Private equity begins fightback against Brussels

British business has launched a European Parliament offensive following fears that Brussels could legislate to increase regulation on the private equity and hedge fund industries.

In a clear signal that the battleground over investment companies has moved beyond Westminster, the British Private Equity and Venture Capital Association (BVCA) and the CBI have sent delegations to woo MEPs. The move has come in response to a damning report by the leading MEP and former Danish prime minister Poul Nyrup Rasmussen.

The report, submitted to the Committee on Economic and Monetary Affairs, calls for greater disclosure from private equity managers and hedge funds about their investments. This echoes similar demands by the House of Commons Treasury Select Committee last summer, which led to a voluntary British code of conduct for private equity.

Mr Rasmussen also wants a legislative proposal at the European Parliament by November, which would incorporate measures to limit the amount of debt private equity could use to purchase a company. This would severely hurt private equity's potential profits and the number of deals it can afford to complete.

Simon Walker, the BVCA chief executive, said: "This is firmly on our radar. We are co-ordinating with the CBI and the European Venture Capital Association, and actively communicating with other national trade associations based in continental Europe, to create better understanding around the positive contribution private equity makes to mainstream business – both here and in Europe."

Mr Rasmussen's report has caused what Peter Skinner, a Labour MEP, called a "schism" in the 40-strong committee. This week it will debate 211 amendments, which will then be voted on at the end of the month.

Mr Skinner said: "On paper the amendments document would be thicker than [Rasmussen's] dossier. The different kinds of amendments show the schism at the committee."

Although he considered Mr Rasmussen had gone too far, Mr Skinner added: "There are valid concerns held by the trade union movement, such as the need for better communication during a leveraged buyout, where there is the potential for job losses."

The Alternative Investment Management Association, the members of which represent 75 per cent of global hedge fund assets, is also understood to be lobbying MEPs.

Mr Rasmussen is expected to try to pare down the amendments later this week to simplify voting. However, one MEP said that this would be difficult given the differences of opinion shown by the amendments.

Other demands made in the initial report include the establishment of a European supervisor "covering all financial services sectors" and a register of hedge funds and private equity managers.