Strategy

London's Stock Market Must Regain Edge, Says Investment Banking Platform

Tom Burroughes, Group Editor, London, 5 September 2022

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The attractiveness of the London Stock Exchange is crucial to the overall health of London as a financial centre – and that includes wealth management. There are concerns that the City is losing its edge as a global hub.

The founder of an investment banking platform – recently interviewed by this news service – has called for the London Stock Exchange’s listings rules to be liberalised in order to avoid being overtaken by global rivals.

The comments, from Nayan Gala, founder of JPIN, came after Michael Findlay said that London’s financial sector would fall to “regional market” status if it did not cut red tape for listings. Such comments also add to debate over whether the City is being hit by Brexit and the UK’s exit from the Single Market. 

“The last few years have evidently raised a few hiccups on the road – but now, particularly with the opportunities Brexit has provided, regulations that once came with the stock market must be eased in response to this,” Gala said in a statement. 

“This will likely assist with boosting the stock volume, value and quality, and could result in a significant bounce back of the LSE,” he added. 

Concerns about London’s business edge also come as policymakers wrestle with skyrocketing energy prices, high inflation and slowing economic growth in the UK. (Such issues also apply in the European Union and its financial hubs, of course.)

A number of banks and asset managers have shifted some business to jurisdictions such as Ireland and Luxembourg to retain access to the European Union, although the exodus hasn’t been a flood as some feared at the time of the Brexit referendum. The EU’s raft of rules, known as MiFID 2 – enacted five years ago – still apply to the UK. According to consultancy EY, the number of Brexit-related staff relocations was revised down to 7,000 over the first quarter of 2022 from 7,400 in the three months to December. EY has been tracking the impact of Brexit since 2016.

During the leadership campaign for the Conservative Party, deregulating the UK economy, including financial services, has occasionally featured. A criticism of Boris Johnson, who will shortly depart Downing Street, is that his administration was not energetic enough at using Brexit as an opportunity for ditching burdensome EU regulations. 

The LSE’s chairman said that London is no longer the "default" European venue for listings and equity raises, and that the LSE, once on a par with New York, Shanghai, and Tokyo, could decline to that of a regional exchange if it continues to shrink at the current pace. 

As of June this year, the number of companies trading on the LSE stood at 1,900 – a slight fall from 1,994 during the same time last year. 

Trade negotiations over Brexit first started in 2016, when the number of listed companies on the LSE reached 2,348 in January that year. 

In May, the Financial Conduct Authority proposed plans to scrap the premium to lure tech companies to the UK – however, additional "mandatory and supplementary" obligations would be introduced for public companies to meet.

In 2020, 25 per cent of the world's cross-border IPO capital was raised in London, and three of London's five largest IPOs were international. In comparison, only 13 listings took place in the first six months of this year, raising just shy of $150 million, a slide of 71 per cent and 99 per cent decline on the last two years respectively. 

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