A private equity consortium is eyeing Sainsbury's

The move, by the British Venture Capital Association (BVCA), comes after a spate of attacks on the industry for not being open enough.

Chancellor Gordon Brown has praised the groups' ability to create jobs quickly and contribute to the economy.

But MPs and unions are among those who have criticised private equity in recent weeks.

'Distinguish'

Private equity companies use clients' money and borrowed money to buy whole companies and try to turn them around.

In the UK, they have taken over businesses ranging from the AA to Birds Eye, and one consortium is considering a takeover of supermarket giant Sainsbury.

In a speech on Thursday, Mr Brown hinted that not all firms were in it for the long haul.

"We've got to distinguish between companies that are long-termist and short-termist," he said.

Heads of a number of large private equity firms are believed to have been encouraging their counterparts to join them in a move for the code during a conference in Frankfurt.

There are fears among some in the industry that if they are perceived as being too closed, the government may intervene.

BVCA members would not be forced to sign up to the code.

And the GMB union dismissed the move for a new code as "too little, too late".

It said the code related to disclosure about the companies owned by private equity firms, rather than the private equity firms themselves.

Unions have been critical of the treatment of employees at firms bought by private equity.

Firms such as Permira, which bought the AA and Birds Eye and sacked many staff, attracted particular wrath.

The economic secretary to the Treasury, Ed Balls, welcomed the announcement.

"Private equity is an important part of the UK financial services sector and can play an important wider economic role creating jobs and developing companies," he said.

"The government will be watching progress very closely."