LSE CEO: Flight listing not a major concern as UK is ‘punching above its weight’
London’s position as Europe’s leading financial center has been under threat over the past few years.
Available now 25% Fewer companies are listing on the UK stock market than a decade ago, reflecting both a long-term downward trend in IPOs and some high-profile delistings. This trend is not limited to just one industry, with technology and construction companies choosing to list overseas or go private.
The alarming situation even made the CEO of Shell – the company at the top Fortune 500 Europe and is the biggest company in the FTSE 100—consider packing for the United States
However, London Stock Exchange Chief Executive Julia Hoggett sounded optimistic. She argued that there was “nothing to panic” because the country was “already beyond its means,” in comments made to the BBC on Thursday.
Hoggett says the rapid growth of US tech giants, including Google and Apple (which are themselves worth more than the top 100 listed companies in London), has skewed perceptions on the London Stock Exchange by comparison.
“When you strip them out and look at actual companies that are similar in size in the US to the kind of company size that we have in the UK,” Hoggett said. They’re not really performing better,” Hoggett said, adding that because London has “all the fundamentals,” she feels optimistic.
Does she have a point?
London has the basic foundations for a major exchange, especially a strong ecosystem of investment banks, lawyers and institutional investors that helps the City become one of the most important financial centers. most important in the world.
But with the recent spate of bad news, it’s hard to see the upside when it comes to the public markets. Take Cambridge-based chipmaker Arm, for example, which has launched Biggest IPO of 2023 in September. Even though the company is British, they chose to list in New York and achieved a valuation of over $54 billion.
Flutter Entertainment, an Irish sports betting company with a market capitalization of £29.7 billion ($37.6 billion), also recently voted in favor of move its main list coming to the US later this month, while based in Germany TUI is about to be delisted from London to Frankfurt.
While there has been some good news – this week computer maker Raspberry Pi said it was planning to list in the UK – the reality is that the flotation remains small, with the number of applicants touching six-year low in 2023.
It even jeopardizes London’s once-unbeatable position among its European rivals – last year, Paris briefly became Europe’s largest stock market.
Indeed, in 2023, LSE will account for just a meager 2% of the $12 billion in capital raised globally through IPOs, Bloomberg reportedwhile other European markets have recovered after a decline in listing activity.
Given that the UK economy accounts for around 3% of global GDP, that figure no longer suggests the country is punching above its weight.
Why does it happen?
Key concerns for the UK market include the relatively complex listing regime, strict governance requirements, lackluster performance of new entrants to the stock market (such as Dr. Martens) and the potential for Valuations are higher in the US, especially for technology companies.
But it is also facing a long-term trend of companies going private – like cybersecurity company Darktrace has vowed to do — this is a problem not limited to the UK As JP Morgan CEO Jamie Dimon pointed out in a letter to shareholders last monthPublic companies are playing a more limited role in the overall financial system—while publicly traded stocks in the US have declined since the turn of the century, the number of companies backed by Private equity has increased significantly.
Hoggett himself also raised another concern: the UK’s ability to attract top talent to its management due to Poorer pay packages of London-listed companies compared to their US peers.
“We have stood in the way of creating a level playing field to compete with the rest of the world,” she said in an interview on the Bloomberg podcast. last year.
A spokesperson for LSE Group said Luck that the health of the UK capital markets is not just related to the number of IPOs. The amount of equity capital raised in London increased by more than 38% year-on-year – more than the next two largest exchanges in Europe combined.
“We are encouraged by the list of companies seeking IPOs and anticipate more activity following the implementation of new listing regulations in the second half of 2024,” the spokesperson said.
What is being done?
As London’s problematic slide has been going on for some time, City and government officials are trying to tackle the problem.
As an LSE spokesperson hinted, the Financial Conduct Authority is building further Simple listing rules that would lower the barrier to entry for companies looking to IPO in the UK. The proposal includes having a single listing category and relaxing eligibility requirements for IPOs.
Prime Minister Jeremy Hunt is exploring avenues for pension fund investment in the UK and plans to meet business executives on Thursday to find ways to attract more listings. Hoggett said this would be an important reform, helping to keep money in the country.
At a time when the UK economy is growing and picking itself up from last year’s economic woes, such new reforms could still be a game changer if and when implemented.
