By Julian Goldsmith, 26 March 2007 14:45
NEWS
Workers could be between £84 and £231 a year worse off compared to other private-sector employees if their company passes into the hands of private equity, according to research from consultancy the Work Foundation.
The research also found that management buy-outs initially cut jobs but expanded the workforce after the first year - by an average of 36 per cent over six years.
Management buy-ins, where the management team is brought in from outside, tend to have an even more disruptive effect on the workforce, with one-fifth of employees losing their jobs over the same period.
The report found that private equity ownership may also reduce workers' say over their own working life, their ability to manage stress and to communicate with senior managers effectively, especially when new managers are brought in.
Unions have been increasingly critical of private equity firms, claiming that much of the cost stripped out of the companies they take over comes in the form of job losses and wage cuts.
Work Foundation chief executive Will Hutton called for more transparency in the way private equity-owned management teams treat their staff. He said in a statement: "There is now an urgent need to ensure private equity firms throw open their books to proper public scrutiny. Britain's greatest PLCs are great in part because they are publicly accountable."
Speaking to silicon.com, a spokesman for the T&G union supported Hutton's sentiment: "We think there is a huge impact potentially on employee levels and pay terms, especially with leveraged buyouts, where a private equity firm increases the amount of a company's debt.
"The only way they can get a return on their investment is to squeeze the workforce. Where the Work Foundation report is valuable is that it highlights the possible impact of private equity ownership on employees."
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1. Roger Huffadine
I thought it was Gartner again - but no we now have the opportunity for an annual silicon.com competition for the organisation that states the bleedin' obvious most times in one year. Of course workers are worse off under private equity that's how the investors get their return.