
All we do is invest in companies and help them to grow. Where do you draw the line between what Richard Branson and Philip Green do and what we do? There's a fundamental misunderstanding about private equity that the industry hasn't addressed, which we're now trying to change. This is matched by a broader misunderstanding about the risks and rewards of capitalism generally. You see one story in the media about pension funds failing to get returns and then another about how private equity penalises employees. But we've created over 3.5bn [pounds sterling] of value in UK firms over the past three years--and most of this flows back into pension funds.
Does private equity pay its fair share of tax?
Tax is a matter for government to decide. We work in 14 countries, so we work with 14 governments. I'm a member of the chancellor's group that's working to maintain the competitiveness of London as a commercial centre. If the government needs to make changes to the tax system, it must ensure that these don't undermine the success of private equity in the UK and the attractiveness of London to the financial sector. When you look at the number of people employed in the capital per private equity executive, you realise that the issue is not as simple as it seems.
Does private equity deserve its reputation for secrecy and limited reporting?
Reporting is demand-led rather than formula-led because you need the market to decide what information is relevant. It's not true that there's no information about private equity companies--they give extraordinarily comprehensive information to investors. We have actually won a prize for the best corporate social responsibility reporting in the FTSE 100. Isn't that ironic? It shows that you can combine the best of both worlds. The chairman of the Treasury select committee held up 3i's annual report and said to the other private equity firms: "As an industry you would not find yourselves in the position you now face, real or otherwise, if you had annual reports of this kind and communicated with people." That was gratifying.
But isn't private equity about overloading companies with debt?
People often ask: "What is private equity's advantage? Isn't it just debt?" But our biggest business is growth capital and that's about putting money into firms to help them expand. It's about...
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