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The London market’s best chances of revival could lie in attracting more secondary company listings, according to a report by Britain’s biggest business lobby group.
A report published by the CBI on Wednesday suggests that the London Stock Exchange could offer a “complementary venue” for additional listings, especially for Asian companies that are becoming more cautious about the US as the Trump administration takes an increasingly hard line against China and other Asian trading nations.
The CBI’s road map for reform of the London market acknowledges that the LSE has suffered heavy declines in initial public offerings, outflows and a loss of liquidity, even if it still second only to US exchanges. Fundraising from IPOs in London has tumbled to its lowest level in at least 30 years.
Rupert Soames, CBI chair, told the Financial Times: “There has been an element of snobbishness about secondary listings. We’re not making the efforts that we should be making in going around and promoting the LSE as a destination for these companies to have a secondary listing.”
He added: “OK, it’s not the same as a primary listing, but it brings volume, it gives people a reason to be in London and there’s going to be some spin-off business for advisers too.”
An overhaul of rules last year included streamlining the process for secondary listings of overseas companies.
Guaranty Trust Holding Company, the parent of Nigeria’s biggest bank, last week announced it would secure a secondary London listing, driven by a search to look overseas for capital after extremely volatile currency movements.
Soames and the CBI report also suggest the Square Mile should even change its vernacular from “secondary” to “dual” listings because the former is “anachronistic and unhelpful”.
The LSE is coming under intense pressure after a rash of UK groups announced plans to switch primary listings to New York, most recently fintech Wise. Shareholders were spooked last week after reports that AstraZeneca’s chief executive Sir Pascal Soriot had privately expressed frustration with the pharmaceutical company’s London listing.
Soames — who is also chair of London-listed Smith & Nephew, the medical device company — acknowledged that the US was more aggressive at trying to encourage listings from overseas and poach British companies.
“If I have one more call from the New York Stock Exchange saying ‘come and list with us’ I’ll be physically sick. We just need a bit of vroom vroom about the promotion of London.”
The boss of the LSE welcomed the CBI report, which was developed in conjunction with 30 chairs from listed companies.
Dame Julia Hoggett said: “Our capital markets are an ecosystem. And in a world where we compete globally for capital, the requirements for them to remain competitive calls for all stakeholders — companies, investors, government, regulators, the exchange and other market participants — to work together to ensure our markets continue to provide a globally leading destination to raise capital.”
The CBI report also highlighted that private equity takeovers were a bigger risk to the strength of the London stock market than switching listings to New York. Only 36 pre cent of the UK’s largest 500 companies are listed, and the wave of public-to-private transactions has been particularly pronounced in the UK compared to other markets.
Of the 213 UK companies that delisted since 2016, 67 per cent, or 143 companies, were acquired by private equity. In the US, by contrast, just 20 per cent of 561 delistings were private equity buyouts.
The CBI report also calls for an increase in remuneration for non-executive board directors, including making it easier for them to hold stock options. Soames argued that the gulf between US and UK remuneration for non-executives made it much more difficult to attract talent.
Smith & Nephew has first-hand experience: the FTSE 100 company’s former chief executive, Namal Nawana, quit after 18 months in the role because the company would not meet his pay demands.
