Private equity as an engine for jobs

What is it that Sweden, Portugal and the private equity sector have in common? They offer shelter (from a working perspective) to around ten million people. As a key driver for the creation of new jobs, private equity and venture capital accounts for 4.5 per cent of all jobs in Europe, according to Invest Europe's “Private Equity at Work” survey.

“The positive impact of private equity [...] on employment and job creation is becoming more evident with each passing year”, says Eric de Montgolfier, CEO of Invest Europe, in his foreword to the fourth edition of Invest Europe's “Private Equity at Work” survey.

In 2021 alone, European companies backed by private equity and venture capital created almost 342,000 jobs – roughly equivalent to the population of Germany’s former capital Bonn. This development was instrumental in cushioning against the macroeconomic impact triggered by the COVID-19 pandemic, especially in view of the labour market. By comparison, all European enterprises created additional jobs amounting to 1.2 per cent of the workforce – one-fifth compared to private equity backed companies, where 6.5 per cent of new jobs were created. These jobs contribute to securing Europe’s position as a business location, driving innovation, and strengthening the backbone of the European economy – SMEs.

DACH region amongst the leaders
In a European ranking, the Germany, Austria and Switzerland region (“DACH”) is at the forefront of jobs creation. Deutsche Beteiligungs AG’s (“DBAG’s”) geographical focus is precisely on this region. Around 56,000 new jobs were created in Germany, Austria and Switzerland between 2020 and 2021 – an increase of 7.3 per cent. Overall, enterprises backed by the private equity sector in the DACH region account for 1.9 million jobs, equivalent to 18 per cent of all jobs in PE-backed enterprises across Europe.

Top 5 regions in Germany, Austria and Switzerland (by the number of jobs in enterprises backed by private equity)

The DACH region is followed by Southern Europe, comprising Greece, Spain, Portugal and Italy – the latter being another focus market for DBAG. Enterprises supported by the private equity sector accounted for a total of 1.4 million jobs (13 per cent) in Southern Europe; with Lombardy (191,016 jobs) and Piedmont (103,215 jobs), two of the biggest regions here are located in Italy.

Top 5 regions in Southern Europe (by the number of jobs in enterprises backed by private equity)

DBAG’s focus sectors are the champions in creating new jobs in the SME sector
Looking at the individual sectors of the European SME sphere, a clear picture emerges: Information and Communications Technology (ICT), which comprises DBAG’s focus sector of IT services & software, is the main driver behind the positive development on the labour market. Specifically, 18 per cent of all newly-created European jobs in the ICT sector between 2020 and 2021 were attributable to companies supported by private equity. This was closely followed by the biotech/healthcare sector – another of DBAG's fields of activity – which accounted for 15 per cent of jobs created in private equity-backed SMEs.

And even though these figures are already very encouraging, this reflects more than a mere short-term phenomenon: looking at long-term trends, enterprises backed by private equity created more than 430,000 jobs between 2017 and 2021. This translates into an annual increase of around 4.5 per cent and underscores the importance of private equity as one of the key pillars of the economy.