Peter Harrison, chief executive of FTSE 100 listed asset manager Schroders, says proposals designed to encourage international companies to list in London will reinvigorate the City, allowing it to embrace some of the world’s fastest growing businesses.
Harrison told Financial News that proposed new rules unveiled by Lord Hill on 2 March, which aim to position London as a leading centre for listings, would also prevent the UK from losing some of the country’s best start-ups to other financial centres, such as New York or Amsterdam.
Hill’s recommendations, designed to make the UK a more competitive financial centre post-Brexit, 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%.
“There is a bubble in Spacs at the moment. But fundamentally these are vehicles which could help transform industries,” Harrison told Financial News.
“The UK stock market has perennially underperformed for the past 10 years. The reason is structural. We’re too biased towards the old economy. We need to be more capable of embracing the new world.”
He added: “The cost to the UK consumer of not having the Googles, Facebooks and Teslas of the future is just massive.”
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.
The City has also missed out on attracting so-called blank cheque companies that have surged in the past 12 months. Spacs have exploded in popularity during the pandemic, reaching record highs last year and continuing at breakneck speed so far in 2021.
In the first two months of the year, there have been $61bn worth of Spac IPOs globally, according to data provider Dealogic, almost all listing in the US, and follows a record $83bn worth of deals in 2020.
Harrison brushed off concerns that proposals to issue dual-class shares — giving company founders significant sway over big decisions such as mergers and acquisitions —would undermine shareholder rights.
“These companies need long term shareholders, dual share classes provide some of that structure. It creates an environment for long term investment,” said Harrison.
“People will say ‘well, don’t we get dud companies?’ The UK has world class asset management capabilities. Why would we not want the choice? We’re very good at pricing these risks, so give it to us. Don’t force us to buy companies in America.”
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