Private equity is an essential part of the solid foundation on which the European economy is built and its society flourishes. It is an engine for growth, and that growth is an engine for job creation.
From food and clothing to apps and computer software, most people come into contact with a product or service from a company backed by private equity every single day. Far from being a niche sector of finance, private equity is woven into the fabric of Europe. This is an industry that is central to the recovery from the effects of COVID-19, and which will help drive social and economic progress across the continent over the long term. Nowhere is this contribution more acutely felt – or needed – than in Europe’s job market.
Invest Europe’s Private Equity at Work report, the second edition of which we launched in May, is an ambitious effort to track and map private equity’s role in employment and job creation across the continent. The data we have gathered from thousands of companies illustrates the industry’s reach.
At the end of 2019, private equity backed companies employed 10.2 million people across Europe – on a par with the entire population of Sweden. The figure equates to 4.3% of the entire European workforce, employed at over 23,000 private equity backed companies, ranging from emerging start-ups and fast-growing SMEs to large multinational corporations. Not only do those businesses employ millions of people directly, but they also support many millions more in the international supply chain and at customers that rely on private equity backed companies’ products and services to perform their roles.
The past 12 months have brought immense challenges for individuals, communities and countries across Europe. While our employment data does not yet show the impact of the pandemic on private equity backed portfolio companies, it does show that those businesses went into 2020 in a strong position.
Invest Europe’s research team analysed over 10,000 companies with private equity backing and found that they created 254,157 jobs in 2019 – roughly equivalent to the working population of Tallinn. That represents an increase of 5.2% on the previous year, almost six times the 0.9% employment growth achieved across Europe as a whole.
What is just as impressive is the consistency. Our industry created almost 261,500 jobs for the 2017-2018 period, and 236,000 for 2018-2019. This means private equity backed companies added almost half a million jobs throughout the continent from 2017-2019!
Europe desperately needs dynamism to recover strongly from the effects of the pandemic, and that is precisely what private equity brings to the labour market. In sectors that drive innovation and competitiveness, private equity outperforms. Information Communications Technology (ICT) was the leading sector for employment growth, adding 7% more jobs in 2019, followed by Biotech & Healthcare and Energy & Environment, both of which increased employment by 6%.
For SMEs specifically – the backbone of Europe’s economy – the impact of private equity can be even more transformational. ICT companies created 17% more jobs, while businesses in the Financial & Insurance Activities sector, including hot European Fintechs, hired 13% more people. There is a clear link between investment and innovation, and the creation of high-value jobs in dynamic sectors. Yet whatever the company, whatever the sector, the industry’s focus remains the same – making a stronger, more profitable and more successful business. And, as a result, those businesses invariably need more employees.
That positive influence crosses Europe, spanning large, developed conurbations, as well as growing towns and cities, and more rural communities. The Ile de France region around Paris has the largest concentration of private equity backed jobs with more than 1.4m employed by private equity portfolio companies, followed by London with more than 640,000 workers. However, the fastest growing in terms of job creation are less internationally-known destinations – Slovakia’s capital Bratislava, Irish region Munster and Västerbotten in northern Sweden all saw private equity backed employment increase by over 50% in 2019.
This data is not an abstract concept. Every new job is an opportunity for an individual and essential financial support for families and communities. It is a building block on which a stronger and more resilient economy will emerge. Private equity investment is central to Europe’s recovery and future competitiveness, and can bring far-reaching benefits that will flow through our society and economy long term.