Socialist Worker

Vulture funds bring chaos, study shows

Issue No. 2294

When private equity firms buy out public services job losses and bankruptcies follow fast, research by the GMB union shows.

The union warns that increasing buyouts by these private firms “may lead to more business failures like Southern Cross”—the care home operator that went bust in June last year.

It also warns that buyout firms will need to refinance some £111 billion over the next five years if they are to avoid insolvencies.

Maria Ludkin, GMB’s corporate affairs officer, accused private equity firms of behaving “like vampires sucking the lifeblood out of healthy business”.

“Private equity produces financial results by reducing the payroll and using the money to reward themselves,” she said.

Firms at risk include Four Seasons, which needs to repay £780 million by September, and AA, which has debts of some £4.8 billion.

Losses

General Healthcare Group (GHG), another of the largest private healthcare providers, also expects heavy losses.

It owes around £2 billion and is expected to face debt restructuring and a breach in debt agreements by June.

GHG borrowed £2 billion in 2006 to take over a raft of services. It poured £315 million of this into its operating business and £1.65 billion into property.

Rent payments from the operating business are now used to service debt on the property wing. Southern Cross also did this, which led to its default.

Paul Maloney, the GMB national officer for staff at AA, said, “Employees, tied tenants and consumers took all of the pain for no gain as the multi-millionaire elite enriched themselves.”

And this chaos is encouraged through government tax breaks.

Vital services should not be the playthings of the super‑rich. But this is exactly what we will see throughout the NHS and other services if the Tories get their way.


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