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Was Private Equity’s Successful Lobby for Gentler Tax Hikes a Masterclass in PR?

19.11.24

By Kirsten Scott, Financial Services

The private equity industry recently pulled off what many in the comms world might consider a remarkable feat of influence. Facing a proposed tax increase on carried interest—from 28% to a much heftier 45%—the industry lobbied intensely and ultimately succeeded in negotiating a more modest hike to 32%. This seemingly small reduction represents a significant win for private equity (PE) firms, reducing the financial burden that could have impacted their operations within the UK.

Context: What is Carried Interest and why does it divide opinion?

At its core, carried interest is a share of the profits that investment managers, such as those in private equity, earn when they successfully grow the value of a fund. Unlike a traditional salary, carried interest is generally only paid out after investors achieve a certain return on their investment. For PE professionals, this can mean years of working with no payout, and if the fund doesn’t perform well, there’s no reward at all.

However, the debate around carried interest centres on how it’s taxed. In the UK, it’s often classified as a capital gain (historically taxed at 28%), which is lower than income tax rates that go up to 45%. Supporters argue this lower rate incentivises long-term investment, helping fund the growth of businesses and job creation. Critics, however, claim it’s a tax loophole that allows wealthy financiers to avoid higher taxes.

Rachel Reeves, Chancellor of the Exchequer, faced a difficult balance when delivering her inaugural budget, aiming to fund public services while keeping the UK attractive for global investment. The carried interest tax reform was a key part of this balancing act. The British Private Equity and Venture Capital Association (BVCA) has pushed to convey the benefits of private capital to the UK economy, emphasising how it drives employment, innovation, and regional growth.

The BVCA’s efforts gained a foothold in government thinking, which was evident in the language published alongside the Budget. It acknowledged that “carried interest has unique characteristics” and pointed out the lengthy, risk-based nature of private capital investment.

This recognition reflects the impact of BVCA’s lengthy campaign, underscoring the importance of data, personal connection, and well-framed arguments in driving influence.

What made this campaign so effective?

This campaign’s success was no accident. It was a carefully crafted, high-stakes private equity communications effort that leveraged some of the most powerful tools in the influence arsenal: strategic data use, influential alliances, narrative shifts, personal connection, and headline-grabbing statements. Let’s break down how each of these tactics played out in the campaign and how they might be applied to other financial communications strategies.

1) Leverage data for impact

Data is a powerful tool, but in PR, the trick is using it effectively to support a broader narrative. The BVCA did this exceptionally well, transforming numbers into a story that policymakers couldn’t ignore. Economic evidence such as EY’s report showed that private equity-backed businesses contribute 6% to the UK’s GDP and support 2.2 million jobs, illustrating the sector’s vital role. Private capital supports 10% of private sector GDP, which made a compelling case for its broader value to the economy.

The BVCA presented this data strategically to demonstrate how the tax increase could undermine economic stability and job growth. For policymakers, these numbers showed PE’s importance not only for investors but for the UK economy’s health—a crucial point in the BVCA’s lobbying message.

2) Align with influential voices

The power of influential voices can never be underestimated, and the BVCA leveraged this to full effect. By aligning with high-profile figures, including global financiers like Blackstone’s Stephen Schwarzman, the association created a network of allies who could advocate in influential circles. The strategy included hosting private dinners and other intimate gatherings where these figures could speak directly to key players.

With allies like Schwarzman, the BVCA extended its reach beyond UK borders and drew on the credibility of respected names, amplifying its campaign’s impact. This approach enabled PE advocates to frame the tax hike as a policy with global implications, raising the stakes beyond just the UK’s financial sector.

3) Reframe the narrative

Private equity has long struggled with a perception problem. The BVCA recognised that the “profit at any cost” stereotype could derail the campaign and worked hard to reframe the conversation. Rather than hiding behind the criticisms, they shifted focus by highlighting PE’s contributions to local economies and its role in supporting innovation, job creation, and essential services like biotech and clean energy.

Through its MP Connect program, the BVCA offered MPs a closer look at private equity-backed companies in their constituencies. The tours allowed MPs to witness the jobs and contributions these businesses bring to their communities, humanising the sector and challenging the notion of PE as an elite, disconnected industry.

4) Connect on a personal level

One of the BVCA’s most effective tactics was to foster personal connections between PE-backed businesses and members of parliament (MPs). They organised discussions and company tours, where MPs could witness firsthand the impact of PE in their constituencies. This direct engagement gave the campaign a personal touch, making MPs more receptive to the BVCA’s arguments.

Creating these opportunities for MPs to connect with local business owners helped policymakers see beyond the numbers. They saw the human side of PE-backed businesses, reinforcing the industry’s value in a tangible, relatable way.

5) Captivate your audience with powerful statements

Throughout the campaign, the BVCA didn’t shy away from bold statements to capture attention. They issued warnings about a potential “mass exodus” from the UK to emphasise the competitive disadvantage the tax hike could create, potentially driving investment to more favourable tax environments abroad. These statements weren’t just rhetoric; they underscored the potential consequences of the proposed tax hike and kept the message in the spotlight.

With this strong narrative, the BVCA secured multiple media appearances, including TV interviews, helping to emphasise the urgency of their message and reach a broader audience.

What can individual brands take from this?

Marketing teams at private equity firms should consider their brand narrative, in line with this campaign and tap into a similar storytelling approach to benefit their brands. Highlighting positive, relatable aspects of private equity investing, that resonate with a broader audience, PE firms can demonstrate their value beyond finance.

By strategically leveraging data, building influential alliances, reframing narratives, fostering personal connections, and maintaining powerful statements, the BVCA orchestrated a campaign that protected billions in profits while shaping public perception.

For PR professionals both in and outside of the PE industry, this campaign offers valuable insights into how complex, even controversial, topics can be navigated with strategic communication. At its heart, the PE lobby’s efforts reiterate the importance of crafting a message that resonates with an audience’s values and concerns—an essential lesson for any private equity communications campaign looking to make a lasting impact.

Key takeaways:

Leverage data for impact
PR campaigns should always anchor themselves in solid data, but it’s crucial to frame this data in a way that resonates with the audience’s priorities. Whether appealing to policymakers, customers, or stakeholders, data that demonstrates tangible value makes a stronger case.
Align with influential voices
Collaborating with well-regarded industry voices or subject matter experts can enhance credibility and expand influence. This is particularly valuable when the audience or stakeholders may be sceptical; having a trusted, influential ally can help validate the message.
Reframe the narrative
In any PR campaign, addressing and reframing negative perceptions can be more effective than avoiding them. Whether it’s challenging a stereotype or highlighting overlooked positives, shifting the narrative can engage a broader audience.
Connect on a personal level
PR efforts are often most effective when they bring an abstract issue down to a personal level. Engaging directly with stakeholders and creating face-to-face opportunities fosters empathy and understanding, making the message more relatable and harder to dismiss.
Captivate your audience with headline-grabbing statements
Compelling statements, backed by facts, can help amplify the impact of a campaign. Bold claims—especially when supported by data—make a campaign more memorable and can drive audience engagement.