Today Andy Silvester talks to Michael Moore, Director General at BVCA. They discuss the scale of private equity and venture capital in the UK, their importance in the UK’s employment market, and how vital they are for companies looking to scale up.
And in the headlines: Sainsbury’s CEO Simon Roberts has said that the supermarket plans to pump £500m into price cuts; Foxtons has poached Chestertons CEO Guy Gittins; and Oxford Metrics, the company behind the ABBA Voyage shows, has sold off a part of its business.
Episode transcript (auto-generated)
Andy Silvester 0:08
Good afternoon and welcome to the City View podcast me Andy Sylvester as we head in actually towards four full days off for the Queen’s Jubilee, a break that will be one for celebration for many people but we’re also told will wipe up to some 0.5% of UK GDP this quarter. Not quite sure that’s in the spirit of the same but that we are. In a few minutes I’ll be joined by Michael Moore he’s the chief executive of the British private equity and venture capital association will talk about deal making in the capital, the reputation of private equity and what more the government can do to ensure that UK is growing businesses have plenty of access to capital. First, though the corporate headlines and Sainsbury’s boss has said this morning that the supermarket giant plans to pump fresh funds into offsetting rising costs over the rest of the year. As shoppers become more he said increasingly concerned about their finances, the UK second largest supermarket chain to invest more than half a billion quid into lower pricing by March 2023. As part of a long term value plan. Sainsbury’s boss Simon Roberts said the supermarket has had to pass on some increases in the price of essential products such as milk, that stress that it has invested money to ensure smaller rises than rivals. We have a really important relationship with our suppliers, and we’ll work with them when the cost of food production is going up and impacting upon farmers he said. Meanwhile, foxtons has appointed guy Gittens to hit the London estate agent from this autumn Gittens, who currently holds the title of Chief Executive rival estate agent Chestertons will take on the job of Group CEO foxtons in September replacing Nick Budden has been CEO there since 2014. It’s a bit of a coup to pluck from arrival and leadership news comes just days after foxtons coughed up just north of 10 million for two takeovers. In a bid to snap up an even larger share of London’s property market the London listed group has bought IMM properties which trades under the name Gordon and CO in South London, as well as stones residential in North London. The deals are expected to improve the resilience of revenues at foxtons according to analysts it’s already London’s largest lettings agent and add John s for capital has posted buoyant gross profit of 171 million pounds morning despite mass in sales brainchild battling all sorts of macroeconomic challenges and of course accounting delay woes. As well capital said it would maintain its light for light profit and growth guidance, the former WPP boss and S for Chairman Sorrell so the pandemic had accelerated digital transformation, despite the softening of global GDP growth because of the withdrawal of the COVID stimulus, significant inflation. Increasing interest rates the war in Ukraine and China’s continued zero COVID lockdowns he said, The secular trend to digital marketing continues to provide strong tailwinds as for of course, focus almost entirely in the digital space elsewhere. Good news for shell which has received approval to move ahead with a project in Australia. And the company behind the other voyage shows as sold off one part of its business and not the one relating to Swedish holograms. It must be said unsurprisingly. And that’s all the corporate news for today. And I dare say it might be that for the rest of the week, Phil’s a very sleepy and it’s going on today. So today, we’ll have a proper conversation with Michael Moore, who is the Chief Executive of the British private equity and venture capital Association. And interesting career Michael has had including some time in Westminster, but now fully focused on flying the flag for the UK venture capital and private equity business. Michael, thanks for joining us.
Michael Moore 3:31
Thank you, Andy, great to be with you.
Andy Silvester 3:33
Why don’t we talk about? Well, probably something that’s fairly easy for us to talk about, which is the scale of private equity and venture capital in the UK, because I think, probably in the public imagination, it’s still a relatively niche part of the financial system. Maybe people don’t think about it too much. Maybe they almost see it as a sort of US phenomenon that we haven’t quite caught up with yet. But recent studies suggest that though we might not know it venture capital private equity, as a pretty vital part of the UK employment market, if nothing else.
Michael Moore 4:06
Yeah, and to start was your initial observation. It is certainly a sophisticated part of the UK as financial services and, but also globally significant. We have got the largest hub of private equity and venture capital expertise and investment anywhere outside the United States. So you’re right. It’s synonymous with the US. But we’ve made a great success of it here in the UK, and still have a huge role to play across the whole of Europe, to the point where we connect financial services to the real economy. That’s actually I think, what our recent report with EY has highlighted the fact that there are nearly 2 million jobs in businesses backed by venture capital or private equity, and that they’re all over the UK. I know that the city am Trent an online audience is predominantly one To the southeast, but there’s podcasts I’m sure reaches the whole of the country. And in that context, you know, you’ve got 50% of the jobs, actually outside London in the southeast. So a big part of the economy and growing.
