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Private equity takeovers are damaging to workers and the entire sector should be subject to more scrutiny, a new report warns.

The Work Foundation says that employees at firms entering private equity deals are likely to either see jobs shed or wages lowered.

According to the pressure group, the secretive nature of private equity groups makes monitoring changes experienced by firms problematic.

But it says that by tracking companies as they enter and exit ownership by private equity funds, clear findings emerge.

Today's research says that during management buy-in takeovers (MBIs) by private equity groups, the direct result is an average reduction in salaries of £231 over the year, while the total number of jobs falls by a fifth.

In contrast, management buy out takeovers (MBOs) see jobs being expanded upon in the long-term, but workers are still worse off by an average of £83.70 a year against other private sector employees.

Will Hutton, chief executive of the Work Foundation, today commented: "A sizeable tranche of corporate Britain is falling under private equity, but the industry operates with near zero levels of public accountability. This report seeks to shed some light on one of 21st century capitalism's most virulent and secretive new forms."

Mr Hutton explained that private equity groups prided themselves on their ability to "squeeze performance from the organisations they own", by introducing measures such as performance-related pay.

"But we are concerned that often, the price that is paid by workers is too high and that levels of trust between workers and managers suffer," he added.

"There is now an urgent need to ensure private equity firms throw open their books to proper public scrutiny, that they pay appropriate levels of tax, and that the growth of private equity is not exposing the entire British economy to a risk of instability due to the levels of debt the industry takes on as it grows.

"Britain's greatest plcs are great in part because they are publicly accountable," the chief executive concluded.

The Work Foundation is calling on better protection for workers in terms of regulation, stricter rules on the amount of debt interest that can be offset against tax by private equity firms and measures to make groups more transparent.