When Carmen Aguilar García began investigating the involvement of private equity firms in England’s childcare sector with her fellow data journalists three years ago, she didn’t imagine her efforts would one day be scaled up to examine private equity’s role in the entire UK economy. That ambitious undertaking by Carmen and colleagues from across the Guardian was published earlier this week.
“The initial investigation into the childcare sector in 2023 was already challenging and a big team effort,” says Carmen, a data projects editor at the Guardian. “Extrapolating it to the whole economy did not seem realistic back then.”
If such a wide-ranging and complex investigation initially seemed impossible, it also feels imperative. Unlike companies publicly traded on the stock market, businesses owned or controlled by private equity are more opaque. But, as they underpin more and more public and essential services and increasingly shape our daily lives, the scale and nature of their influence deserves closer scrutiny.
Private equity firms use money from investors to buy up businesses with the aim of reshaping them and then selling them to return a profit. While the industry and its advocates argue the model can provide an engine for growth and efficiency, there are important questions about the vulnerabilities of financing models that use large amounts of debt, particularly in the public sector – and also about whether current regulation is fit for purpose.
Carmen, her colleague Michael Goodier and two software developers were grappling with how to trace private equity’s influence across the UK economy, when, a few feet away across the newsroom, our social affairs correspondent Jessica Murray received an anonymous tip from someone who worked for a private equity-owned children’s home company.
After digging into the the story, Jessica walked over to the newsdesk to pitch an article about what she’d discovered. “The newsdesk told me that Carmen and the data team were working on a big private equity project and that we should team up,” she recalls. “So the story became part of this bigger state-of-the-nation investigation. It’s a good example of data journalism and human-centred on-the-ground reporting coming together.”
But the scale of the project and the opacity of private equity structures posed many challenges.
The first difficulty when it came to measuring private equity’s stake in the economy was figuring out if a given company was actually controlled by private equity. “Some companies don’t want to show that they’re backed by private equity, but when you dig into it you find that they are,” explains Carmen.
The danger wasn’t merely about understating the industry’s foothold in the UK. Labyrinthine corporate ownership structures meant there was also a risk of overcounting, particularly when it came to measures such as company headcounts. A key finding of the investigation was that as many as one in eight workers in Britain are now employed by companies ultimately controlled by private equity firms – but calculating this figure and ensuring it was robust was painstaking work. “We had to deconsolidate large corporate structures to avoid double-counting employees,” Carmen explains as she points to some of the complex corporate ownership diagrams the data team developed.
And that was just one aspect of the methodology they devised for the project: “We had to build our own database of UK companies that are controlled by a private equity firm, map the whole group structure for each of those companies, and extract information related to the controlling party and the number of employees in each company.”
The project drew on multiple sources of data. “We don’t trust data blindly, so it was essential that, for each step, we checked the accuracy of the data and understood its limitations,” says Carmen. “In stories like this one, the data and the methodology are key. If either were not robust enough the story could be wrong. So if we aren’t confident about the data, we don’t publish.”
Transparency is also crucial: each of the articles published as part of the investigation contains an expandable section that goes into more detail about the methodology behind the project (see below).
While Jessica’s side of the investigation didn’t involve analysing macro data, she likewise needed to verify and cross-check information from the initial whistleblower and other company insiders. Their insights highlighted the pressures and failings some private equity-owned public services can encounter when the model goes wrong. For example, an official Ofsted inspection of one children’s homes found that it was “chaotic”, with “high levels of distress” among the children.
“I was really shocked by what was in those reports,” says Jessica. “I’d spoken to the whistleblowers and that was shocking, but then when I read the official reports, the conditions were clearly appalling. So we’re not only showing how much private equity is taking over all these different services, we’re also showing what it can sometimes mean for an individual who lives or works in a children’s home or in a care home.”
Jessica was also taken aback by the widespread lack of understanding about private equity. “Another thing that might surprise people is that a lot of those in power don’t fully understand this world,” she says. As well as talking to economists and academics who study private equity, Jessica also asked politicians to comment on the situation. “Some of them said they’d like to help but they didn’t understand private equity enough to feel qualified to talk about it.”
Hence the crucial role of public service journalism in making the world of private equity less impenetrable. To that end, Anna Leach, a visual projects editor, worked with a team on a captivating visual storytelling format to help explain how private equity works – using a fictional veterinary practice as a case study. “I chose a vet to illustrate how it works because there’s been such a dramatic acceleration in private equity control of that sector over the last 10 years. There’s a lot of awareness of the impact of that, with people now being priced out of pet ownership.”
The visual explainer also illustrated a common financing structure known as a leveraged buyout. These involve private equity firms borrowing a large proportion of the funds used to buy a business and then saddling the business with that debt. “It’s easy to show money flowing from one party to another,” says Anna, “but some concepts such as debt are very hard to visualise.”
Prina Shah, a senior digital designer who worked on the visual explainer, says the use of toy figurine models not only helped make the concepts more relatable for readers, they also made it easier to engineer the way the visuals switch seamlessly between 2D flow diagrams and 3D scenes. “What we were fundamentally doing was revealing money flows but it was important to set the scene first to make these concepts relatable and hopefully more understandable,” she says. “The use of models lent themselves perfectly to sitting within a 3D world but could also be easily shrunk to be used as icons in a 2D flow diagram. The models also made the icons come alive as they look realistic but also were simple and use block colours that work well at a smaller scale.”
As financial literacy has become increasingly key to understanding politics and society, visual explainers can be particularly helpful. “Business and finance are areas people are very affected by, but they often don’t understand the intricacies of it,” Anna explains. “The temptation is to go for the simple answers given by politicians. It’s harder to look at and understand some of the complex structural factors.”
Part of that complexity, reflected in the Guardian’s investigation, is that private equity isn’t simply a villain. “We were very aware that it’s more complicated than private equity being good or bad,” says Jessica. “Private equity can be good for businesses when it’s done right. And there’s also the role of regulation.”
The articles and the visual explainer prominently feature the private equity industry’s defence against some of the criticisms that have been levelled at it, giving readers a different perspective on the industry. “Starting with a question also creates a curiosity gap for the reader,” says Anna. “People don’t want to be lectured to, they want to be given the relevant information.”
Again, the key challenge was ensuring that this relevant information was robust. And in turn, that required resilience and perseverance on the part of the team of more than 10 data journalists, reporters, visual journalists, software developers and digital designers who were involved in the project.
“We had to adapt our initial plan several times to ensure accuracy,” says Carmen. “There was a lot of problem-solving in this investigation, and many people contributed to finding solutions. There are always high and low moments in data investigations, especially in complex ones like this. Resilience, adaptation and a problem-solving mentality are essential, but also believing that what you are doing is an important contribution to society and that people deserve to know. And we had all of this.”
