P.E. To U.K.: Lighten Up Or We Leave

Faced with the possibility of a battery of new heavy levies on profits in the U.K., private equity firms may take their business elsewhere if they find the new developments too taxing.

Faced with the possibility of a battery of new heavy levies on profits in the U.K., private equity firms may take their business elsewhere if they find the new developments too taxing. Vince O’Brien, chairman of the British Venture Capital Association, warned that, as much as the industry would like to stay local, “We need to ensure that no sudden or gratuitous changes in our tax or regulatory environment makes [private equity firms] consider moving their base of operations out of London or the U.K.” That could be a big blow to the country, whose private equity industry accounts for 52% of all p.e. in Europe. According to The Telegraph, the U.K. was able to amass that sizable slice by granting private equity tax breaks, such as exemption from value added tax, and reducing capital gains tax on assets held for more than two years from 40% to 10%. But times change, and the U.K. reportedly is unhappy with all the wealth pouring into a lightly regulated field. The veiled threat was aimed at Chancellor of the Exchequer Gordon Brown, of whom O’Brien noted that the industry “had no greater friend in Treasury,” with the hopes of influencing him before he announced his budget March 22.