G8 told to act on private equity

Unions criticised the job cuts after the AA was bought by private equity

Trade unions are seeking a united G8 response to what they see as the dangers of private equity firm buyouts.

International trade unions meeting in Paris are set to call for a taskforce to investigate highly-leveraged deals.

The unions are worried that the debt used to finance such deals means that jobs have to be cut to boost short-term returns and pay back borrowings.

Private equity firms say they make companies more competitive which means better job security for employees.

Unions were particularly critical of the case of the AA, which got rid of 3,000 staff - more than a quarter of its workforce - while it was owned by a leading private equity company: Permira.

Another Permira purchase, Birds Eye, cut nearly 500 jobs with the closure of its factory in Hull.

In Europe last year, £118bn was spent in private equity takeovers, up 41% from 2005.

A consortium of private equity firms said recently it was considering whether to make a bid for supermarket group Sainsbury's.

'Profit profit profit'

Paul Maloney, senior organiser for the GMB union said the problem was not just that workers are moved down the pecking order following such buyouts.

"Employees don't come into the pecking order with private equity firms - the only pecking order they have got is profit, profit, profit - bag it and run," he said.

But Peter Linthwaite, chief executive of the British Venture Capital Association said workers were more likely to get a stake in a business owned by private equity.

"Ownership is at the core of what private equity is about - it is about giving people a sense of ownership in a business," he said.

"It's been shown by studies that post private equity investing in a company more share option schemes are put in place for the entire workforce than were there before."

The meeting is being organised by the trade union advisory committee to the Organisation for Economic Cooperation and Development.