The UK, with London at its heart, is the established centre of the European private equity industry and accounts for more than 50% of the European market. As the sector grow and begins to make more of a social and economic impact, so we politicians are beginning to examine the industry more closely.
I have long taken an interest in economic affairs. Having run my own business in the City, and through my past experience as the shadow financial secretary to the Treasury, I am well aware of the vital role parliamentary action or inaction can play in promoting or discouraging those who seek to establish and expand businesses in Britain.
Four years ago, a group of MPs and peers formed the All Party Group for Private Equity and Venture Capital, of which I have served as secretary. This group is designed to serve as a forum to which members of the private equity and venture capital industry and government officials at both national and European level are invited to discuss the current issues affecting the sector.
In recent times, the private equity and venture capital industry has enjoyed pretty solid cross-party support in parliament. It is this support that has been crucial to the success of the industry at home, where it now invests in all sectors of the economy.
In my own constituency, one of the great benefits of the City of London has been the general light touch of financial services regulation ? particularly in comparison with the US since the Sarbanes-Oxley regulations were introduced there in 2002. While some fear avid European intervention or the enthusiasm of trade unions for a more highly regulated financial services sector, this thankfully has been resisted so far by the overwhelming majority of government and opposition MPs.
This level of political backing cannot be taken for granted, however, and the industry is becoming increasingly conscious of the need to increase awareness within its own ranks about the importance of parliamentary support. The British Venture Capital Association plays an essential role in this by reminding companies that to benefit from supportive taxation and regulatory regimes, politicians will need to be kept on side.
In a recent speech to the APG, Rod Selkirk, chairman of BVCA, highlighted that 80% of investment in the UK industry comes from overseas, with 45% coming fro the US alone ? a puzzling fact at a time when the industry has a track record of consistently outperforming all comparable asset classes.
It seems incredible to me that our own institutions seem so apparently reluctant to invest in the asset class, particularly when there appears to be common agreement that we must do everything possible to plug the gap between pension provision and need.
I regard it as both unfortunate and strange that public sector workers in the US will be the most significant beneficiaries of the fruits of venture capital via their pensions investments. By contrast, those British people working in the public realm will not benefit to anything like the same degree.
The private equity and venture capital industry has done a great deal to explain what it does and how it does it, but as the sector grows it will need to do more to increase public and political understanding. After all, whilst politicians can make judgements about which issues to support and which groups to ally with, it will always be those directly involved in the industry, the practitioners, who will be the best advocates of their cause.