The chief executive of the London Stock Exchange has denied the stock exchange is in crisis, despite companies worth hundreds of billions of pounds leaving for the US.
Business bosses have told the BBC that Britain is facing an “existential crisis” as major companies have either already left, are considering a move or have been bought by private foreign investors.
But Julia Hoggett said: “There is no need to panic” as Britain is “already punching above its weight”.
A Treasury spokesman said Britain was “already one of the best places in the world to grow and secure investment” and was working on ways “to further improve Britain’s competitiveness” .
The Chancellor, Jeremy Hunt, will hold a summit of financial leaders on Thursday to brainstorm how to boost the attractiveness of the UK markets for domestic and international businesses.
It is important that the shares of large companies are listed in Britain because other sectors – such as insurance, accounting, law and pensions – cluster around them.
Financial services account for 10% of the entire UK economy and generate £90 billion a year in taxes – half the NHS budget.
But a growing number of companies are delisting from the London Stock Exchange.
Cambridge-based microchip giant ARM Holdings – once listed in London, is now selling its shares in New York. Paddy Power’s owner Flutter will move there this summer. Shares of British pharmaceutical company Indivior soared as it said it was considering a move, while even the biggest company on the British stock market, Shell, had warned it could move.
Smaller companies have also told the BBC that listing on the UK market is simply not worth it.
Biotech company E-therapeutics was listed on the London stock exchange for 17 years – until last week. Boss Ali Mortazavi is also looking to the US and says the London market is now broken and closed.
“Has it reached a crisis point? Absolutely yes,” he said.
“I actually think that’s a bit of an understatement. I would call it existential risk.”
Britain’s largest company, Shell, has repeatedly warned it would look at “all options” to reduce the 30% discount at which Shell is valued compared to its US rivals. Shell CEO Wael Sawan told the BBC last year that the American markets had rolled out the red carpet.
“I express my sincere appreciation to the people of the New York Stock Exchange. The reception we received there was exemplary.”
Asked about a possible move to New York, he said: “It would be irresponsible to rule anything out.”
Charles Hall of investment bank Peel Hunt said Shell’s departure would be a blow to London.
“That would be absolutely huge because inevitably other companies would follow suit,” he said.
‘BP would have to think about it then, and all the big mining companies too… the UK market is shrinking and then global asset managers are putting less money into Britain, so it certainly has an impact on our own economy, not just the stock market. ” he said.
Mr Hall added that although the City of London had lost some of its business to the EU’s financial centers after Brexit, other European stock exchanges were also struggling to compete with New York.
‘Cause for optimism’
Technology giant Apple is worth more than all the hundred largest companies in London combined. This also applies to Google and Microsoft. On average, companies in the US market are valued at twice the price per pound or dollar of profit as Britain. But Ms Hoggett said those few big US companies distorted the picture.
“If you take them out and look at the actual companies of similar size in the US to the kind of companies we have in Britain, they haven’t really performed any better,” 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 see preparing to come to market, but also in terms of the activity of the companies that is on the market, that is demonstrably not true.”
She added: “We have all the fundamentals here in London, and I see strong reason for optimism.”
Retirement money
Ms Hoggett said finding a way to get more British money flowing into British businesses was crucial. British investment managers put just 4% of their assets into British shares. That is less than the more than 40% about thirty years ago and well below the average of other countries.
‘The vast majority of all other developed countries with strong capital markets and strong economies spend far more of their domestic pension money on their own economies than Britain does. And that’s why that’s one of the biggest areas of reform that we’re still doing. look at that.”
It’s not all one-way traffic. Tech startup Raspberry Pi will soon go public in London, and Chinese fast fashion giant Shein is considering that London has had problems 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 embarking on an ambitious program of capital market reforms to further boost the UK’s competitiveness to improve.”
The Chancellor and the head of the LSE insist London is not on fire, but Hunt clearly thinks it is important enough to take the engines to a special summit at his country retreat on Thursday.