Michael Moore’s Outlook: Now comes the test of substance
‘But there are no stairs’. So went the punchline to the pitch by the BVCA team when they proposed a new venue for our annual conference.
And it had been going so well up to that point.
Anyone amongst the thousand people who attended our two day Summit in early September can vouch for the fact that, thankfully, a solid set of stairs had been installed in the meantime. That allowed all of us to access the new event space near St Paul’s Cathedral in London without drama, or losing anyone down an unexpected gap in the floor.
Self praise is no honour and all that, so this is not about to be a puff piece about the conference (‘Just as well’, I hear the editor mutter as he reviews the copy). But as a moment in time to take the pulse of the UK private capital industry, and how it is seen by our stakeholders in government and elsewhere, it was hugely significant.
Over two days we heard from three government ministers, a shadow cabinet member and a leading regulator as they stressed the importance of the private capital industry to the UK’s economic future. Whether the focus was pension reform or investment across the nations and regions of the UK, private equity and venture capital were consistently plugged by the politicians as central to their efforts.
That was good to hear. But the test of substance comes soon. Somewhere between this month’s magazine arriving with you and the next one hitting your desk, there will be the first Budget of the Chancellor, Rachel Reeves.
We have been engaging extensively on the future of ‘carried interest’, as I have detailed here before. The Treasury’s consultation in August offered another opportunity to make the case. So ministers and officials now have an even stronger understanding of the economics of the industry (for which, we pointed out, the carried interest arrangements are a powerful part of the incentivisation and alignment of interests), which was their first focal point.
Their second area of enquiry, into the technicalities of the UK arrangements allowed us to demonstrate the competitive advantage the UK enjoys from hosting the 140,000 strong hub of private capital, the largest in the world outside the USA. Investment of £20 billion last year, and over 2 million jobs in the economy, help to land that point.
And the last theme, about international comparators, was tailor made to allow us to show the UK’s success in attracting global capital and global talent, thus underlining the need for international competitiveness in our future tax arrangements. We cannot stress that competitiveness point too often or too strongly.
But this technical policy effort, supported by firms and advisors across the ecosystem, is only one of three crucial elements in the mix before the Budget decisions become clear at the end of October.
Our policy advocacy will be for nought if the industry’s value to the country is not understood well by politicians across the political spectrum. Which is why we have spent the last couple of years making the case that we are ‘partners for growth’ on the economy. And why the UK political party conference season was well timed to keep this front of mind for all concerned.
Over the past month I’ve been in Edinburgh for a dreich couple of days, sunny Brighton, monsoon Liverpool and overcast Birmingham. Suffice to say, while the fates of the political parties after a defining general election in July may have been highly variable, like the autumn conference weather, there remains a welcome unity of purpose about the need for economic growth and a recognition of our industry’s role in generating it.
So that’s all right then? To a large extent, yes – technical case made, economic and social value understood. But I said there are three crucial elements and the last is not one we can influence hugely, far less control. That is the bigger picture political and economic judgement which the government must make before finalising its Budget decisions, responding to the economic and fiscal outlooks at the moment the choices are made.
This uncertainty is the same for everyone with something at stake in the Budget. But it does mean there remains a gap in the understanding of what will be decided, which will only become clear on 30th October. Like the stairs at our conference, we hope it will be navigated successfully.
Michael Moore
Chief Executive, BVCA
This article was originally published on 9 October 2024 on the Private Equity News website here.
