The proposed shake-up of UK listing laws has “nothing to do with Brexit” and is “long overdue” to ensure that London’s capital markets can attract the country’s best companies, according to the former chief executive of the London Stock Exchange.
Xavier Rolet, who led the London Stock Exchange Group for eight years until his departure in 2017, told Financial News that the proposals by Lord Hill for overhauling the UK listings market have long been needed to make the City more competitive.
The proposals, unveiled by the Treasury on 2 March, were posited as a way to bolster the City of London the wake of the UK’s departure from the European Union. The recommendations include liberalising rules around special purpose acquisition companies, giving company founders more voting rights after a float and reducing the proportion of shares that need to be listed from 25% to 15%.
The new recommendations have “nothing to do with Brexit but with a long overdue — and long requested — upgrade and modernization of UK listing rules to ensure their fitness with our modern and fast-evolving world,” Rolet said.
The UK has struggled to attract high-growth companies to its capital markets, particularly compared to the much larger US market. In 2020, 57% of US initial public offerings were of high-growth or technology companies, according to research by think-tank New Financial, compared to just 27% in the UK.
Investment banks in the City were responding to the trend of companies remaining private for longer by establishing specialist teams to help companies raise funds away from the public markets. The boom of Spacs in the US has made the debate about the declining number of IPOs in Europe less of a pressing debate than in recent years, however.
“A full re-calibration of the regulatory and fiscal framework pertaining to our equity markets is needed to ensure they are fit for purpose to fulfil their primary mission: Scaling up the promise of world-class scientific innovation our entrepreneurs are bringing into the world,” said Rolet.
Rolet declined to comment on whether the UK could attract more Spacs to the UK, but the recommendations to “liberalise” the rules around blank cheque companies could level the playing field for London, which has so far lost out to Frankfurt and Amsterdam.
Russ Mould, investment director at AJ Bell, said any changes to Spac listing rules, which have been welcomed by bankers and lawyers, should be “treated with caution”.
“Casual observers who do not work in the financial markets could be forgiven for thinking that this is simply another attempt to loosen well-established rules so that the City and its eco-system of bankers, lawyers, advisers and fund managers do not miss out on the juicy fees which are currently flowing toward New York in particular,” he said.
Chris Cummings, chief executive of the Investment Association, said that the Lord Hill proposals are “an important first step to help re-energise capital markets”, but added that any changes need to ensure “appropriate investor protections for minority shareholders”.
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