New European rules on private equity firms 'harmful', says CBI

The CBI has urged MEPs to reject sections of the Alternative Investment Fund Managers Directive.

The employers' group argued that the directive, as it stands, could harm firms still struggling in the aftermath of the recession and jeopardise employee relations.

The CBI said that the directive would oblige private equity-owned companies to disclose commercially sensitive information on research and development programmes and remuneration policies.

As well hindering innovation, the proposals would also increase costs and bureaucracy and prevent a level playing field because other privately-owned companies would not be affected, the employers' group added.

Equally of concern to the CBI is the possible effect the directive would have on employee relations.

It would mean that relations between employers and employees in companies owned by private equity would to an extent by replaced by relations between employees and the private equity firm.

This, the CBI insisted, would put private-equity owned firms at a disadvantage, discouraging investment. Treating employees differently depending on the ownership of a company would set a dangerous precedent too.

Under the terms of the draft legislation, it would affect companies with as few as 50 staff.

A letter signed by nearly 700 companies across Europe, warning of the dangers of the AIFM legislation and calling for all companies to be treated fairly, has been sent to MEPs.

John Cridland, the CBI's deputy director-general, said: "The proposed legislation would damage companies owned by private equity firms and discourage investment. We are particularly concerned about the impact it would have on small and medium-sized companies.

"The additional bureaucracy and forced disclosure of commercially-sensitive information would be a real problem, and impede companies that should be encouraged in order to foster economic recovery."