Financial Times 16. March 2007

A demand for a co-ordinated G8 response to the “threat” posed by private equity and hedge funds will be made on Friday by trade union leaders from the world’s leading industrial nations. This will be the latest development in the growing political pressure being brought to bear particularly on private equity.

A meeting in Paris organised by the trade union advisory committee to the Organisation for Economic Co-operation and Development will call on leaders of G8 nations to establish a joint task force to investigate dangers posed to the international financial system from the “spectacular growth” of highly leveraged private equity deals and hedge fund investments.

Trade union leaders, who include John Monks, general secretary of the European Trade Confederation, Brendan Barber, general secretary of the Trades Union Congress, and others from the US, Canada and Japan, will say the world’s leading industrialised nations need a common tax and regulatory approach to private equity and hedge funds.

They complain that generous tax allowances on interest payments have encouraged “shadowy” private equity investors to raise large borrowings to buy big companies which are then forced to axe jobs to boost short term returns and pay off debts.

Mr Barber, writing in Friday’s Financial Times, says: “High returns are quickly produced by ruthlessly reducing companies to their core functions, the maximum exploitation of tax relief and off-shoring, and saddling companies with added debt.

“At worst a speculative bubble will burst, and while employees will pay the heaviest price they will not be the only victims. Pension fund losses could affect millions . . .” 

Copyright The Financial Times Limited 2007

By Andrew Taylor, Employment Correspondent