Securing access to the single market matters for the UK private equity industry, an expert from London Business School has said.
Florin Vasvari, Professor of Accounting, London Business School, made the remarks speaking yesterday to Private Equity International, following the appointment of Philip Hammond as the new UK Chancellor.
Discussing the key issues that the UK private equity industry would like the new Chancellor to tackle, Professor Vasvari began by saying that access to the single market “matters for portfolio companies, because one source of exits is big European corporates buying companies in the UK.”
There are three questions he believes the new Chancellor will need to address. The first of these is the regulatory agenda. Vasvari believes Britain’s vote to leave the EU provides an opportunity to set a new regulatory agenda and a regime with less emphasis on reporting and disclosure. He suggests a change would be welcome, with the current purpose of reporting unclear and often a barrier to entry for new fund managers.
Reporting to regulators, Vasvari points out, “is still not made public, and it adds a lot of costs to running a fund.
“It makes the existing managers bigger and stronger because they don’t get the competition they used to. But for a first-time manager, it’s very difficult to raise a fund in this regulatory environment.”
Second, is the issue of tax incentives.
If the UK is to be made a more attractive investment environment for private equity, the new Chancellor will also need to address the question of corporation tax. He might wish to consider George Osborne’s pledge to cut corporation tax from 20 per cent to less than 15 per cent.
“That would certainly attract non-UK investors,” Vasvari says.
Finally, Professor Vasvari pays consideration to the issue of extending the AIFMD Marketing Passport, which allows fund managers to market UK funds to European investors.
An extension “will allow fund managers in the UK to also raise money in Europe, and a lot of European pension funds are underinvested in alternative assets,” Professor Vasvari explains.
However, whether the UK is granted a passport – and how quickly it will be granted – depends on industry lobbying, Vasvari notes.
“We have a lot of alternative asset managers in London, and I think the lobby will be very strong, so I’m optimistic but, again, there’s no guarantee.”