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Recession a Possibility Moulton tells CULS
Posted: 18.09.2007
Private equity chief Jon Moulton made clear that a recession is quite possible as part of the fall out from the US sub prime and Northern Rock crisis.
"For the first time for a long time we can see the route to a recession," Mr Moulton told the Cambridge University Land Society, in a meeting chaired by Cyril Leonard senior partner Douglas Blausten.
"It isn't surprising we have got problems. We are also seeing a pressure on property prices and a great shortage of funding for mortgages."
Around 150 senior figures from the property world and the City - including former Professor Willem Buiter, Professor of European Political Economy at the LSE and a former member of the Bank of England Monetary Policy Committee - attended the CULS Global Economy Forum breakfast at the Savile Club in September.
Mr Moulton, Managing Partner at private equity firm Alchemy Partners said higher interest rates were driving housing prices down along with spending. "There will be less money for people to spend in the run up to Christmas and retailers are coming under pressure," he said. "The route to recession certainly exists."
Mr Moulton, whose firm has come to the fore through buying out ailing companies said he did not want to see a recession but he predicted there would be less debt in the near future and more volatility in interest rates. "There will definitely be an erosion in asset values in the residential area and a softening in the property market."
He also predicted private equity firms would face an "inevitable" increase in taxation in the future. "There will be changes, it has to be expected," he said.
Mr Moulton made a strong defence of private equity companies but admitted "not a lot of tax" was being taken from them. The tax man was seen as an enemy as were the unions and politicians.
Big deals generated adverse publicity. But private equity firms were really successful at financing industry and had more flexibility than publicly quoted companies. The British private equity industry was the most regulated on the planet and to date there had not been one single scandal.
Private equity was a really successful way of financing industry, it threw money in all directions, drove a lot of transactions and brought a lot of fees and a lot of income into London. The industry had generated good returns for investors.
"It is now a mature industry - so it is actually difficult to find a bad buyout firm," he said. But he said that private equity groups will no longer enjoy the huge returns seen over the past few years - particularly on large buyout deals.
"I expect it will be the same for those guys in property who made large acquisitions five to six years ago at prices that the rest of you said were bonkers." |
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The CULS audience listens to Jon Moulton, Managing Partner Alchemy Partners
Jon Moulton, Managing Partner Alchemy Partners
L to R Jon Moulton, Douglas Blausten of Cyril Leonard chairman of the CULS Global Economy Forum, Professor Willem Buiter of the LSE and a former member of the Bank of England Monetary Policy Committee.
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