Andy Silvester 5:13
Yeah, and product, I guess, in vegetable products in particular has not always had to put as nicely. The words tend to scare people outside of financial services. I think, you know, you sort of hear private equity and people imagine corporate raiders, et cetera, et cetera. But But actually, if you look at what private equity just in the last 12 to 24 months has done for some British firms that otherwise probably wouldn’t exist anymore. Are you starting to see people start to see private equity as being a really it’s basically a force for good? And surprisingly, CDM sees it as a force for good but are you able to see you know, McCall’s being one obvious instance? You know, are you able to see these company interventions starting to give people more faith, I guess, the public more faith in private equity and the good it can do?
Michael Moore 5:59
Well, I think the McColl’s examples that you use Andy — it is a first class one, because that’s a situation where two different private equity bidders were in the frame looking not just to take on the McCall’s business, but actually, to ensure that was properly integrated into one or other supermarket chain, and that the jobs, the pension, schemes, and everything else were looked after, as well. So I think that kind of example brings to life, a broader truss that we feel about the industry, it is invested in growing the economy, it’s looking to help with innovation. And it’s very focused on people. If you don’t get the people and you help support them to grow and get new skills and do good for the economy, you’ll be in trouble. In the old days, yeah, perhaps the financial engineering, the smartness was the money was the main emphasis. But now if you want to be a success in venture or private equity, you have to be able to grow the business, you can’t hollow it out, and cast it aside. You got to grow it and make it attractive to the next buyer.
Andy Silvester 7:05
Yeah, and that’s an interesting point you make, because certainly in recent years anyway, one of the criticisms of the funding environment for for business in the UK has been that we’re relatively easy to go to institutional lenders, if you’ve got a big track record, if you are a larger company, you can go to traditional lenders and find capital that way. But actually, one of the things we’re famously pretty bad at in the UK, is finding investment for risk, basically. And I guess that’s at the other end, we talked about those kind of old businesses like Nicole’s that have been saved by private equity for a different reason trying to turn those businesses around. But at the other end of the scale, we’ve got now venture capital that is proving a really important source of finance, for some of our fastest growing companies or scaling up companies as well.
Michael Moore 7:54
It doesn’t need and you know, what is so exciting about the industry is it is looking at everything from those very early stage businesses, bright ideas, kind of stumbling over universities looking for a home, looking for the capital, yes, but looking for the know how you need really active engagement, which is what venture capital and private equity provide a long term view somebody who knows where we can take it along the journey so far, and then there’s somebody else in the ecosystem now, that will take it the next distance, which isn’t to say, and to address the point you’re making, that the system is seamless, and that there’s adequate amount of capital along the way, one of the things that we’re very excited to be working with government on is the idea of unlocking some of the pension capital in the UK, so that we can actually get that unleashed into not only the real economy of the UK, but also to produce better returns for future pensioners, which is another area of public policy that many of our biggest stakeholders are concerned about. The risk involved in all that is substantial. So you do need to be ready to take it. But the returns are pretty consistently very strong. That’s I
Andy Silvester 9:13
guess, on that point, like just before we finish up your report for me, why, hailed by the city Minister John Glenn, who we obviously know well, as a, you know, a sort of proof point of the industry’s vitality and its significance in the UK financial services system. There’s an awful lot going on in recent years, and I’m talking over sort of 10-15 years, you know, enterprise investment schemes, seed enterprise investment scheme, venture capital trusts, so on so forth… You’ve alluded there to, I think, at least alluded to changes to what Solvency II might might bring, how welcoming is the legislative regulatory framework in the UK now for venture capital and private equity? And I guess, could it be more so could Is there are there easy wins for government to bring more of that cash into the UK to build those businesses to build those businesses that employ people in the future?
Michael Moore 10:01
We share an aspiration was the government and the opposition to make the UK be the most attractive place in the world to start our business, grow it and secure not just the city, but also all those jobs that have funds across the country. Can it do better, of course, and not just solvency two but DC pension arrangements that matters as well. We’re of no after Brexit, we think that it’s important that we maintain world class standards. But we also have to ensure that we remain a very attractive place for talent to come and work in the UK, also in the financial institutions and in the businesses that they’re seeking to help support and grow.
Andy Silvester 10:44
Yeah, lots to do. And it’s one of those important regulation, you can point at specific bits. But you’re right, that environment, the overall ecosystem, needing fresh talent coming in. It’s certainly a multifaceted, multifaceted challenge, but also a multifaceted opportunity if we get it right. And Michael, let’s leave it there for now. Thanks for joining us. Thank you very much. Brilliant. That was Michael Moore, the chief executive of the British venture capital and private equity Association. And that’s all from us on this Monday. One more to go from me, podcast wise until the Queen’s Jubilee. See you tomorrow.