The 50th birthday of New York private-equity giant Kohlberg Kravis Roberts – founded with $120,000 by the cousins George Roberts and Henry Kravis and now holding $758 billion of assets under management – is a moment to ask whether the modus operandi the firm pioneered has been good or bad for the world. Private-equity buyouts of underperforming public companies have certainly been a catalyst for sharper corporate performance across every western economy. But with what impact on society?
Some buyouts also provide cover for ‘sin’ businesses that harm the planet or deny workers’ rights. KKR itself will never live down the book title Barbarians at the Gate, referring to its ruthless 1988 takeover of RJR Nabisco. Yet in America, private equity is embedded as a familiar track of capitalism alongside public markets, and the fortunes it makes for practitioners are more admired than abhorred.
In the UK, many private-equity firms go unnoticed as custodians of high-street brands from Asda to Wagamama. But the label is also linked with mismanaged utilities and care homes, profit-gouging from entrepreneurial ventures in need of capital – and unhealthy shrinkage of the stock market.
For a lively exposé from an anti-capitalist perspective, read Asset Class by Hettie O’Brien. From my own pro-capitalist perspective, I wish KKR’s co-chairmen George and Henry a happy anniversary – but I also wish their cousins over here would clean up their act.
Legacy
‘We stabilised the economy,’ claimed Downing Street’s drowning man on Monday, just after the respected Item Club forecast a loss of 163,000 jobs this year as a result of sluggish growth and soaring energy prices. Jobs will go in manufacturing, construction, retail and hospitality – with London hardest hit and only tech-town Cambridge bucking the private-sector trend. As a signal of instability, temporary hiring is rising as permanent recruitment shrinks. And there’s no comfort in public-sector job creation we can’t afford.
Ah, but ‘we cannot escape the effects of the war in the Middle East’, said another government spokesman. Maybe so, but the dismal Starmer legacy includes the blunders and follies of ministers who put rockets under business costs and bombed investment confidence long before real missiles flew.
Unflushed
South East Water, current holder of the ‘most-hated UK utility’ title after extended winter supply failures, chose election day to bury the news that its £400,000-a-year chief executive ‘Dave’ Hinton will step down after ‘an orderly transition over the summer’. Hinton admits he’s a ‘distraction’ from the company’s priority, which (obviously) is to provide uninterrupted clean water to 2.3 million angry customers. But he doesn’t even have the excuse of being a finance guy parachuted in by the company’s (you guessed it) private-equity owners: he’s a water scientist who should have been all over the maintenance and testing issues that left toilets unflushed and attracted a £22 million fine.
At least SE Water’s chairman, Chris Train, had the decency to resign immediately after a Commons committee described the company as ‘devoid of proper leadership’ two weeks ago. It surely can’t be hard to find a more competent manager than Hinton, even an interim one: the longer he remains unflushed, the more Labour’s left (emboldened by this week’s nationalisation of British Steel) will clamour for state control of the entire water industry.
Kinder and cosier
A day spent visiting City bankers and lawyers is also a chance to observe the evolution of office design in the era of hybrid working, AI-driven job culls and what I probably shouldn’t call snowflake sensitivities. It’s all about cosy meeting pods, curvy sofas, soothing acoustics and ‘biophilic’ features, which means internal greenery, natural light and garden terraces. Though I wasn’t offered one, I gather ‘nap pods’ are the coming thing, facilitating 40 winks after a tiring commute. Likewise, ‘pet-focused facilities’ are a recruitment driver for staff whose anxieties are quelled by taking pooches to work.
Demand for these therapeutic add-ons may be reduced by the next design-guru forecast: ‘intelligent robot assistants’. We know AI is already taking out many junior professionals, even if that’s hard to observe when so many work from home at least a day a week. What I did spot was a compensating trend (perhaps a repurposing of unjobbed graduates) towards overstaffed reception desks. And no microaggression: I was ushered to each meeting like a patient in an expensive Swiss clinic.
All to the good if the world of work is kinder than it used to be. But how, you may wonder, does Spectator HQ in Old Queen Street measure up to these new standards? That would be telling: what I can say is that our old home in Doughty Street a generation ago – with its ultra-flexible work patterns, chaise longue in the editor’s office, rewilded garden and resident Jack Russell called Harry – turns out to have been a model ahead of its time.
Party pooper
Ban early-morning airport boozing, says Michael O’Leary – increasing numbers of Ryanair aircraft have to be diverted because of drunken onboard behaviour. Being partial to the occasional 6 a.m. strengthener, I’d call that an unwelcome message when holiday travel is about to be made even more funless by random flight cancellations on top of seasonal air traffic control delays. But here’s my zero-alcohol Stansted sunrise tip: if the lads are kicking off in Wetherspoons, head for the safer haven of Comptoir Libanais and a reviving apple-mint-ginger-lemonade called toufaha. I promise you, it’s the next best thing to jet fuel.