The UK private equity and venture capital industry is bracing itself for an economic slowdown, according to new research published by the British Private Equity and Venture Capital Associa
The UK private equity and venture capital industry is bracing itself for an economic slowdown, according to new research published by the British Private Equity and Venture Capital Association.
A YouGov poll of BVCA members indicates that 70 per cent of companies expect the UK’s economic environment to get worse in 2008, with 56 per cent of firms surveyed believing that the UK economy will grow by just 1 to 2 per cent in 2008.
The proportion of firms viewing the UK as an attractive jurisdiction in which to do business has fallen by almost 25 per cent over the past quarter, from 93 per cent in September to 70 per cent at the end of last year. An increase in the regulatory burden is expected by 71 per cent of firms surveyed, while 86 per cent believe the burden of taxation will increase.
Members were also asked at what level they expected Bank of England base rates to be in December 2008. The majority (58 per cent) expected rates of between 4.51 and 5 per cent, down from the current 5.5 per cent, while a further 9 per cent expected rates of between 4.01 and 4.5 per cent. However, 29 per cent expect rates of between 5.01 per cent and 6 per cent.
‘The clouds are gathering,’ says BVCA chief executive Simon Walker. ‘This is not going to be an easy year for the economy or for private equity. The economic environment is becoming much tougher.
‘It is essential for the UK economy that private equity can compete in difficult times, creating new jobs and providing good returns for pension funds. Private equity is about backing entrepreneurs and growing business – critical for the economy at any time, but especially during a downturn.’
The research was conducted by YouGov among a non-random sample in December and is based on 96 individual responses from 73 BVCA member companies. The survey is conducted quarterly amongst professionals in the UK private equity and venture capital industry.
