Proposed tax changes for Britain's private equity sector could prompt wealthy managers to relocate abroad, according to the CEO of private equity firm CVC, who added to a growing chorus of warnings from industry leaders regarding the new Labour government's tax proposals. Labour has been consulting with investors about eliminating a tax break on carried interest—the performance fees earned by fund managers when assets are sold—in advance of a broader government budget announcement in October.
"We have people moving all the time. Will it influence where some people want to be based? Probably, actually," Rob Lucas, CEO of CVC, told reporters following the company's inaugural results as a publicly-listed entity. Lucas, whose shares in CVC are valued at approximately $640 million according to LSEG data, stated that he was not overly concerned about potential staff relocations, noting that the global business is flexible regarding where employees are based.
"I'm assuming the government doesn't want the UK to be uncompetitive going forward," said CVC's finance chief Fred Watt, expressing hope that the government would heed the industry's warnings. The British finance ministry did not immediately respond to a request for comment.
Carried interest is received by a few thousand individuals in Britain and has contributed to the wealth of a generation of private equity executives. Critics argue that the money earned from fund performance should be taxed as income, as private equity firms are investing other people's money. Some executives privately suggest that few individuals are likely to move elsewhere if taxes increase, given London's concentration of lawyers and accountants, and because tax is not the sole factor in deciding where to live.
CVC reported an increase in half-year profit and expects margins to expand in the second half of 2024, marking its first set of results since listing on the Amsterdam stock exchange in April. The company's decision to go public has helped revive Europe's market for initial public offerings this year, alongside new offerings from Swiss skincare firm Galderma and Spanish fashion company Puig.
CVC's adjusted after-tax profit for the six months to June amounted to 340 million euros ($377 million), a 16% increase from 292 million in the prior year. The company's underlying earnings exceeded analysts' forecasts, boosting its shares by three percent in early trading. Total assets under management surged to 193.3 billion euros, up from 177.3 billion, as previously disclosed in August.
CVC's extensive portfolio of investments includes stakes in the Spanish football league La Liga, Europe's Six Nations rugby tournament, and watchmaker Breitling. Its assets span private equity, credit, and infrastructure.
