Mooted changes to taxes on Britain’s private equity industry could drive wealthy managers overseas, the CEO of private equity firm CVC said on Thursday, adding to a drumbeat of warnings from executives about the new Labour government’s tax plans.
Labour has been consulting investors about closing a tax break on carried interest — the performance fees that fund managers make when assets are sold — ahead of a wider government budget announcement in October.
“We have people moving all the time. Will it influence where some people want to be based? Probably, actually,” Rob Lucas, chief executive of CVC, told reporters after the company’s maiden results as a publicly-listed company.
Lucas, who has shares in CVC worth about $640 million according to LSEG data, said that he was not concerned about the prospect of staff moving, adding that the global business was flexible about where people were based.
“I’m assuming the government doesn’t want the UK to be uncompetitive going forward,” said CVC’s finance chief Fred Watt, adding he was hopeful the government would heed the industry’s warnings.
Britain’s finance ministry did not immediately respond to a request for comment.
Carried interest is paid by a few thousand people in Britain, and has helped make a generation of private equity executives very wealthy. Critics say the money they make on fund performance should be taxed as income, because private equity firms are investing other people’s money.
Some executives say privately that few individuals are likely to move elsewhere if taxes rise, given London is where many lawyers and accountants are based, and because tax is not the only consideration when deciding where to live.
CVC reported an increase in half-year profit and said it expected margins to expand in the second half of 2024, in its first set of results since floating on the Amsterdam stock exchange in April.
The company’s move to go public has helped reboot Europe’s market for initial public offerings this year, along with new offerings from Swiss skincare firm Galderma and Spanish fashion company Puig.
CVC reported adjusted after-tax profit of 340 million euros($377 million) for the six months to June, up 16 per cent from 292 million the prior year. The company’s underlying earnings topped analysts’ forecasts, helping push up its shares by three per cent in early trading.
The company’s total assets under management jumped to 193.3 billion euros, up from 177.3 billion, as it had previously disclosed in August.
The company’s sprawling network of investments include stakes in Spanish football league La Liga, Europe’s Six Nations rugby tournament and watchmaker Breitling. Its assets span private equity, credit and infrastructure.