As the shock of the referendum recedes, it is fortunate that PE has strong national and European representation to help firms shape the debate.
In the weeks and months since the UK’s decision to leave the EU, private equity investors and fund managers in the UK and across Europe have begun to analyse the potential effects on their investments and funds. While there will be no immediate changes, general and limited partners will have to consider the best structures and domiciles to facilitate continued cross-border fundraising and investments.
Since Invest Europe was established in Brussels 33 years ago, we have worked hard alongside our GP and LP members to provide a clear voice for openness and for the free flow of talent and capital. Our UK members will continue to benefit from this, helping to shape our responses to policy and regulatory proposals that could affect their operations. Indeed, one in 10 of Invest Europe’s 650 members is already based outside the EU.
To demonstrate private equity’s role as a catalyst for economic progress, Invest Europe recently held a well-received roundtable for some of the EU institutions’ foremost financial decision-makers to meet our members and their portfolio companies. We will continue to use our established presence on the ground in Brussels to make the case for the entire industry.
Finding a new model for Britain’s relationship with the EU will be challenging and time-consuming, while other consequences of the vote have been swift. With Jonathan Hill’s resignation as European commissioner for financial services immediately after the referendum, we lost an informed, intelligent and pragmatic policymaker whose general orientation and policy agenda we could endorse. His responsibilities have passed to Commission vice-president Valdis Dombrovskis – who Invest Europe met shortly after his initial appointment as a commissioner – and he has stressed continuity and the need for “a well-functioning financial sector”. The Capital Markets Union action plan laid out by Hill last year is still on track and we do not anticipate any radical changes in the short term.
There are positive steps being taken on the policy front that we must continue to shape. Following our response to the European Venture Capital Funds regulation consultation, the Commission proposed reforms in July to help smaller fund managers – including mid-market private equity – access the passport that will allow them to raise capital more easily across the EU.
Also announced in July were the European Securities and Markets Authority’s latest recommendations for the Alternative Investment Fund Managers Directive marketing passport to be extended to fund managers located in up to 12 non-EU countries. We now have to wait and see whether the European Commission will act on this advice.
A broad mood of pragmatism will aid discussions as Britain untangles itself from the EU. It will also help maintain the focus on improving the environment for the financial services sector and facilitating further investment into European companies.
Nevertheless, resurgent national interests and rising anti-globalisation calls make it all the more important for the private equity industry to stand united in Europe. Invest Europe helps us to achieve this, allowing us to speak to policymakers at the highest level with an aligned and coherent voice, and ensuring that the whole of the European industry, wherever fund managers or investors are based, has maximum influence on the future we all want to see: a Europe in which private equity can continue to thrive.
Gerry Murphy is Invest Europe chair and Blackstone Europe chairman
First published in Private Equity International.