Here is a funny thing. The rest of the world rates Britain higher than the Brits. So says Steven Fine, chief executive of City broker Peel Hunt.
Flotations of homegrown companies have reduced to a trickle in London. Meanwhile, many firms that are here, especially in tech, are heading elsewhere, usually to New York.
This as the government insists the UK is the go-to, happening place. And, as Fine says: "Domestic self-esteem is quite low." Yet, "we are seeing a rotation out of US assets into Europe and greater institutional positivity towards the UK."
This week, the Economic Secretary to the Treasury, Emma Reynolds, will mark the 30th anniversary of the AIM junior market with a speech at the London Stock Exchange billed as "reinforcing the UK’s position as a global hub for investment and innovation".
Her address comes as London is dealt a fresh blow by the decision of Wise, the money transfer business, to move its primary listing to New York. Four years ago, it was so different. Then, Wise provided a boost by choosing to float its shares in London. As a FinTech operator, Wise’s £9 billion ($12.15 billion) IPO was hailed as signalling UK pre-eminence in a tough European and global arena.
Today worth £11 billion, Wise is off, joining the 30 companies to have quit the London exchange this year. Last week as well, two high-flying UK tech operators, Spectris and Alphawave, went private, their takeovers resulting in a £5.5 billion loss of market value, not to mention the trading volume that will also vanish.
Another slap comes with Assura rejecting a UK merger offer that would have doubled its size and kept it on the London market. Instead, the £1.6 billion GP surgeries operator agreed to be bought by US private equity giant KKR.
So far, by return, this year there has been only one flotation, that of UK accountancy firm MHA, on Aim.
No wonder the likes of Fine are fed up. While some point to the lack of flotations being a European, even global problem, with the US tally of listed companies 40 per cent lower than in the late 1990s, it does not negate the fact that London is faring worse. Nor does it alleviate the damage caused by the exits and absence of substitutes – not just to the stock market and prestige, but to the underlying support system of broking firms like Fine’s, banks, lawyers, accountants. Income, jobs and tax receipts are suffering.
It's not as if UK businesses are bad and the country is a poor place in which to invest – KKR’s purchase of Assura, for one, indicates otherwise. As does the reported interest of Australian infrastructure investor Macquarie in acquiring stakes in London City, Birmingham and Bristol airports. No, it is more that being listed is not as attractive as it once was and other exchanges have greater appeal.
What’s to be done? Fine argues the problem lies with UK pension funds shunning their home market. The government makes noises they will be forced to fly the flag but it remains a threat, nothing more.
Pressure has been brought to bear via the Mansion House accords to encourage them to back UK infrastructure and private equity but it has ignored UK publicly listed shares. UK pension funds put less of people’s retirement money into their own country’s PLC than their foreign equivalents – US, Canada and Australian funds support businesses in their backyards to a much greater extent.
The government is unwilling to crack the whip for fear of being seen to interfere in what has been historically perceived as a free market. Equally, though, those funds enjoy tax breaks amounting to £49 billion a year. There is a strong case for saying they cannot have it both ways.
Similarly, ISAs are tax-free but there is no obligation for them to invest in UK shares. Mark Slater, who runs the fund manager, Slater Investments, has questioned why. "You don’t want government to tell people where to invest, ideally. But I think you can say if money is tax-advantaged, in other words the government’s giving you money, then they have a right to tell you the terms on which you get that benefit.
"If people want to own Apple, they can still own Apple, they just can’t do it through an Isa. Why should the British government seek to lower the cost of capital of Apple?"
Requiring them to "buy British" in exchange for public money smacks of MAGA ideology and has not been taken up by the government. There is an added complication, raised by lawyers, which is the definition of a UK business. In today’s interlinked, internationalised world, it is not so clear-cut.
There is the familiar issue, too, of the Treasury being reluctant to forego a nice little earner. At present, share purchases in London attract 0.5 per cent stamp duty, a levy that does not apply elsewhere, not least in the US. It creates the anomaly highlighted by the Capital Markets Industry Taskforce, intended to lift the City, that investors are taxed "when buying a UK-listed Aston Martin share but not when buying a German-listed Porsche share or US-listed Tesla share". But that oddity also brought in £3.2 billion in 2023-2024 and this is a financially strapped administration.
London’s listing rules could be less doctrinaire and not so expensive to obey. The reason Wise chose to depart is that New York allows dual-class shares – some shares carry greater voting rights than others. London does not. That is what Wise meant when it alluded to the US listing as having "a structure that aligns with US market practices including those of our US-listed tech peers, which we believe allows us to remain laser-focused on delivering our mission". Wise founder Kristo Kaarmann will have 18 per cent of the shares but 50 per cent of the votes.
In its desire to be "pure", to maintain tradition, London, as with the government’s reluctance to require pension funds to invest, is shooting itself in the foot. Investor equality free of government intervention may be the UK way but it is not copied elsewhere. If the UK wishes to stop the rot, it may have to change.
