Private Equity

Baroness Moyo Excerpts

Thursday 20th November 2025 Grand Committee

[Baroness Moyo (Non-Afl)]

My Lords, as I have disclosed in the register of interests, I serve on Oxford University’s endowment investment committee, which allocates capital to private equity. There is always a risk that a debate on the role of private equity will be based on dated views of the industry, characterised by asset stripping, financial engineering and cutting jobs. However, compared with 20 years ago, today’s private equity is largely focused on creating growth through productivity gains driven by operational improvements and technological innovation.

I will make three points about private equity as it relates to the United Kingdom’s prosperity. First, private equity is an engine in the British economy. The British Private Equity & Venture Capital Association estimates that, in 2025, private equity-backed companies employ approximately 2.5 million workers—that is one in 14 of Britain’s working population. The association also estimates that these companies generate nearly £200 billion, or 7% of GDP, for the economy. More widely, when suppliers and related consumers are included, 2023 estimates put private equity’s economic impact at roughly £300 billion, or about 11% of the UK’s GDP.

Secondly, private equity plays an important role in boosting the country’s productivity. The Productivity Institute found that private equity-backed companies benefit from productivity gains that are higher than those in the wider economy. Specifically, the institute notes an increase in total factor productivity of greater than 4%, and an increase in labour productivity as large as 5%. Crucially, the report notes that these gains are unlikely to be the result of cutting jobs. This revelation about productivity alone is key; it should not be overlooked amid concerns around the UK’s persistent productivity puzzle.

Thirdly, private equity must continue to play a vital role in driving innovation. Private equity is not just helping to turn around older, established companies; it is also providing growth capital to help companies scale up, and venture capital to support start-ups. The noble Lord asked for specific examples. I give him the magnificent seven, which are currently powering 200 to 300 basis points of economic growth as we live and breathe.

More specifically, both artificial intelligence and climate efforts, which are critical for future economic success, require large-scale capital investment, which private equity can help to provide. The era of AI in particular promises to drive down costs in public goods and increase efficiency of delivery in things such as the National Health Service. The IEA estimates that the energy transition and climate initiatives are going to require $5 trillion per year globally. Essentially, these efforts need all the capital that we can get, private equity included.

Yet today, in the UK context, private equity faces challenges, including finding a route to sell companies it has invested in and nurtured. This is, in part, due to the UK’s capital markets having weakened and investor interest in IPOs and public markets falling away. Worryingly, this year the United Kingdom has fallen out of the world’s top 20 IPO markets. Additionally, private equity investors are struggling to find promising new UK companies to invest in, highlighting burdensome regulation that ultimately holds back growth and puts the UK at a distinct disadvantage in the global competition for investment capital.

Britain needs more good jobs, more innovation and greater productivity. It also needs more infrastructure and improvements in public services. All of these require vast quantities of large-scale investment. At a time when this country’s growth is slowing—it recorded growth worth just 0.1% of GDP in the last quarter and is registering a 5% unemployment rate—this backdrop is a stark reminder that we must not deter major sources of capital and job creation such as private equity.

To be balanced, there are notable criticisms—some of which have already been mentioned—from local authorities experiencing escalating costs in both child and adult care provision from the private sector, and, in some cases, private equity-owned businesses. Business and the Government must, of course, come together and co-operate to address these urgent concerns. But more generally, government action, be it through legislation or regulation, should aim to create a much more engaging environment for private equity investment opportunity.