Unite warns private equity: act responsibly or risk losing our
pensions investments
17 July 2008
Private equity could soon see its access to pensions funds
challenged by unions as concern grows that members' savings are
being used to support buyouts which hit jobs and communities.
The UK's biggest trade union, Unite, representing nearly two
million workers in UK and Ireland, with members participating in
pension schemes worth billions of pounds, has joined forces with
major US union, the SEIU, to warn that union pension schemes should
no longer be relied on by the buyout industry as a source of ready
money.
Concerned that private equity buyouts mean job losses and
insecurity, Unite is establishing a capital stewardship programme
to scrutinise how pension funds managers are investing retirement
savings. The move comes on the Global Day of Action (today,
Thursday, July 17th, 2008) on private equity. To mark the
day, MPs have tabled a Commons motion calling for tougher statutory
regulation of private equity.
According to Tony Woodley, joint general secretary of Unite: "We
will be taking a long, cool look at where our members' retirement
savings are going.
"We shall not prop up leveraged buyouts where workers are made
redundant, factories are closed, and jobs are outsourced or
off-shored. Nor will we support poor investment decisions where our
members' savings take the hit for reckless, get-rich-quick
schemes.
"There will be no blank cheques. If private equity wants
our pension money, then they must prove that this money will not
help throw workers on the scrapheap while lining the pockets of the
equiteers.
"Private equity operates in the mists of secrecy, which is not a
culture we want to expose our members' pensions savings
to."
According to Unite, pension schemes have a duty to ensure that
they are not over-exposed to investments built on debt. They
will be pressing pension trustees should consider the impact of
private equity investments on society at large, including the
treatment of workers and whether private equity is paying its full
dues to the UK taxpayer.
A typical strategy of a buyout firm is to buy a company off the
stock market, load it with debt and squeeze out profits by cutting
costs, including labour costs. Buyout firms also avoid paying taxes
by deducting the interest on their debt, reducing their tax
obligation to zero and denying the British taxpayer hundreds of
millions of pounds in revenue.
Job cuts soon followed when private equity took over Bird's Eye,
the AA and Burton's Foods. A preliminary review of European
companies acquired by one private equity company, KKR, indicates
that KKR has been responsible for the loss of nearly 10,000 jobs
across the continent in the past seven years.
The Global Day of Action will see coordinated action in 25
countries to highlight the operation of the leveraged buyout
industry.
ENDS
For further information contact Pauline Doyle, Unite press
office, on 07976 832 861
Notes to Editors
- In the United Kingdom, one in 10 people in the private sector
work for companies owned by private equity firms.
- The BT pension scheme is the largest in the UK and has been
increasing its allocation to private equity, which now stands at 4
per cent.
- The Railways Pension Fund had 8 per cent of its funds in
private equity investments in 2006 - a total of £1.35bn and a £120m
increase on the previous year.
- The West Midlands Pension Fund is one of the most heavily
exposed to private equity, with around 5.5 per cent of the fund
invested.
- The Greater Manchester Fund has £340m allocated to private
equity and PFI funds
- For public sector workers, particularly in local government and
higher education, pension funds are increasingly being invested in
companies involved in PFI projects, an area of attractive
investment for private equity.
John Heppell MP has tabled Early Day Motion number 2046.
