Fee revenue in financial services space soars

The private equity industry generated a total of £5.4bn of income for the financial and professional services sector, in the financial year 2006-7. The figures are part of a research paper titled The Impact of Private Equity as a UK Financial Service 2006/7 launched by the BVCA and conducted by Arbor Square.

One billion of the total fee income was generated outside of London, demonstrating that private equity contributes to the diversity and vibrancy of the UK’s regional economies.

The total fee revenue generated equates to more than 12% of the total annual turnover of the UK financial services industry and average annual fees of £580,000 per executive working on private equity-related mandates.

Almost £4.2bn (77%) of this total was generated by corporate finance and accounting firms, banking and finance providers, and legal services firms, which form the backbone of the private equity financial and professional services support network.

Specialist due diligence providers, as well as broking and equity capital markets teams generated more than £400m in fees during 2006, largely in relation to advisory services provided during the private equity investment and exit processes.

On average, private equity accounts for an estimated 28% of total UK corporate revenue amongst legal, accounting and corporate finance advisers active in the UK private equity industry.

The research is the first fully comprehensive report into the impact of the private equity and venture capital industry on the financial and professional services sector. It also shows that over 18,000 people are employed either directly or indirectly by private equity in the UK, the vast majority of whom are in highly skilled jobs.

Speaking at the report’s launch at the London Stock Exchange, BVCA chief executive, Simon Walker said: “This report shows just how important the private equity industry is to the UK economy and the financial services industry. It confirms something that many of us have known for some time: we are part of the economic mainstream. In these uncertain economic times private equity has, more than ever, a critically important role to play in making the economy more productive and helping to stimulate economic growth. We help raise skill levels and ensure that London remains a financial powerhouse. This report underlines the benefits that private equity brings and how important it is that the UK retains a competitive edge.”