Daily on UK commercial TV we’re subjected to adverts from Tui.
They’re the ones with the joyous happy music showing people indulging in sun-kissed holidays, with beautiful beaches, clear blue seas, gorgeous pools and sumptuous al fresco dining, courtesy of the mammoth holiday operator.
Not only is the weather in the UK dismal at present but Tui itself has declared it’s off, choosing to drop the dual listing of the Anglo-German company’s shares in London and Frankfurt, in favour of having them posted in Frankfurt only.
Lucky Germans. They get Europe’s largest holiday provider with a market capitalisation of €3.5 billion as a welcome boost to their stock index. London gets to say another goodbye.
Tui’s move is the latest in recent months by companies choosing to list their shares abroad or end their dual listing, again dropping London.
Smurfit Kappa, the packaging group, is New York bound, as is gambling company Flutter. YouGov, the UK pollster, is debating switching allegiance overseas. Arm Holdings listed its shares on Wall Street last year. Building supplies firm CRH and plumbing equipment company Ferguson have also gone. Global commodity behemoth Glencore is to list its planned coal-mining spin-off in New York. Commodity broker Marex has applied to list its shares in the US. Now Tui.
The holiday firm was originally British, having been formed by Germany’s Preussag when it merged Thomson Travel and First Choice to create Tui Travel PLC in 2007. Britain still accounts for most of Tui’s income. These and other facts are trotted out to illustrate just how much Tui loves Britain.
In which case, why go? Because it’s much simpler to be only on one stock market and in Tui’s case that means Frankfurt.
Already, 75 per cent of Tui’s shares are traded in Germany. Frankfurt-only will also help Tui deal with EU regulations on airline ownership. That smacks of an anti-Brexit play, but Tui insists not, saying there is ‘no political background’ to its London delisting.
Nevertheless, the company is responding to one of the consequences of Brexit. Airlines must be owned and controlled by EU entities if they are to enjoy the benefits of the single market in aviation.
Britain used to enjoy its own EU dividend as the location of choice for companies wanting to do business within the EU. It was a gateway to the trading bloc. Not any more.
There is a lack of liquidity in London. Pension funds and other institutional investors, put off by high interest rates and UK stamp duty, are looking elsewhere to put their money.
Valuations also tend to be lower in London. Companies find that investors in other markets, notably New York, are prepared to price them higher. They appreciate tech more than we do.
Obtaining an overseas listing can be simpler and quicker overseas than in London. Add to that, too, the deep wells of funding available in the US and in other places, and the relative ease of raising capital there, and everything points away from the LSE.
Tui’s loss is a significant blow. A household name, it was until recently a member of the FTSE 100 and it’s still in the FTSE 250.
The FTSE was 40 years old last week, but there was little cause for celebration. Investment company AJ Bell said the index delivered an annualised return over that period of 5.2 per cent. That compares with 9.1 per cent from the US’s S&P 500 and 7.8 per cent from European shares, as measured by the MSCI Europe (ex-UK) index.
Some in London are trying to put a brave face on Tui’s going, saying the rationale is understandable. They point out that 1,860 companies remain listed in London and the disappearance of one with a market cap of £3.5 billion is scarcely a blip in a market with a valuation of more than £2 trillion.
Others are worried. They fear the emigrants reflect deep-rooted structural weaknesses in the London market and UK economy. What is more, they say, the LSE seems powerless to respond.
It would not be so concerning if those going were being replaced, at least in part. But that is not happening. Businesses that would once have been odds-on to list their shares in London are either being wooed away by a foreign market or they are selling privately and avoiding the bureaucracy of floating.
The once imperious LSE is rapidly losing its allure. More than 80 per cent of UK-based chief executives believe that the value of being a constituent of the London stock exchange has declined in the past year. Research by consultancy Teneo found that 81 per cent of those interviewed said the advantages of a UK stock market quote had diminished, while 57 per cent think the benefits will dwindle further in the coming year. A third have considered ditching London and moving their listing overseas.
Some go further still and maintain that what we’re seeing is the de-equitisation of the city, which is destined to become a world-class centre for the legal and accounting professions and insurance but not much else. Analysts at Peel Hunt speak of a ‘doom loop’ of a declining number of UK stocks and the large number of British companies that have succumbed to foreign takeovers.
The inactivity and lack of faith in the UK exhibited by the pension funds is especially troublesome. At a moment when the country was supposed to be basking in post-Brexit freedom, able to set its own rules and standards, making itself attractive to investors worldwide, the opposite appears to be occurring. Even its own pension funds are not flying the flag.
Not enough attention was paid in the run-up to Brexit to the impact on the city of quitting the EU. Now the cost of that lackadaisical approach is being felt.
Successive governments have ignored the city. They’d got used to having a city and with it, a London stock market, that were booming, in international demand, prestigious world-leaders. The assumption was that they could look after themselves. Well, they can’t. They require a government that champions them, and with that, affords companies unassailable advantages to listing in London.
There is one piece of consolation. Tui delivered a blow to London, but it provided relief to Frankfurt. The German market has seen industrial gases group, Linde delist and domestic companies, including BioNTech and iconic footwear, Birkenstock, going public in the US.
It is not only London that is wilting. But complacency will not suffice. Reforms to make listing less complex are promised but much more is required. A change of mindset is needed: a dismal LSE is a dismal city is a dismal UK economy. Ministers need to understand that, before more companies head for the door and the LSE sinks into oblivion.
