I have posted numerous times on the Private Equity business (here, here, here and here) and the threat it has to our economy. I notice that commenters' here are split as to whether this is true or not.
I understand the view that this is merely a working of capitalism in market form. However, what is missed is that an unregulated market has allowed distortion to grow. huge finance has been raised to buy poor-performing companies that have turned out to be not so easy to turn round, see here in today's Sunday Times.
So what I hear you ask? The only people losing money are the City capitalists? This is the devil though, as if these companies go into administration they may well use the pension pot for the staff or even if no buyer can be found, go bankrupt. Now they are only going to go into administration because they are so heavily indebted. Money the venture capitalists have already taken out in profit.
So the Venture Capitalists have lost their own money and possibly the livelihoods of the companies too. You may say these companies were doomed anyway; but the unsustainable level of debt they have been burdened with won't have helped, will it?
Earlier this week, Little Chef, was a near victim of this, being bought out at the last minute. This kind of Private Equity failure will hugely increase throughout this year due to crazy deals that have been completed in the last couple of years finally collapsing.
Don't expect 3% GDP growth for the economy this year.