The Bank of England (BoE) is looking into the risks in the private equity sector, after warning that financing for smaller and riskier corporates could be vulnerable to ‘a significant deterioration in investor risk sentiment’.
The Financial Policy Committee (FPC) said on Wednesday that higher interest rates have made life more difficult for private equity funds, contributing to downward pressure on asset valuations while increasing default rates on debt linked to the sector.
The impact of this has been seen in the advice sector over the past year. The number of acquisitions by private equity-backed advice firms dropped by 10% in 2023, as some consolidators buckle under the weight of their eexisting debt.