Boosting London's Stock Market: A Critical Priority for the Next Chancellor

Recent Takeover Bids Highlight the Decline

In a typical week, multiple takeover bids for UK-listed companies grab headlines. This week alone saw three significant deals: Rotork, Gooch & Housego, and Ramsdens. While these transactions bring short-term gains for shareholders, they underscore a broader issue with London's stock market.

The Sizable Outflow and Minimal Inflow

According to Peel Hunt's report titled 'Selling the Family Silver,' between January 2023 and now, there have been 154 takeover bids involving UK companies worth over £100 million, totaling an astounding £165 billion. Additionally, seven large companies have moved their primary listings from London to the US, amounting to another £120 billion. In stark contrast, only 11 new listings in London of similar value have occurred, adding up to just £6 billion.

Previous Efforts and Their Lack of Success

The UK government and stock exchange have made efforts to address this imbalance through consultations, taskforces, and policy changes. For instance, the UK listing rules were modified to allow founders greater control over their shares, akin to US tech companies. However, these measures have not significantly reversed the trend.

Politicians and regulators recognize the importance of a vibrant stock market for capital allocation and wealth creation. Rachel Reeves's Mansion House accords aimed to boost capital flows but focused more on infrastructure and privately owned assets rather than public markets. The approach was further criticized for excluding significant opportunities in scale-ups, which can thrive within robust stock market settings.

Possible Solutions and Future Outlook

Charles Hall of Peel Hunt suggests several measures such as increasing the UK's share weighting in pension schemes, providing tax reliefs for entrepreneurs listing in London, and removing stamp duty on share trading. These steps could potentially revitalize the stock market.

The next chancellor must address this issue with renewed vigor. While Andy Burnham has not emphasized this point heavily, Charles Haldane, who seems to have influence over Burnham's economic priorities, advocates for shifting incentives in tax reliefs to encourage investment in UK firms. His argument is that correcting the 'home bias' of the UK pension system could be a critical step.

The current hollowing-out of London's stock market is a serious concern. Without concerted action, it risks undermining the overall economic health and potential for growth in the UK.

Source: The Guardian