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Big companies leaving UK ‘not a crisis’, says stock market chief
Image caption LSE chief Julia Hoggett says there is “strong cause for optimism”Article information
The chief executive of the London Stock Exchange has denied it is in crisis, despite companies worth hundreds of billions of pounds pulling out of the US.
Company bosses told the BBC that the UK faces an “existential crisis” as major companies have already left, are considering a move or have been bought by private foreign investors.
But Julia Hoggett said there was “no sense of panic” as the UK “already punches above its weight”.
A Treasury spokesperson said the UK “is already one of the best places in the world to grow and secure investment” and that it is working on ways to “further improve the UK’s competitiveness”.
The Chancellor, Jeremy Hunt, will hold a summit of finance chiefs on Thursday to discuss how to increase the appeal of UK markets for national and international companies.
Owning shares in large UK-listed companies is important because other sectors – such as insurance, accountancy, law, pensions – cluster around them.
Financial services represent 10% of the entire UK economy and generate £90 billion a year in tax – half the NHS budget.
But an increasing number of companies are delisting from the London Stock Exchange.
Cambridge-based microchip giant ARM Holdings – previously listed in London – is now selling its shares in New York. Paddy Power owner Flutter will move there this summer. Shares in British pharmaceutical company Indivior soared when it said it was considering moving, while even the UK stock market’s biggest company, Shell, warned it might move.
Image caption Ali Mortazavi, head of biotechnology company E-therapeutics, says the London stock market is “broken and closed”.
Small businesses also told the BBC that it simply isn’t worth listing on UK markets.
Biotechnology company E-therapeutics had been listed in London for 17 years – until last week. Boss Ali Mortazavi is also looking at the US and said the London market is broken and closed.
“Has it reached a crisis point? Unequivocally yes,” she said.
“Actually, I think that’s an understatement. I would call it an existential risk.”
The UK’s biggest company, Shell, has repeatedly warned it would look at “all options” to reduce the 30% discount Shell is priced at compared to its US rivals. Shell chief executive Wael Sawan told the BBC last year that US markets had rolled out the red carpet.
“I extend my true thanks to the folks at the New York Stock Exchange. The welcome we had there was exemplary.”
Asked about a possible move to New York, he said: “It would be irresponsible to rule out any possibility.”
Charles Hall, of investment bank Peel Hunt, said Shell’s exit would be a blow to London.
“That would be absolutely huge, because inevitably other companies would follow suit,” he said.
“BP would then have to consider that, and all the big mining companies too… the UK market shrinks and global asset managers put less money into the UK, so it definitely has an impact on our own economy, not just in the stock market,” he said.
Hall added that although the City of London lost some of its business to EU financial centers after Brexit, other European exchanges were also struggling to compete with New York.
‘Reason for optimism’
Tech giant Apple is worth more than all of the top 100 London-listed companies combined. The same happens with Google and Microsoft. On average, companies in US markets are valued at twice the price per pound or dollar of profit as in the UK. But Hoggett said these few large American companies were distorting the picture.
“When you eliminate them and look at real companies of similar sizes in the US to the type of companies we have in the UK, they haven’t really outperformed,” she said.
Responding to claims that the London stock market is in crisis, closed or broken, she said: “In terms of the pipeline of companies that we are seeing preparing to enter the market, but also in terms of the activity of companies that are in market, this is demonstrably not true.”
She added: “We have all the fundamentals here in London and I see a strong reason for optimism.”
Pension money
Hoggett said finding a way to funnel more UK money to UK businesses was key. UK investment managers place just 4% of their assets in UK equities. This value is lower than the 40% recorded around 30 years ago and well below the average for other countries.
“The vast majority of all other developed nations that have capital markets and strong economies direct much more of their domestic pension money into their own economy than the UK. And so this is one of the biggest areas for reform that we still do. you need to see.”
Not everything is one-way traffic. Tech startup Raspberry Pi will soon list in London, and Chinese fast fashion giant Shein is considering London to have run into trouble with regulators in New York.
A Treasury spokesperson said: “The UK is already one of the best places in the world to grow and secure investment and we are taking forward an ambitious program of capital market reforms to further improve the UK’s competitiveness.” .
The chancellor and the head of the LSE insist that London is not on fire, but Hunt clearly considers it important enough to bring the engines to a special summit at his country residence on Thursday.